Sonic 2013 Annual Report Download - page 26

Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Sources of Capital
Operating Cash Flows. Net cash provided by operating activities decreased $7.3 million to $87.8 million for
fiscal year 2013 as compared to $95.1 million in fiscal year 2012. This decrease is primarily driven by a $14.3
million increase in income tax payments during fiscal year 2013, compared to fiscal year 2012, resulting from our
ability to apply 2011 tax payments to our 2012 tax provision and the timing of extension payments. Apart from
these tax items, operating cash flow would have increased during the year primarily as a result of growth in same-
store sales and profitability as well as an increase in accounts payable and other liabilities.
Investing Cash Flows. Cash used in investing activities decreased $22.9 million to $1.2 million for fiscal year
2013 compared to $24.1 million for fiscal year 2012. During fiscal year 2013, we used $41.3 million of cash for
purchases of property and equipment as outlined in the table below. These cash outflows were mostly offset by
$33.5 million in proceeds primarily related to the franchisee purchase of land and buildings leased or subleased from
us relating to previously refranchised drive-ins, described above. The balance of the change largely relates to a
decrease in notes receivable of $5.0 million stemming mainly from a note payment from one of our advertising
funds and regular principal payments on other notes. Additionally, in fiscal year 2012, we purchased intellectual
property related to the legacy point-of-sale technology that is expected to be replaced over the next several years.
The following table sets forth the components of our investments in property and equipment for fiscal year 2013
(in millions):
Replacement equipment and technology for existing drive-ins $ 17.1
Brand technology investments 13.2
New Company Drive-Ins, including drive-ins under construction 4.1
Rebuilds, relocations and remodels of existing drive-ins 3.9
Acquisition of underlying real estate for drive-ins 1.9
Retrofits, drive-thru additions and LED signs in existing drive-ins 1.1
Total purchases of property and equipment $ 41.3
Financing Cash Flows. Net cash used in financing activities increased $13.5 million to $61.4 million for fiscal
year 2013 as compared to $47.9 million in fiscal year 2012. This increase primarily relates to a debt prepayment
of $20.0 million on our Series 2011-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2011 Fixed Rate Notes”),
a $6.6 million increase in purchases of treasury stock and $5.1 million in debt issuance and extinguishment costs
associated with the partial debt refinancing transaction discussed below. These uses of cash were partially offset
by $16.3 million in proceeds from stock option exercises during fiscal year 2013.
On May 20, 2011, various subsidiaries of ours (the “Co-Issuers”) issued $500 million of 2011 Fixed Rate Notes
in a private transaction which bears interest at 5.4% per annum. The 2011 Fixed Rate Notes have an expected life
of seven years with an anticipated repayment date in May 2018. The Co-Issuers also entered into a securitized
financing facility of Series 2011-1 Senior Secured Variable Funding Notes, Class A-1 (the "2011 Variable Funding
Notes"). This revolving credit facility allows for the issuance of up to $100 million of 2011 Variable Funding Notes
and certain other credit instruments, including letters of credit. Interest on the 2011 Variable Funding Notes is
based on the one-month London Interbank Offered Rate (“LIBOR”) or Commercial Paper (“CP”), depending on the
funding source, plus the base spread mentioned below, per annum. There is a 0.5% annual commitment fee payable
monthly on the unused portion of the 2011 Variable Funding Notes facility.
We used the $535 million of net proceeds from the issuance of the 2011 Fixed Rate Notes and 2011 Variable
Funding Notes (collectively, the “2011 Notes”) to repay in full the existing debt and to pay the costs associated
with our original 2006 securitized financing transaction, including the existing noteholder and insurer make-whole
premiums. Loan origination costs associated with our 2011 refinancing totaled $16.4 million and were allocated
between the 2011 Notes.
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