Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Nov. 30, 2017 | Jan. 03, 2018 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | SONIC CORP. | |
Entity Central Index Key | 868,611 | |
Current Fiscal Year End Date | --08-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Nov. 30, 2017 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 38,458,052 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Nov. 30, 2017 | Aug. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 23,532 | $ 22,340 |
Restricted cash | 14,808 | 19,736 |
Accounts and notes receivable, net | 35,844 | 33,758 |
Prepaid expenses and other current assets | 12,531 | 13,350 |
Total current assets | 86,715 | 89,184 |
Noncurrent restricted cash | 41,382 | 42,120 |
Notes receivable, net | 10,905 | 9,801 |
Property, equipment and capital leases | 618,426 | 616,001 |
Less accumulated depreciation and amortization | (312,519) | (303,621) |
Property, equipment and capital leases, net | 305,907 | 312,380 |
Goodwill | 75,756 | 75,756 |
Debt origination costs, net | 2,274 | 2,439 |
Other assets, net | 29,974 | 30,064 |
Total assets | 552,913 | 561,744 |
Current liabilities: | ||
Accounts payable | 10,911 | 9,213 |
Franchisee deposits | 662 | 1,093 |
Accrued liabilities | 31,570 | 44,846 |
Income taxes payable | 1,784 | 0 |
Current maturities of long-term debt and capital leases | 3,061 | 3,464 |
Total current liabilities | 47,988 | 58,616 |
Obligations under capital leases due after one year | 15,573 | 16,167 |
Long-term debt, net | 666,600 | 628,116 |
Deferred income taxes | 40,407 | 40,101 |
Other non-current liabilities | 19,625 | 20,502 |
Total non-current liabilities | 742,205 | 704,886 |
Stockholders’ deficit: | ||
Preferred stock, par value $.01; 1,000 shares authorized; none outstanding | 0 | 0 |
Common stock, par value $.01; 245,000 shares authorized; 118,309 shares issued (118,309 shares issued at August 31, 2017) | 1,183 | 1,183 |
Paid-in capital | 234,603 | 236,895 |
Retained earnings | 939,204 | 934,017 |
Treasury stock, at cost; 79,539 shares (78,081 shares at August 31, 2017) | (1,412,270) | (1,373,853) |
Total stockholders’ deficit | (237,280) | (201,758) |
Total liabilities and stockholders’ deficit | $ 552,913 | $ 561,744 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Nov. 30, 2017 | Aug. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 245,000,000 | 245,000,000 |
Common stock, issued (in shares) | 118,309,000 | 118,309,000 |
Treasury stock, shares (in shares) | 79,539,000 | 78,081,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements Of Income - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2017 | Nov. 30, 2016 | |
Revenues: | ||
Company Drive-In sales | $ 62,540 | $ 87,152 |
Franchise Drive-Ins: | ||
Franchise royalties and fees | 40,778 | 40,139 |
Lease revenue | 1,684 | 1,381 |
Other | 426 | 879 |
Total revenues | 105,428 | 129,551 |
Costs and expenses: | ||
Food and packaging | 17,713 | 24,116 |
Payroll and other employee benefits | 22,774 | 31,766 |
Other operating expenses, exclusive of depreciation and amortization included below | 13,579 | 19,426 |
Total cost of Company Drive-In sales | 54,066 | 75,308 |
Selling, general and administrative | 19,769 | 19,754 |
Depreciation and amortization | 9,366 | 10,277 |
Other operating income, net | (221) | (2,840) |
Total costs and expenses | 82,980 | 102,499 |
Income from operations | 22,448 | 27,052 |
Interest expense | 7,675 | 7,189 |
Interest income | (382) | (494) |
Net interest expense | 7,293 | 6,695 |
Income before income taxes | 15,155 | 20,357 |
Provision for income taxes | 3,725 | 7,239 |
Net income | $ 11,430 | $ 13,118 |
Basic income per share (usd per share) | $ 0.29 | $ 0.29 |
Diluted income per share (usd per share) | 0.29 | 0.28 |
Cash dividends declared per common share (usd per share) | $ 0.16 | $ 0.14 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2017 | Nov. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 11,430 | $ 13,118 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 9,366 | 10,277 |
Stock-based compensation expense | 970 | 1,073 |
Other | 343 | (3,028) |
Change in operating assets and liabilities: | ||
(Increase) decrease in restricted cash | 5,016 | 7,472 |
(Increase) decrease in accounts receivable and other assets | 3,703 | 1,391 |
Increase (decrease) in accounts payable | 1,065 | 3,284 |
Increase (decrease) in accrued and other liabilities | (12,175) | (19,361) |
Increase (decrease) in income taxes | 3,358 | 5,005 |
Total adjustments | 11,646 | 6,113 |
Net cash provided by operating activities | 23,076 | 19,231 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (4,055) | (14,845) |
Proceeds from sale of assets | 685 | 10,826 |
Proceeds from sale of investment in refranchised drive-in operations | 0 | 6,958 |
(Increase) decrease in notes receivable | (6,444) | 3,479 |
