Sonic 2012 Annual Report Download - page 25

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In connection with the issuance of the 2011 Fixed Rate Notes, 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. The 2011 Variable Funding Notes have an expected life of five years with an anticipated repayment
date in May 2016 based on the terms of the debt agreement. Interest on the 2011 Variable Funding Notes is based on the
one-month London Interbank Offered Rate or Commercial Paper, depending on the funding source, plus 3.75% per annum.
There is a 0.5% annual commitment fee payable monthly on the unused portion of the 2011 Variable Funding Notes facility.
As of August 31, 2012, there was no outstanding balance under our 2011 Variable Funding Notes.
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 our existing debt in full and to pay the costs associated with the securitized
financing transaction, including the existing noteholder and insurer make-whole premiums.
Before the refinancing, during the second quarter of fiscal year 2011, we repurchased $62.5 million of our prior variable
funding notes in a privately negotiated transaction. We recognized a gain of $5.2 million on the extinguishment of these notes
during the second fiscal quarter of 2011.
Mandatory principal payments of $15 million annually under the new financing versus mandatory principal payments
paid in fiscal year 2011 of $45.4 million will significantly increase the amount of our available free cash flow which we define
as net income plus depreciation, amortization, and stock compensation expense, less capital expenditures. For additional
information on our 2011 Notes, see note 9 – Debt, included in the Notes to the Consolidated Financial Statements in this
Annual Report.
We plan capital expenditures of approximately $30 to $40 million in fiscal year 2013. These capital expenditures primarily
relate to drive-in level expenditures, technology infrastructure expenditures, the development of additional Company Drive-Ins,
the implementation of a new point-of-sale system at Company Drive-Ins, and the implementation of a new supply chain
management tool for use by the entire Sonic system. We expect to fund these capital expenditures through cash flow from
operations as well as cash on hand.
On October 13, 2011, our Board of Directors approved a $30 million stock repurchase program. Under that program,
we were authorized to purchase up to $30 million of our outstanding shares of common stock through August 31, 2012.
During fiscal year 2012, we completed this stock repurchase program.
On August 15, 2012, our Board of Directors approved a new stock repurchase program. Under the new program, we are
authorized to purchase up to $40 million of our outstanding shares of common stock through August 31, 2013. As of August
31, 2012, the total remaining amount authorized for repurchase was $38.9 million. Share repurchases may be made from
time to time in the open market or in negotiated transactions, depending on share price, market conditions and other factors.
The stock repurchase program may be extended, modified, suspended or discontinued at any time. We plan to fund the stock
repurchase program from existing cash on hand at August 31, 2012 and cash flows from operations.
As of August 31, 2012, our total cash balance of $70.8 million ($52.6 million of unrestricted and $18.1 million of restricted
cash balances) reflected the impact of the cash generated from operating activities, cash used for stock repurchases,
refranchising, and capital expenditures mentioned above. We believe that existing cash, funds generated from operations and
the $100 million available under our 2011 Variable Funding Notes will meet our needs for the foreseeable future.
Off-Balance Sheet Arrangements
The company has obligations for guarantees on certain franchisee loans, which in the aggregate are immaterial, and
obligations for guarantees on certain franchisee lease agreements. Other than such guarantees and various operating leases
and purchase obligations, which are disclosed below in “Contractual Obligations and Commitments” and in note 6 – Leases
and 15 – Commitments and Contingencies to our Consolidated Financial Statements, the company has no other material off-
balance sheet arrangements.
Management's Discussion and Analysis of Financial Condition and Results of Operations