Sonic suffers second quarter net loss, sales decline

by Bryan Salvage
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OKLAHOMA CITY – Sonic Corp., the nation's largest chain of drive-in restaurants, announced for the second fiscal quarter ended Feb. 28 a net loss of $642,000 or $0.01 per diluted share versus net income of $8.7 million or $0.14 per diluted share in the same quarter last year.

Revenues declined 33% to $112.8 million from $169.0 million in the year-earlier period. System-wide same-store sales declined 13.2% for the second quarter; same-store sales at partner drive-ins (those in which the company owns a majority interest) declined 14.9% in the quarter. Franchise drive-in openings totaled 17 for the quarter versus 24 in the same period last year.

"The second fiscal quarter is typically the most volatile one for Sonic, and this year was no exception," said Clifford Hudson, chairman and chief executive officer. "Our second quarter sales were adversely affected by severe winter weather. In addition, many of Sonic's core markets, particularly Oklahoma and Texas, recently have started to experience a more pronounced decline in consumer spending, as evidenced by double-digit declines in sales tax collections in both of these states.”

"With spring approaching and some signs indicating the economy is improving, we believe the long-term fundamentals of Sonic's business and its potential for growth are solid," Mr. Hudson said.

Management anticipates earnings for 2010 will total $0.55 to $0.60 per diluted share, compared with earnings of $0.72 per diluted share for fiscal 2009, excluding gains and provisions for impairment. This outlook is based primarily on projected system-wide same-store sales being flat to 5% lower in the second half of the fiscal year, reflecting expected improvement in the latter half of the year versus the current trend. The company also anticipates a decline in restaurant-level margins associated with the decline in sales.

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