Other | 361 | 799 |
Net cash provided by (used in) investing activities | (9,453) | 7,217 |
Cash flows from financing activities: | ||
Purchases of treasury stock | (42,735) | (49,096) |
Payment of dividends | (6,227) | (6,345) |
Payments on debt | (22,000) | (1,062) |
Proceeds from borrowings | 60,000 | 0 |
Proceeds from exercise of stock options | 959 | 29 |
Other | (2,428) | (976) |
Net cash used in financing activities | (12,431) | (57,450) |
Net increase (decrease) in cash and cash equivalents | 1,192 | (31,002) |
Cash and cash equivalents at beginning of period | 22,340 | 72,092 |
Cash and cash equivalents at end of period | 23,532 | 41,090 |
Cash paid during the period for: | ||
Interest | 7,088 | 6,700 |
Income taxes (net of refunds) | 61 | 2,514 |
Non-cash investing and financing activities: | ||
Net additions to capital lease obligations | 14 | 1,433 |
Change in obligation to acquire treasury stock | (1,942) | 1,458 |
Stock options exercised by swap | 4,592 | 0 |
Tax benefit related to exercise of stock awards | $ 1,714 | $ 0 |
Basis Of Presentation
Basis Of Presentation | 3 Months Ended |
Nov. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis Of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements of Sonic Corp. (the “Company”). In the opinion of management, these financial statements reflect all adjustments of a normal recurring nature, including recurring accruals, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. In certain situations, recurring accruals, including franchise royalties, are based on more limited information at interim reporting dates than at the Company’s fiscal year end due to the abbreviated reporting period. Actual results may differ from these estimates. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2017 , included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of the results that may be expected for a full year or any other interim period. Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest. All intercompany accounts and transactions have been eliminated. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled for the transfer of promised goods or services to customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU will replace most of the existing revenue recognition requirements in U.S. GAAP when it becomes effective. Further, the FASB has issued clarifying guidance with ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-08 provides guidance for evaluating when another party, along with the entity, is involved in providing a good or service to a customer. ASU No. 2016-10 clarifies assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use or right to access the entity's intellectual property. ASU No. 2016-20 provides corrections or improvements to issues that affect narrow aspects of the guidance. The Company plans to adopt the standards in the first quarter of fiscal year 2019, which aligns with the required adoption date. The standards are to be applied retrospectively or using a cumulative effect transition method. The Company does not believe the new revenue recognition standard will impact the recognition of sales from Company Drive-Ins or the recognition of royalty fees from franchisees, nor will it have a material impact to the recognition of gift card breakage. The Company expects the pronouncement will impact the recognition of the initial franchise fee, which is currently recognized upon the opening of a Franchise Drive-In. The impact on these fees is not expected to be material to total revenue, and the Company anticipates electing the cumulative effect transition method. The Company continues to evaluate the effect that this pronouncement will have on principal versus agent considerations, other transactions, the financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard, which replaces existing lease guidance, requires lessees to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Accounting guidance for lessors is largely unchanged. The standard is effective for fiscal year 2020, with early application permitted. This standard requires adoption based upon a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with optional practical expedients. Based on a preliminary assessment, the Company expects that most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase in the assets and liabilities on the consolidated balance sheet. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses.” The update was issued to provide more decision-useful information about the expected credit losses on financial instruments. The update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for fiscal year 2021, with early adoption permitted for fiscal years beginning after December 15, 2018. The update should be adopted using a modified-retrospective approach. