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"Our multi-layered sources of growth, including an expanding franchise base, higher royalty rates and improved restaurant margins, continues to drive our earnings," said Clifford Hudson, President and Chief Executive Officer. "These strategies have produced solid top-line growth, improved profitability and record earnings. This marks an excellent start to the new year and provides a good foundation for Sonic's continued growth in the months to come."
These strategies produced first quarter highlights including strong sales growth, evidenced by a 4.6% increase in system-wide same-store sales; ongoing benefit from the company's unique ascending royalty rate which led to a 21% increase in franchise royalties during the first quarter; continued momentum in new store development with the opening of 37 new restaurants; improved restaurant- and corporate-level margins which contributed to a 25% increase in operating income; and Further benefit from the company's use of excess cash flow for share repurchases which improve earnings per share and increase return on equity.
Sonic's total revenues for the first quarter increased 11% to $65.9 million from $59.6 million in the year-earlier period.These results, however, do not take into account the sale of 36 drive-ins to franchisees last year. Adjusting for the disposition of these restaurants, total revenues increased about 19% in the first quarter of 2000. First quarter net income increased 26% to $7.5 million or $0.39 per diluted share versus $5.9 million or $0.31 per diluted share last year.
Other highlights for the first quarter included a 7.8% increase in average unit volumes for company-owned stores resulting from improved performance of new stores and the disposition of under-performing stores during fiscal year 1999, and a 15% increase in system-wide sales to $416.8 million.Over 75% of the chain now has the new Sonic 2000 retrofit look and 90% of the chain is expected to have the look by the end of fiscal year 2000.
"We also are very pleased with the strength of our development pipeline," Hudson continued. "Although our 37 store openings did not match the record pace seen in the first quarter last year, this reflected primarily a timing issue rather than lack of opportunity. We added four new franchisees in the first quarter, with commitments for up to 24 drive-ins under area development agreements. With these additions and the almost 40 other new franchisees attracted to our system over the past three years, we remain very much on track to open at least 180 new drive-ins during fiscal 2000, including 35-40 company-owned restaurants. This expansion would represent the most active year of drive-in openings in our history as a public company and, coupled with the final stages of implementing our Sonic 2000 retrofit program, will continue to be a strong driver of revenue growth.
"Looking ahead to the balance of the year, we believe that Sonic's multi-layered growth strategy will continue to position the company as a performance leader in the fast-food industry," Hudson remarked. "The sales pace in December accelerated slightly compared with the first quarter and we remain confident of the company's ability to deliver enhanced value for its stockholders by consistently growing earnings and achieving a high return on equity." Sonic Corp. franchises and operates the largest chain of drive-in restaurants in the United States.