Sonic 2015 Annual Report Download - page 22

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
These purchases decreased $36.8 million in fiscal year 2015 compared to the same period last year mainly due to the
completion of the new technology installations at Company Drive-Ins during the first quarter of the fiscal year. Additionally,
proceeds from the sale of assets increased $11.6 million primarily related to the sale of operations and real estate for nine
Company Drive-Ins, as well as the sale of surplus property.
Financing Cash Flows. Net cash used in financing activities increased $44.3 million to $119.5 million for fiscal year 2015
as compared to $75.2 million in fiscal year 2014. This increase primarily relates to a $40.7 million increase in purchases of
treasury stock and $18.8 million in dividend payments. This increase is partially offset by $91.0 million in proceeds from
drawdowns on the 2011 Variable Funding Notes throughout fiscal year 2015, and offset by the $80.5 million of repayments
on the 2011 Variable Funding Notes.
In the second quarter of fiscal year 2013, we made a debt prepayment, at par, of $20.0 million on our Series 2011-1 Senior
Secured Fixed Rate Notes, Class A-2 (“2011 Fixed Rate Notes” and, together with the 2011 Variable Funding Notes, the “2011
Notes”). In the fourth quarter of fiscal year 2013, in a private transaction we refinanced $155 million of the 2011 Fixed Rate
Notes with the issuance of $155 million of Series 2013-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2013 Fixed Rate
Notes”), which bear interest at 3.75% per annum. The 2013 Fixed Rate Notes have an expected life of seven years, interest
payable monthly, with no scheduled principal amortization. As a result, mandatory debt payments have decreased from
$15.0 million to $9.8 million per year. Additionally, in the fourth quarter of fiscal year 2013, we extended the renewal date
of our 2011 Variable Funding Notes by two years to May 2018 and decreased the base spread from 3.75% to 3.50%.
At August 31, 2015, the balance outstanding under the 2011 Fixed Rate Notes, the 2011 Variable Funding Notes and the
2013 Fixed Rate Notes, including accrued interest, was $272.9 million, $10.5 million and $155.2 million, respectively. The
weighted-average interest cost of the 2011 Fixed Rate Notes, 2011 Variable Funding Notes and 2013 Fixed Rate Notes was
5.9%, 4.1% and 4.1%, respectively. The weighted-average interest cost includes the effect of the loan origination costs.
In fiscal year 2013, the debt prepayment and the partial debt refinancing mentioned above resulted in a pro-rata write-
off of loan origination costs from the 2011 Fixed Rate Notes, representing a majority of the $4.4 million loss which is reflected
in “Net loss from early extinguishment of debt” on the Consolidated Statements of Income. An additional $4.1 million in
debt origination costs were capitalized in conjunction with the 2013 Fixed Rate Notes. Loan costs are being amortized over
each note’s expected life. The amount of loan costs expected to be amortized over the next 12 months is reflected in “Other
current assets” on the Consolidated Balance Sheets. For additional information on our 2011 Notes and 2013 Fixed Rate
Notes, see note 10 – Debt, included in the Notes to Consolidated Financial Statements in this Annual Report.
In August 2012, our Board of Directors approved a $40 million share repurchase program. Under that program, we were
authorized to purchase up to $40 million of our outstanding shares of common stock through August 31, 2013. In January
2013, the Board of Directors increased the purchase authorization to $55 million. During fiscal year 2013, we completed this
share repurchase program.
In August 2013, the Board of Directors extended the share repurchase program, authorizing us to purchase up to
$40 million of our outstanding shares of common stock. In January 2014, our Board of Directors approved an incremental
$40 million authorization for this program that allowed for up to $80 million of common stock to be repurchased through
August 31, 2014.
As part of this program, in February 2014, we entered into an accelerated share repurchase (“ASR”) agreement with
a financial institution to purchase $40 million of our common stock. In exchange for a $40 million up-front payment, the
financial institution delivered approximately 2.1 million shares. During March 2014, the ASR purchase period concluded
with no additional shares delivered, resulting in an average price per share of $19.13. We reflected the ASR transaction as
a repurchase of common stock for purposes of calculating earnings per share and as a forward contract indexed to its own
common stock. The forward contract met all of the applicable criteria for equity classification.
The Company completed the Board-approved share repurchase program during fiscal year 2014, with approximately 4.1
million shares repurchased, resulting in an average price per share of $19.61.
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