Sonic 2005 Annual Report Download - page 4

In 2005, financially and operationally, we achieved new performance milestones that underscore the
success of our brand-building strategies and reveal the potential we have to sustain this momentum in the
future.
For instance, during the past year we crested an important mark, opening drive-in number 3,000 on the
way to a year-end total of 3,039. Importantly, we also witnessed ongoing volume growth concurrent with
the expansion of our chain, as system-wide average unit volume surpassed the $1 million level for the first
time. This feat, in turn, reflected the underlying success of sales-driving strategies that led to another year
of solid same-store sales growth in tandem with higher franchise income.
Each of these factors – together with many others – helped continue the strong returns we have achieved
for our stockholders. Total revenues for the year rose 16% to $623 million and, with the benefit of
continued expense leverage, we were able to translate this increase into 20% bottom-line growth as net
income advanced to $75 million or $1.21 per diluted share. These earnings represented a 21% return on
average equity for 2005 – the sixth consecutive year that ROE has been above 20% and an accomplishment
that we think places Sonic in rare company these days.
With all the exhilaration of a championship season, 2005 demonstrated the increasing power of the Sonic
brand and our continued success in reaching current and potential customers in new and exciting ways. In
a broader context, looking at our industry and Sonic’s past several years for perspective, we clearly have
enjoyed exceptional growth in our business and with our brand.
It’s accurate to think of our forward progress in terms of a series of ongoing initiatives that collectively
provide synergy for the Sonic brand. This is what we have referred to in the past as our multi-layered
growth strategy. Same-store sales growth – organic expansion within our existing chain – has been one of
the key elements of this strategy. During 2005, we again notched one of our strongest years ever, with
6.0% system-wide same-store sales growth on top of the 6.5% increase we registered in 2004! This past
year also marked the nineteenth consecutive year of positive system-wide same-store sales for Sonic, an
incredible record for any company.
Importantly, our higher same-store sales have occurred in two notable ways. First, sales at our partner
drive-ins outpaced those at franchise drive-ins as we continued to close the performance gap between the
two. Since 2002, we have worked to “Zap the Gap” between the average sales volume of our partner and
franchise drive-ins, cutting the difference 43% over that time. Second, our same-store sales growth in
2005 was more robust in developing markets, which not too many years ago tended to lag behind our core
markets. In both areas – sales growth for partner drive-ins and those drive-ins in developing markets –
these welcome trends have now extended for almost two full years.
To Our Stockholders
2
140
million dollars in
marketing to be
spent next year