Sonic's Third Quarter Earnings Per Share Increase 17%

OKLAHOMA CITY, June 20 /PRNewswire-FirstCall/ -- Sonic Corp. , the nation's largest chain of drive-in restaurants, today announced record results for its third fiscal quarter ended May 31, 2006. Highlights of the quarter included:

- A 17% increase in net income per diluted share to $0.27 from $0.23 per diluted share in the same quarter last year (as adjusted for the modified retrospective application of Statement of Financial Accounting Standards No. 123R, "Share-Based Payment," (SFAS 123R) and the Company's recent three-for-two stock split); - An increase in net income of 12% to $23.8 million from $21.3 million in the same period last year (as adjusted); - An 11% increase in total revenues to $186.5 million from $167.7 million in the year-earlier quarter; - System-wide same-store sales growth of 4.3%; and - The opening of 43 new drive-ins, including 37 by franchisees, versus a total of 40 in the same quarter last year.

Commenting on the news, Cliff Hudson, Chairman and Chief Executive Officer, said, "Sonic continued to register solid sales results in the third quarter, driven by a multi-layered approach to our business. Anchored by steady chain expansion, growing franchise income, fresh and compelling new product news, our commitment to increased media support, and technology initiatives, we've seen continued healthy sales gains that have tracked within our recently raised expectations for the second half of the fiscal year. This momentum reflects growth throughout the day, particularly in our non- traditional day parts like morning, afternoon and evening. Combined with ongoing expense leverage on the bottom half of our income statement and the benefit of using our strong cash flow to repurchase shares, this solid top- line growth has translated into strong earnings increases and attractive returns for our shareholders. Additionally, drive-in level profits increased handsomely in the third quarter, continuing the positive trend that began in the fall of 2003."

"These results represent a great kick-off to the summer months, seasonally our strongest period," Hudson continued. "The acceleration in same-store sales we witnessed in the third quarter has continued into June, with estimated system-wide same-store sales growth remaining within our higher near-term target range of 3% to 5%. Considering our solid start to the summer and the ongoing success of our strategies and increasing reach of our brand, we look for a strong finish to our fiscal year in August."

Net income per diluted share for the third quarter rose 17% to $0.27 from $0.23 in the year-earlier period (as adjusted), while net income increased 12% to $23.8 million versus $21.3 million last year. For the first nine months of fiscal 2006, net income per diluted share rose 16% to $0.59 compared with $0.51 last year (as adjusted), while net income increased 12% to $53.2 million from $47.7 million in the same period last year. Net income for the third quarter of fiscal 2006 included stock compensation expense of $1.9 million or $0.01 per diluted share, reflecting the implementation of Statement of Financial Accounting Standards No. 123R, "Share-Based Payment," (SFAS 123R); net income for the third quarter of fiscal 2005 has been adjusted to reflect stock compensation expense of $1.9 million or $0.01 per diluted share using the modified retrospective application provided by SFAS 123R. Net income for the first nine months of fiscal 2006 reflected stock compensation expense of $5.4 million or $0.04 per diluted share versus $5.0 million or $0.04 per diluted share in the year-earlier period.

All per share amounts have been adjusted to reflect the company's April 2006 three-for-two stock split.

Revenues for the third fiscal quarter rose 11% to $186.5 million from $167.7 million in the year-earlier period, with the year-over-year growth reflecting same-store sales gains, increased franchising income related to new development as well as the company's ascending royalty rate, and the benefit of the acquisition of 15 franchise drive-ins at the beginning of fiscal 2006. Revenues for the first nine months of fiscal 2006 increased 12% to $495.2 million from $442.5 million in the same period last year.

Sonic's system-wide same-store sales increased 4.3% during the third quarter versus 5.5% in the year-earlier period, reflecting a 5.0% increase at franchise drive-ins and a 1.4% increase at partner drive-ins. For the first nine months of fiscal 2006, system-wide same-store sales increased 4.8% compared with 6.8% for the first nine months of fiscal 2005, reflecting a 5.4% increase at franchise drive-ins and a 2.2% increase at partner drive-ins. Sales by franchise drive-ins in fiscal 2006 have continued to benefit from the implementation of Sonic's new PAYS program (credit card terminals at each drive-in stall), which has been in place for more than a year at partner drive-ins. The roll-out of PAYS to franchise drive-ins, which began in February 2005 and now extends to over 65% of Sonic's franchise drive-ins, is expected to have an ongoing positive impact on franchisee same-store sales over the remainder of the calendar year.

