Sonic 2013 Annual Report Download - page 51

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15. Employee Benefit and Cash Incentive Plans
The Company sponsors a qualified defined contribution 401(k) plan for employees meeting certain eligibility
requirements. Under the plan, employees are entitled to make pre-tax contributions. The Company matches an
amount equal to the employee’s contributions up to a maximum of 6% of the employee’s salaries depending on years
of service. The Company’s contributions during fiscal years 2013, 2012 and 2011 were $1.9 million, $1.7 million and
$1.6 million, respectively.
The Company has Cash Incentive Plans (the “Incentive Plans”) that apply to certain members of management,
and grants of awards under the Incentive Plans are at all times subject to the approval of the Company’s Board of
Directors. Under certain awards pursuant to the Incentive Plans, if predetermined earnings goals for a fiscal year are
met, the Incentive Plans provide that a predetermined percentage of the employee’s salary may be paid in the form
of a bonus. The Company recognized as expense incentive bonuses of $6.7 million, $4.9 million and $5.4 million
during fiscal years 2013, 2012 and 2011, respectively.
16. Commitments and Contingencies
Litigation
The Company is involved in various legal proceedings and has certain unresolved claims pending. Based on the
information currently available, management believes that all claims currently pending are either covered by insurance
or would not have a material adverse effect on the Company’s business, operating results or financial condition.
Lease Commitments
The Company has obligations under various operating lease agreements with third-party lessors related to the
real estate for certain Company Drive-In operations that were sold to franchisees. Under these agreements, which
expire through 2029, the Company remains secondarily liable for the lease payments for which it was responsible
as the original lessee. As of August 31, 2013, the amount remaining under these guaranteed lease obligations
totaled $11.1 million. At this time, the Company does not anticipate any material defaults under the foregoing
leases; therefore, no liability has been provided.
Purchase Obligations
At August 31, 2013, the Company had purchase obligations of approximately $51 million which primarily
related to its estimated share of system-wide commitments for food products. The Company has excluded
agreements that are cancelable without penalty.
17. Selected Quarterly Financial Data (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
2013 2012 2013 2012 2013 2012 2013 2012
Total revenues (1) $ 126,008 $ 128,279 $ 111,141 $ 115,084 $ 146,634 $ 149,427 $ 158,802 $ 150,940
Income from operations 17,203 16,754 12,018 10,548 29,994 30,736 30,033 30,902
Net income (2) $ 6,133 $ 5,499 $ 3,577 $ 1,677 $ 14,793 $ 14,407 $ 12,198 $ 14,502
Basic income per share (3) $ 0.11 $ 0.09 $ 0.06 $ 0.03 $ 0.26 $ 0.24 $ 0.22 $ 0.25
Diluted income per share (3) $ 0.11 $ 0.09 $ 0.06 $ 0.03 $ 0.26 $ 0.24 $ 0.21 $ 0.25
(1) Revenues were impacted by the refranchising of 34 Company Drive-Ins during the latter part of the Company’s
second fiscal quarter of 2012.
(2) Includes losses on early extinguishment of debt of $0.5 million and $3.9 million in the second and fourth
quarter of fiscal year 2013, respectively, a tax benefit of $0.7 million from the retroactive reinstatement of the
Work Opportunity Tax Credit (“WOTC”) and resolution of income tax matters in the second quarter of fiscal year
2013, as well as a $2.4 million loss on the closure of 12 lower-performing Company Drive-Ins as a result of an
assessment in advance of capital expenditures for pending technology initiatives and an impairment charge of
$1.6 million related to the write-off of assets associated with a change in the vendor for the Sonic system’s
new point-of-sale technology in the fourth quarter of fiscal year 2013.
(3) The sum of per share data may not agree to annual amounts due to rounding.
49
Notes to Consolidated Financial Statements
August 31, 2013, 2012 and 2011 (In thousands, except per share data)