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.” The update is intended to reduce diversity in practice in how certain transactions are classified and will make eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The update is effective for fiscal year 2019. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case the amendments will apply prospectively as of the earliest date practicable. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory," as part of its simplification initiatives. The update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than deferring the recognition until the asset has been sold to an outside party as is required under current GAAP. The update is effective for fiscal year 2019. The new standard will require adoption on a modified retrospective basis through a cumulative-effect adjustment to retained earnings, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows - Restricted Cash." The update requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update is effective for fiscal year 2019. The amendments should be adopted on a retrospective basis to each period presented, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification Accounting," which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The update is effective for fiscal year 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. The Company has reviewed all other recently issued accounting pronouncements and concluded they are not applicable or not expected to be significant to our operations. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Nov. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Three months ended 2017 2016 Numerator: Net income $ 11,430 $ 13,118 Denominator: Weighted average common shares outstanding– basic 39,327 45,720 Effect of dilutive employee stock options and unvested restricted stock units 558 823 Weighted average common shares outstanding – diluted 39,885 46,543 Net income per common share – basic $ 0.29 $ 0.29 Net income per common share – diluted $ 0.29 $ 0.28 Anti-dilutive securities excluded (1) 1,288 821 __________________ (1) Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive. |
Share Repurchase Program
Share Repurchase Program | 3 Months Ended |
Nov. 30, 2017 | |
Equity [Abstract] | |
Share Repurchase Program | Share Repurchase Program In October 2016, the Company's Board of Directors increased the authorization under the share repurchase program by $40.0 million . During fiscal year 2017 , approximately 6.7 million shares were repurchased for a total cost of $172.9 million , resulting in an average price per share of $25.71 . In August 2017, the Board of Directors approved an incremental $160.0 million share repurchase authorization of the Company's outstanding shares of common stock through August 31, 2018. During the first three months of fiscal year 2018 , approximately 1.7 million shares were repurchased for a total cost of $40.8 million , resulting in an average price per share of $24.51 . The total remaining authorized under the share repurchase program as of November 30, 2017 was $119.2 million . Share repurchases may be made from time to time in the open market or otherwise, including through an accelerated share repurchase program, under 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. |
Income Taxes
Income Taxes | 3 Months Ended |
Nov. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below: Three months ended 2017 2016 Provision for income taxes $ 3,725 $ 7,239 Effective income tax rate 24.6 % 35.6 % The lower effective tax rate in the first quarter of fiscal year 2018 was primarily attributable to the recognition of excess tax benefits related to stock option exercises. Excess tax benefits in the amount of $1.7 million were recognized in the consolidated statements of income as a component of the provision for income taxes during the first quarter of fiscal year 2018, resulting in a favorable effective tax rate impact of 11% . On December 22, 2017, the “Tax Cuts and Jobs Act” ("H.R. 1") was signed into law, significantly impacting several sections of the Internal Revenue Code. The Company is currently analyzing the impact of these changes; therefore, an estimate of the impact to income taxes is not yet available. The Company will remeasure all deferred tax assets and liabilities as of December 22, 2017, based on the provisions of H.R. 1, which include a reduction in the federal statutory tax rate from 35% to 21% . The impact of the remeasurement will be recorded in the second quarter. In addition to the reduction of the federal statutory tax rate, the H.R. 1 provisions currently being analyzed as having an impact on the Company's effective tax rate in fiscal years 2018 and 2019 include, but are not limited to, the following: Changes effective fiscal year 2018 and future years: • Bonus depreciation expensing - increased from 50% to 100% for qualified property placed in service after September 27, 2017 and before 2023 • Impact of H.R. 1 on state income taxes Changes effective fiscal year 2019 and future years: • Interest expense limitations - net interest expense deduction is limited to 30% of adjusted taxable income • Repealed the tax deduction for qualified domestic production income • Employee compensation to covered employees (CEO and CFO plus next three highest compensated officers) in excess of $1 million is non-deductible. The Company continues to work through all aspects of H.R. 1 to determine the impact on the Company’s financial statements. |