During the third quarter, Sonic opened 43 new drive-ins, including 37 franchise drive-ins, compared with a total of 40 in the year-earlier period, which included 27 by franchisees. For the first nine months of fiscal 2006, the total number of drive-in openings was 109, up from 106 in the first nine months of fiscal 2005. Sonic anticipates opening a total of 170-180 new drive- ins in fiscal 2006, including approximately 140-145 by franchisees, versus 175 drive-ins opened in fiscal 2005, which included 138 by franchisees.

Concluding, Hudson added, "For both partners and franchisees, Sonic's sale-driving strategies have continued to push drive-in level profits higher and enhance incentives for future chain expansion. As we look to maintain this momentum over the long term, we have continued to explore new opportunities, including a re-imaging initiative now being tested in certain partner drive- ins. Through May, we have re-imaged approximately 80 existing partner drive- ins, and further testing is planned over the summer months at additional partner drive-ins. The initial response from customers has been positive. Based on these results and progress, we currently plan to begin a roll-out of the re-imaging program to the rest of our system in January 2007."

In the fourth fiscal quarter ending August 31, 2006, Sonic estimates that diluted earnings per share will total approximately $0.28 to $0.29, including stock compensation expense of $0.01 per diluted share, versus $0.25 per diluted share in the year-earlier quarter, including stock compensation expense of $0.01 per diluted share ($0.26 reported in the year-earlier period, adjusted for the April 2006 stock split). The company bases this outlook on the following assumptions:

- Total revenue growth of 11% to 13% over the comparable 2005 period, reflecting: - System-wide same-store sales growth within the company's 3% to 5% target range for the fourth quarter; - The acquisition of 15 franchise drive-ins at the beginning of fiscal 2006; - Approximately 60 to 70 new drive-in openings in the fourth quarter, including 45 to 50 by franchisees; and - Growth of approximately $3.0 million in franchising income resulting from new franchise drive-ins, higher average unit volumes, and increased royalties due to the company's unique ascending royalty rate; - Restaurant-level costs in the fourth quarter, as a percentage of sales, are expected to be slightly favorable versus the same quarter last year as the benefit of sales leverage is anticipated to more than offset the increases in other operating costs, primarily higher utility costs and credit card charges resulting from an increase in credit card transactions associated with the PAYS program; - Growth in corporate overhead expenses in the 10% to 12% range, excluding the impact of stock compensation expense, which is estimated to be approximately $2.0 million or $0.01 per diluted share in the fourth quarter; - An increase in depreciation and amortization expense in the range adjustment of the 1990s retrofit asset lives in the fourth quarter of 2005; - A tax rate in the range of 36.5% to 37.5% reflecting the limitations of deductibility of stock compensation expense for tax accounting purposes, as well as the expiration of a workers' tax credit program effective January 1, 2006; - An ongoing outlook for total capital expenditures of approximately $75 million to $80 million for the year, excluding acquisitions, including the cost of partner drive-in development as well as higher expenditures for drive-in remodels, relocations, and new equipment; - Continued significant growth in cash flow from operations, which is expected to be used in the fourth and future quarters to fund capital expenditures and, on an opportunistic basis, repurchase company stock or purchase franchise drive-ins; and - The benefit of repurchasing approximately $113 million of common stock since the third fiscal quarter of 2005, leaving approximately $92 million authorized under its stock repurchase program through August 31, 2007.

A listen-only simulcast of Sonic's third quarter conference call can be accessed at the company's web site. The simulcast will begin at approximately 9:00 a.m. Central Time tomorrow, June 21, 2006. An on-demand replay, using the same link, will be available at approximately noon tomorrow and will continue until July 21, 2006.

