Sonic 2006 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2006 Sonic annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 60

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60

The following table shows total stock-based compensation expense and the tax benefit included in the
Consolidated Statements of Income and the effect on basic and diluted earnings per share for the years ended
August 31:
2006 2005 2004
Selling, general and administrative $ 7,187 $ 6,757 $ 6,495
Income tax benefit (2,266) (1,819) (1,511)
Net stock-based compensation expense $ 4,921 $ 4,938 $ 4,984
Impact on net income per share:
Basic $ 0.06 $ 0.05 $ 0.06
Diluted $ 0.06 $ 0.05 $ 0.05
Many of the options granted by Sonic are incentive stock options, for which a tax benefit only results if the option
holder has a disqualifying disposition. For grants of non-qualified stock options, the company expects to recognize a
tax benefit on exercise of the option, so the full tax benefit is recognized on the related stock-based compensation
expense. As a result of the limitation on the tax benefit for incentive stock options, the tax benefit for stock-based
compensation will generally be less than the company’s overall tax rate, and will vary depending on the timing of
employees’ exercises and sales of stock.
As a result of adopting SFAS 123R retrospectively, financial statements for the prior periods presented have been
adjusted to reflect the fair value method of expensing stock options. The following table details the impact of
retrospective application on previously reported results for the years ended August 31:
2005 2004
As Previously As Previously
Adjusted Reported Adjusted Reported
Income Statement items:
Income from operations $ 117,449 $ 124,206 $ 99,619 $ 106,114
Income before income taxes 111,664 118,421 93,241 99,736
Net income 70,443 75,381 58,031 63,015
Net income per share - basic $ 0.78 $ 0.84 $ 0.65 $ 0.71
Net income per share - diluted 0.75 0.80 0.63 0.68
Cash Flow items:
Net cash provided by operating activities $ 127,685 $ 132,280 $ 103,260 $ 106,658
Net cash used in financing activities (51,297) (55,892) (61,755) (65,153)
Balance Sheet items:
Deferred income taxes $ 7,786 $ 11,164
Paid-in capital 153,776 121,982
Retained earnings 397,989 426,783
Total stockholders’ equity 387,917 384,539
Total liabilities and stockholders’ equity 563,316 563,316
Sonic Corp. 2006 Annual Report
39
Notes to Consolidated
Financial Statements
August 31, 2006, 2005 and 2004
(In thousands, except per share data)