Accounts And Notes Receivable
Accounts And Notes Receivable | 3 Months Ended |
Nov. 30, 2017 | |
Receivables [Abstract] | |
Accounts And Notes Receivable | Accounts and Notes Receivable Accounts and notes receivable consist of the following: November 30, August 31, Current accounts and notes receivable: Royalties and other trade receivables $ 15,842 $ 19,571 Notes receivable from franchisees 1,972 1,441 Receivables from system funds 11,540 6,360 Other 7,416 7,475 Accounts and notes receivable, gross 36,770 34,847 Allowance for doubtful accounts and notes receivable (926 ) (1,089 ) Current accounts and notes receivable, net $ 35,844 $ 33,758 Noncurrent notes receivable: Receivables from franchisees $ 7,723 $ 6,810 Receivables from system funds 3,228 3,033 Allowance for doubtful notes receivable (46 ) (42 ) Noncurrent notes receivable, net $ 10,905 $ 9,801 The Company’s receivables are primarily due from franchisees, all of whom are in the restaurant business. Substantially all of the notes receivable from franchisees are collateralized by real estate or equipment. The receivables from system funds represent transactions in the normal course of business. |
Contingencies
Contingencies | 3 Months Ended |
Nov. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Litigation As reported in the Annual Report on Form 10-K for the year ended August 31, 2017, the Company was named as a defendant in five purported class action complaints related to a payment card breach at certain Sonic Drive-Ins. The Company has since been named as a defendant in four additional purported class action complaints filed on October 9, 2017, in the United States District Court for the Northern District of Ohio, on November 3, 2017, in the United States District Court for the Northern District of Texas, on November 13, 2017, in the United States District Court for the District of Arizona, and on December 17, 2017, in the Northern District of Illinois (the nine actions are collectively referred to as the “Litigation”). Each of these complaints asserts various claims related to the Company’s alleged failure to safeguard customer credit card information, and the plaintiffs seek monetary damages, injunctive and declaratory relief and attorneys’ fees and costs. The Litigation has since been centralized in the Northern District of Ohio for coordinated or consolidated pretrial proceedings. The Company believes it has meritorious defenses to the Litigation and intends to vigorously oppose the claims asserted in the complaints. We cannot reasonably estimate the range of potential losses that may be associated with the Litigation because of the early stage of each lawsuit. We also cannot assure you that we will not become subject to other inquiries or claims relating to the payment card breach in the future. Although we maintain cyber liability insurance, we currently believe it is possible that the ultimate amount paid by us, if we are unsuccessful in defending all of the Litigation, will be in excess of our cyber liability insurance coverage applicable to claims of this nature. We are unable to estimate the amount of any such excess. The Company is involved in various other legal proceedings and has certain unresolved claims pending. Based on the information currently available, management believes that all such other claims currently pending are either covered by insurance or would not have a material adverse effect on the Company’s business 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 . 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 November 30, 2017 , the balance of the franchisee’s loan was $5.5 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 November 30, 2017 , the amount remaining under these guaranteed lease obligations totaled $14.1 million . At this time, the Company does not anticipate any material defaults under the foregoing leases; therefore, zero liability has been provided. |
Fair Value Of Financial Instrum
Fair Value Of Financial Instruments | 3 Months Ended |