Sonic, America's Drive-In, originally started as a hamburger and root beer stand in 1953 in Shawnee, Okla., called Top Hat Drive-In, and then changed its name to Sonic in 1959. The first drive-in to adopt the Sonic name is still serving customers in Stillwater, Okla. Sonic has over 3,000 drive-ins coast to coast and in Mexico, where more than a million customers eat every day. For more information about Sonic Corp. and its subsidiaries, visit Sonic at http://www.sonicdrivein.com/.

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those expressed in, or underlying, these forward- looking statements are detailed in the company's annual and quarterly report filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

The tables on the following pages provide information regarding the number of Partner Drive-Ins, Franchise Drive-Ins and system-wide drive-ins in operation as of the end of the periods indicated. In addition, these tables provide information regarding franchise sales, system-wide growth in sales, and both franchise and system-wide average drive-in sales and change in same- store sales. System-wide information includes both Partner and Franchise Drive-In information, which we believe is useful in analyzing the growth of the brand. While we do not record Franchise Drive-In sales as revenues, we believe this information is important in understanding our financial performance since we calculate and record franchise royalties based on a percentage of franchise sales. This information also is indicative of the financial health of our franchisees.

SONIC CORP. Unaudited Financial Highlights (In thousands, except per share amounts) Third Quarter Ended Nine Months Ended May 31, May 31, -------------------- ------------------- 2006 2005 2006 2005 (adjusted*) (adjusted*) -------- -------- -------- -------- Revenues $186,469 $167,653 $495,217 $442,493 Income from operations 39,060 34,815 89,764 79,908 Net income 23,834 21,275 53,168 47,662 Net income per share - diluted 0.27 0.23 0.59 0.51 Weighted average shares - diluted 89,007 94,074 89,596 93,945 * Previously reported prior-year results have been adjusted to implement SFAS 123R on a modified retrospective basis. All per share information reflects the company's April 2006 three-for-two stock split. SONIC CORP. Unaudited Supplemental Information Third Quarter Ended Nine Months Ended May 31, May 31, ------------------ ------------------ 2006 2005 2006 2005 ------ ------ ------ ------ Drive-Ins in operation: Partner: Total at beginning of period 599 548 574 539 Opened 6 13 16 23 Acquired from (sold to) franchisees -- -- 15 -- Closed (1) -- (1) (1) ------ ------ ------ ------ Total at end of period 604 561 604 561 ------ ------ ------ ------ Franchise: Total at beginning of period 2,490 2,386 2,465 2,346 Opened 37 27 93 83 Acquired from (sold to) company -- -- (15) -- Closed (net of reopening) (2) (1) (18) (17) ------ ------ ------ ------ Total at end of period 2,525 2,412 2,525 2,412 ------ ------ ------ ------ System-wide: Total at beginning of period 3,089 2,934 3,039 2,885 Opened 43 40 109 106 Closed (net of reopening) (3) (1) (19) (18) ------ ------ ------ ------ Total at end of period 3,129 2,973 3,129 2,973 ====== ====== ====== ======= Core markets 2,392 2,121 2,392 2,121 Developing markets 737 852 737 852 ------ ------ ------ ------ All markets 3,129 2,973 3,129 2,973 ====== ====== ====== =======

Note: Partner Drive-Ins are those Sonic Drive-Ins in which the company owns a majority interest, typically at least 60%. Most supervisors and managers of Partner Drive-Ins own a minority equity interest.

Markets are identified based on television viewing areas and further classified as core or developing markets based upon the number of drive-ins in a market and the level of advertising support. Market classifications are updated periodically.

SONIC CORP. Unaudited Supplemental Information ($ in thousands) Third Quarter Ended Nine Months Ended May 31, May 31, -------------------- ------------------------ 2006 2005 2006 2005 -------- -------- ---------- ---------- Sales Analysis Partner Drive-Ins: Total sales $156,921 $141,797 $ 418,719 $ 374,663 Average drive-in sales 262 257 706 688 Change in same-store sales 1.4% 6.1% 2.2% 8.6% Franchise Drive-Ins: Total sales $737,271 $669,191 $1,954,516 $1,777,235 Average drive-in sales 296 279 791 748 Change in same-store sales 5.0% 5.3% 5.4% 6.4% System-wide: Change in total sales 10.3% 12.3% 10.3% 14.0% Average drive-in sales $ 289 $ 275 $ 774 737 Change in same-store sales 4.3% 5.5% 4.8% 6.8% Core and Developing Markets System-wide average drive-in sales: Core markets $ 297 $ 285 $ 802 $ 767 Developing markets 259 250 679 660 System-wide change in same-store sales: Core markets 4.8% 5.1% 5.3% 6.5% Developing markets 2.2% 6.8% 2.6% 7.8%

Note: Change in same-store sales based on drive-ins open for at least 15 months.

