Sonic 2009 Annual Report Download - page 46

Notes to Consolidated Financial Statements
August 31, 2009, 2008 and 2007 (In thousands, except per share data)
Accumulated Other Comprehensive Income
In August 2006, the company entered into a forward starting swap agreement with a financial institution to hedge part of the
interest rate risk associated with the pending securitized debt transaction. The forward starting swap was designated as a cash flow
hedge, and was subsequently settled in conjunction with the closing of the Class A-2 notes, as planned. The loss resulting from settlement
was recorded net of tax in accumulated other comprehensive income and is being amortized to interest expense over the expected term
of the debt. See Note 10 for additional information.
14. Segment Information
FASB Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) establishes annual
and interim reporting standards for an enterprise’s operating segments. Operating segments are generally defined as components of
an enterprise about which separate discrete financial information is available as the basis for management to allocate resources and
assess performance.
Based on internal reporting and management structure, the company has determined that it has two reportable segments: Partner
Drive-Ins and Franchise Operations. The Partner Drive-Ins segment consists of the drive-in operations in which the company owns a
majority interest and derives its revenues from operating drive-in restaurants. The Franchise Operations segment consists of franchising
activities and derives its revenues from royalties and initial franchise fees received from franchisees. The accounting policies of the segments
are described in the Summary of Significant Accounting Policies. Segment information for total assets and capital expenditures is not
presented as such information is not used in measuring segment performance or allocating resources between segments.
The following table presents the revenues and income from operations for each reportable segment, along with reconciliation to reported
revenue and income from operations:
2009 2008 2007
Revenues:
Partner Drive-Ins $ 567,436 $ 671,151 $ 646,915
Franchise operations 131,712 127,111 115,626
Gain on sale of Partner Drive-Ins 13,154 3,044 732
Unallocated revenues 6,487 3,407 7,196
$ 718,789 $ 804,713 $ 770,469
Income from Operations:
Partner Drive-Ins $ 87,209 $ 123,049 $ 126,739
Franchise operations 131,712 127,111 115,626
Gain on sale of Partner Drive-Ins 13,154 ––
Unallocated revenues 6,487 6,451 7,928
Unallocated expenses:
Selling, general and administrative (63,358) (61,179) (58,736)
Depreciation and amortization (48,064) (50,653) (45,103)
Provision for impairment of long-lived assets (11,163) (571) (1,165)
$ 115,977 $ 144,208 $ 145,289
15. Net Revenue Incentive Plan
The company has a Net Revenue Incentive Plan (the “Incentive Plan”), as amended, which applies to certain members of
management and is at all times discretionary with the company’s Board of Directors. If certain predetermined earnings goals are met,
the Incentive Plan provides 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 $1,187, $1,324, and $2,943 during fiscal years 2009, 2008 and 2007, respectively.
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