Nov. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Of Financial Instruments | Fair Value of Financial Instruments The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company has no financial liabilities that are required to be measured at fair value on a recurring basis. The Company categorizes its assets and liabilities recorded at fair value based on the following fair value hierarchy established by the FASB: • Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. • Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The Company’s cash equivalents, some of which are included in restricted cash, are carried at cost which approximates fair value and totaled $70.9 million at November 30, 2017 and $73.9 million at August 31, 2017 . This fair value is estimated using Level 1 inputs. At November 30, 2017 and August 31, 2017 , the fair value of the Company’s Series 2016-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2016 Fixed Rate Notes”) and Series 2013-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2013 Fixed Rate Notes” and, together with the 2016 Fixed Rate Notes, the “Fixed Rate Notes”) approximated the carrying value, including accrued interest, of $578.2 million . At November 30, 2017 the fair value of the Company's Series 2016-1 Senior Secured Variable Funding Notes, Class A-1 (the “2016 Variable Funding Notes” and, together with the Fixed Rate Notes, the “Notes”) approximated the carrying value of $98.2 million , including accrued interest. At August 31, 2017 the 2016 Variable Funding Notes had $60.1 million balance. The fair value of the Notes is estimated using Level 2 inputs from market information available for public debt transactions for companies with ratings that are similar to the Company’s ratings and from information gathered from brokers who trade in the Company’s notes. |
Other Operating Income
Other Operating Income | 3 Months Ended |
Nov. 30, 2017 | |
Other Income and Expenses [Abstract] | |
Other Operating Income | Other Operating Income During the first quarter of fiscal year 2017, the Company recorded a gain of $3.8 million on the sale of minority investments in franchise operations retained as part of a refranchising transaction that occurred in fiscal year 2009. The gain is reflected in other operating income, net, on the condensed consolidated statement of income. |
Refranchising Initiative
Refranchising Initiative | 3 Months Ended |
Nov. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Refranchising Initiative | Refranchising Initiative The Company completed a refranchising initiative in fiscal year 2017. During the first quarter of fiscal year 2017, 56 Company Drive-Ins were refranchised, and the Company retained a non-controlling minority investment in the franchise operations. Income from minority investments is included in other revenue on the condensed consolidated statements of income. The gains and losses below are recorded in other operating income, net, on the condensed consolidated statement of income. The following is a summary of the pretax activity recorded as a result of the refranchising initiative (in thousands, except number of refranchised Company Drive-Ins): Three months ended Number of refranchised Company Drive-Ins 56 Proceeds from sales of Company Drive-Ins $ 8,950 Assets sold, net of retained minority investment (1) (5,461 ) Initial lease payments for real estate option (2) (3,810 ) Goodwill related to sales of Company Drive-Ins (377 ) Loss on assets held for sale (259 ) Refranchising initiative losses, net $ (957 ) _______________ (1) Net assets sold consisted primarily of equipment. (2) During the first quarter of fiscal year 2017, as part of a 53 drive-in refranchising transaction, the Company entered into a direct financing lease which included an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, because the exercise of this option could occur at any time within 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option was applied as the initial minimum lease payment for the real estate. The franchisee exercised the option in the last six months of fiscal year 2017. Until the option was fully exercised, the franchisee made monthly lease payments which were included in other operating income, net of sub-lease expense. |
Basis Of Presentation (Policy)
Basis Of Presentation (Policy) | 3 Months Ended |
Nov. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles Of Consolidation | Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest. All intercompany accounts and transactions have been eliminated. |
