Sonic 2015 Annual Report Download - page 45

Share repurchases will be made from time to time in the open market or otherwise, including through an accelerated
share repurchase program, under the terms of a Rule 10b5-1 plan, in privately negotiated transactions or in round lot or
block transactions. The share repurchase program may be extended, modified, suspended or discontinued at any time. We
plan to fund the share repurchase program from existing cash on hand at August 31, 2015, cash flows from operations and
borrowings under our 2011 Variable Funding Notes.
Dividends
In August 2014, the Company initiated a quarterly cash dividend program and paid a quarterly dividend of $0.09 per
share of common stock, totaling $18.8 million for the fiscal year. Subsequent to the end of the fiscal year, the Company
declared a quarterly dividend of $0.11 per share of common stock to be paid to stockholders of record as of the close of business
on November 11, 2015, with a payment date of November 20, 2015. The Company did not pay any cash dividends on its
common stock prior to fiscal 2015. The future declaration of quarterly dividends and the establishment of future record and
payment dates are subject to the final determination of the Company’s Board of Directors.
14. Employee Benefit and Cash Incentive Plans
The Company sponsors a qualified defined contribution 401(k) plan for employees meeting certain eligibility requirements.
Under the plan, employees are entitled to make pre-tax contributions. The Company matches an amount equal to the
employee’s contributions up to a maximum of 6% of the employee’s salaries depending on years of service. The Company’s
contributions during fiscal years 2015, 2014 and 2013 were $1.6 million, $1.3 million and $1.9 million, respectively.
The Company has short-term and long-term cash incentive plans (the “Incentive Plans”) that apply to certain employees,
and grants of awards under the Incentive Plans are at all times subject to the approval of the Company’s Board of Directors.
Under certain awards pursuant to the Incentive Plans, if predetermined earnings goals are met, 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 $12.4
million, $9.5 million and $8.2 million during fiscal years 2015, 2014 and 2013, respectively.
15. Commitments and Contingencies
Litigation
The Company is involved in various legal proceedings and has certain unresolved claims pending. Based on the
information currently available, management believes that all claims currently pending are either covered by insurance or
would not have a material adverse effect on the Company’s business, operating results or financial condition.
Note Repurchase Agreement
On December 20, 2013, the Company extended a note purchase agreement to a bank that serves to guarantee the
repayment of a franchisee loan, with a term through 2018, and also benefits the franchisee with a lower financing rate.
In the event of default by the franchisee, the Company would purchase the franchisee loan from the bank, thereby becoming
the note holder and providing an avenue of recourse with the franchisee. The Company recorded a liability for this guarantee
which was based on the Company’s estimate of fair value. As of August 31, 2015, the balance of the franchisee’s loan was
$6.0 million.
Lease Commitments
The Company has obligations under various operating lease agreements with third-party lessors related to the real
estate for certain Company Drive-In operations that were sold to franchisees. Under these agreements, which expire through
2029, the Company remains secondarily liable for the lease payments for which it was responsible as the original lessee. As
of August 31, 2015, the amount remaining under these guaranteed lease obligations totaled $8.0 million. At this time, the
Company does not anticipate any material defaults under the foregoing leases; therefore, no liability has been provided.
Purchase Obligations
At August 31, 2015, the Company had purchase obligations of approximately $283.2 million which primarily related to its
estimated share of system-wide commitments for food products. The Company has excluded agreements that are cancelable
without penalty.
Notes to Consolidated Financial Statements
August 31, 2015, 2014 and 2013 (In thousands, except per share data)
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