Markets are identified based on television viewing areas and further classified as core or developing markets based upon the number of drive-ins in a market and the level of advertising support. Market classifications are updated periodically.

SONIC CORP. Unaudited Supplemental Information (In thousands, except per share amounts) Third Quarter Ended, Nine Months Ended May 31, May 31, ---------------------- ---------------------- 2006 2005 2006 2005 (adjusted*) (adjusted*) --------- --------- --------- --------- Income Statement Data Revenues: Partner Drive-In sales $ 156,921 $ 141,797 $ 418,719 $ 374,663 Franchise Drive-Ins: Franchise royalties 26,599 23,869 69,597 62,144 Franchise fees 1,268 781 3,088 2,590 Other 1,681 1,206 3,813 3,096 --------- --------- --------- --------- 186,469 167,653 495,217 442,493 Costs and expenses: Partner Drive-Ins: Food and packaging 40,213 36,811 109,480 98,799 Payroll and other employee benefits 46,418 42,157 126,358 114,032 Minority interest in earnings of Partner Drive-Ins 8,182 6,658 17,503 15,285 Other operating expenses 28,942 26,065 83,154 73,041 --------- --------- --------- --------- 123,755 111,691 336,495 301,157 Selling, general and administrative 13,293 12,096 38,703 34,714 Depreciation and amortization 10,185 9,051 30,079 26,327 Provision for impairment of long-lived assets 176 -- 176 387 --------- --------- --------- --------- 147,409 132,838 405,453 362,585 --------- --------- --------- --------- Income from operations 39,060 34,815 89,764 79,908 Interest expense 2,404 1,456 6,522 4,947 Interest income (189) (164) (904) (518) --------- --------- --------- --------- Net interest expense 2,215 1,292 5,618 4,429 --------- --------- --------- --------- Income before income taxes 36,845 33,523 84,146 75,479 Provision for income taxes 13,011 12,248 30,978 27,817 --------- --------- --------- --------- Net income $ 23,834 $ 21,275 $ 53,168 $ 47,662 ========= ========= ========= ========= Net income per share: Basic $ 0.28 $ 0.24 $ 0.61 $ 0.53 ========= ========= ========= ========= Diluted $ 0.27 $ 0.23 $ 0.59 $ 0.51 ========= ========= ========= ========= Weighted average shares used in calculation: Basic 85,993 90,296 86,545 90,235 ========= ========= ========= ========= Diluted 89,007 94,074 89,596 93,945 ========= ========= ========= ========= * Previously reported prior-year results have been adjusted to implement SFAS 123R on a modified retrospective basis.

All per share information reflects the company's April 2006 three-for-two stock split.

SONIC CORP. Unaudited Supplemental Information Third Quarter Ended Nine Months Ended May 31, May 31, ------------------- ------------------- 2006 2005 2006 2005 -------- -------- -------- -------- Margin Analysis Partner Drive-Ins: Food and packaging 25.6% 26.0% 26.1% 26.4% Payroll and employee benefits 29.6% 29.7% 30.2% 30.4% Minority interest in earnings of Partner Drive-Ins 5.2% 4.7% 4.2% 4.1% Other operating expenses 18.4% 18.4% 19.9% 19.5% ---- ---- ---- ---- 78.8% 78.8% 80.4% 80.4% May 31, August 31, 2006 2005 (adjusted*) --------- --------- (In thousands) Balance Sheet Data Total assets $ 628,274 $ 563,316 Current assets 54,875 35,249 Current liabilities 80,684 65,342 Obligations under capital leases, long-term debt, and other non-current liabilities 181,555 110,057 Stockholders' equity 366,035 387,917 * Previously reported prior-year results have been adjusted to implement SFAS 123R on a modified retrospective basis.