New Accounting Pronouncements | Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled for the transfer of promised goods or services to customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU will replace most of the existing revenue recognition requirements in U.S. GAAP when it becomes effective. Further, the FASB has issued clarifying guidance with ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-08 provides guidance for evaluating when another party, along with the entity, is involved in providing a good or service to a customer. ASU No. 2016-10 clarifies assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use or right to access the entity's intellectual property. ASU No. 2016-20 provides corrections or improvements to issues that affect narrow aspects of the guidance. The Company plans to adopt the standards in the first quarter of fiscal year 2019, which aligns with the required adoption date. The standards are to be applied retrospectively or using a cumulative effect transition method. The Company does not believe the new revenue recognition standard will impact the recognition of sales from Company Drive-Ins or the recognition of royalty fees from franchisees, nor will it have a material impact to the recognition of gift card breakage. The Company expects the pronouncement will impact the recognition of the initial franchise fee, which is currently recognized upon the opening of a Franchise Drive-In. The impact on these fees is not expected to be material to total revenue, and the Company anticipates electing the cumulative effect transition method. The Company continues to evaluate the effect that this pronouncement will have on principal versus agent considerations, other transactions, the financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard, which replaces existing lease guidance, requires lessees to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Accounting guidance for lessors is largely unchanged. The standard is effective for fiscal year 2020, with early application permitted. This standard requires adoption based upon a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with optional practical expedients. Based on a preliminary assessment, the Company expects that most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase in the assets and liabilities on the consolidated balance sheet. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses.” The update was issued to provide more decision-useful information about the expected credit losses on financial instruments. The update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for fiscal year 2021, with early adoption permitted for fiscal years beginning after December 15, 2018. The update should be adopted using a modified-retrospective approach. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.” The update is intended to reduce diversity in practice in how certain transactions are classified and will make eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The update is effective for fiscal year 2019. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case the amendments will apply prospectively as of the earliest date practicable. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory," as part of its simplification initiatives. The update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than deferring the recognition until the asset has been sold to an outside party as is required under current GAAP. The update is effective for fiscal year 2019. The new standard will require adoption on a modified retrospective basis through a cumulative-effect adjustment to retained earnings, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows - Restricted Cash." The update requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update is effective for fiscal year 2019. The amendments should be adopted on a retrospective basis to each period presented, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification Accounting," which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The update is effective for fiscal year 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. The Company has reviewed all other recently issued accounting pronouncements and concluded they are not applicable or not expected to be significant to our operations. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Nov. 30, 2017 | |
Earnings Per Share [Abstract] | |
Computation Of Basic And Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share: Three months ended 2017 2016 Numerator: Net income $ 11,430 $ 13,118 Denominator: Weighted average common shares outstanding– basic 39,327 45,720 Effect of dilutive employee stock options and unvested restricted stock units 558 823 Weighted average common shares outstanding – diluted 39,885 46,543 Net income per common share – basic $ 0.29 $ 0.29 Net income per common share – diluted $ 0.29 $ 0.28 Anti-dilutive securities excluded (1) 1,288 821 __________________ (1) Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive. |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Nov. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate | The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below: Three months ended 2017 2016 Provision for income taxes $ 3,725 $ 7,239 Effective income tax rate 24.6 % 35.6 % |
