Sonic 2012 Annual Report Download - page 4

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Reporting to you this year feels different... and it feels better!
In reviewing this letter and considering where our company is, remember these three things:
• How we have improved;
• Why I believe we are on better footing; and
• How we are going to sustain this improvement, despite persistent external headwinds.
We have improved because our food quality and customer service have improved. Our customers have
told us this consistently over the last four years, as we have reported to you in prior years.
We have improved because we have become more focused on customer value and pricing tiers than
we were before the recession. Our customers tell us the value we offer has improved versus three and
four years ago.
We have improved because our media buying and television creative, including a return to our "Two
Guys" campaign, are now much more effective. Stronger vendors combined with more effective day-part
strategies and product promotions are driving positive sales. This was not true 18 to 24 months ago, but
it is so now. Positive feedback from customers and franchisees, along with favorable sales and
profitability trends, are evidence of this.
And so, the Sonic brand is on sound footing with growing sales and profitability as a result of these
improvements and others like:
• Stronger, more stable company drive-in level management;
• The addition of new talent at our company, including our new chief marketing officer, James
O'Reilly, and key marketing staff members;
• Greater national media presence; we have secured the overwhelming support of our franchisees to
pursue media strategies, specifically greater national presence, that should lift our brand
awareness in every market and nationwide;
• A stronger product pipeline, which is now the best it has been in years;
• Lower new drive-in building costs, reduced by 15% to 20%, to improve the return on investment
(ROI) for new Sonic Drive-Ins; and
• A stronger technology platform, setting us up for good things to come!
Our work to increase shareholder value relies on a multi-layered growth strategy, which incorporates
sales growth, leverage from higher sales, strategic use of free cash, increasing royalty revenue and new
drive-in development, to achieve double-digit earnings per share growth. We were very pleased that
positive same-store sales in fiscal 2012 fueled other layers in our multi-layered growth strategy,
including greater operating leverage, increased franchising revenue and strategic use of cash, which
resulted in a 13% increase in earnings per share for the year to $0.60 from $0.53, on an adjusted basis,
for fiscal 2011. The improvement was disproportionately greater in the latter part of the year when our
earnings per share for the fourth fiscal quarter improved 25%.
We have the view that the initiatives we have planned for 2013 and beyond will only build and
complement the foundational improvements made over the past three years. All of these components
are expected to sustain our improvement and increase shareholder value over the near term and long
term. So life is better at Sonic.
To Our Shareholders:
2