Accounts And Notes Receivable (
Accounts And Notes Receivable (Tables) | 3 Months Ended |
Nov. 30, 2017 | |
Receivables [Abstract] | |
Schedule Of Accounts And Notes Receivable | Accounts and notes receivable consist of the following: November 30, August 31, Current accounts and notes receivable: Royalties and other trade receivables $ 15,842 $ 19,571 Notes receivable from franchisees 1,972 1,441 Receivables from system funds 11,540 6,360 Other 7,416 7,475 Accounts and notes receivable, gross 36,770 34,847 Allowance for doubtful accounts and notes receivable (926 ) (1,089 ) Current accounts and notes receivable, net $ 35,844 $ 33,758 Noncurrent notes receivable: Receivables from franchisees $ 7,723 $ 6,810 Receivables from system funds 3,228 3,033 Allowance for doubtful notes receivable (46 ) (42 ) Noncurrent notes receivable, net $ 10,905 $ 9,801 |
Refranchising Initiative (Table
Refranchising Initiative (Tables) | 3 Months Ended |
Nov. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Summary of the pretax activity recorded as a result of the refranchising initiative | The following is a summary of the pretax activity recorded as a result of the refranchising initiative (in thousands, except number of refranchised Company Drive-Ins): Three months ended Number of refranchised Company Drive-Ins 56 Proceeds from sales of Company Drive-Ins $ 8,950 Assets sold, net of retained minority investment (1) (5,461 ) Initial lease payments for real estate option (2) (3,810 ) Goodwill related to sales of Company Drive-Ins (377 ) Loss on assets held for sale (259 ) Refranchising initiative losses, net $ (957 ) _______________ (1) Net assets sold consisted primarily of equipment. (2) During the first quarter of fiscal year 2017, as part of a 53 drive-in refranchising transaction, the Company entered into a direct financing lease which included an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, because the exercise of this option could occur at any time within 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option was applied as the initial minimum lease payment for the real estate. The franchisee exercised the option in the last six months of fiscal year 2017. Until the option was fully exercised, the franchisee made monthly lease payments which were included in other operating income, net of sub-lease expense. |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Nov. 30, 2017 | Nov. 30, 2016 | |
Earnings Per Share [Abstract] | ||
Net income | $ 11,430 | $ 13,118 |
Weighted average common shares outstanding– basic (in shares) | 39,327 | 45,720 |
Effect of dilutive employee stock options and unvested restricted stock units (in shares) | 558 | 823 |
Weighted average common shares outstanding – diluted (in shares) | 39,885 | 46,543 |
Net income per common share – basic (usd per share) | $ 0.29 | $ 0.29 |
Net income per common share – diluted (usd per share) | $ 0.29 | $ 0.28 |
Anti-dilutive securities excluded (in shares) | 1,288 | 821 |
Share Repurchase Program (Detai
Share Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |
Nov. 30, 2017 | Aug. 31, 2017 | Oct. 31, 2016 | |
Equity [Abstract] | |||
Shares repurchase authorized amount | $ 160 | $ 40 | |
Shares acquired through stock repurchase program | 1.7 | 6.7 | |
Purchase of treasury stock | $ 40.8 | $ 172.9 | |
Weighted-average price per share | $ 24.51 | $ 25.71 | |
Remaining amount authorized for repurchase through share repurchase program | $ 119.2 |
Income Taxes (Schedule Of Provi
Income Taxes (Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2017 | Nov. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 3,725 | $ 7,239 |
Effective income tax rate | 24.60% | 35.60% |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | Dec. 22, 2017 | Nov. 30, 2017 | Nov. 30, 2016 |
Income Tax Contingency [Line Items] | |||
Excess tax benefit | $ 1,714 | $ 0 | |
Tax rate impact related to exercise of stock awards, Percent | 11.00% | ||
Federal statutory tax rate | 35.00% | ||
Subsequent Event [Member] | |||
Income Tax Contingency [Line Items] | |||
Federal statutory tax rate | 21.00% |
Accounts And Notes Receivable24
Accounts And Notes Receivable (Details) - USD ($) $ in Thousands | Nov. 30, 2017 | Aug. 31, 2017 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Royalties and other trade receivables | $ 15,842 | $ 19,571 |
Current accounts and notes receivable, gross | 36,770 | 34,847 |
Allowance for doubtful accounts and notes receivable | (926) | (1,089) |
Current accounts and notes receivable, net | 35,844 | 33,758 |
Allowance for doubtful notes receivable | (46) | (42) |
Noncurrent notes receivable, net | 10,905 | 9,801 |
Notes Receivable From Franchisees [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Current accounts and notes receivable, gross | 1,972 | 1,441 |
Noncurrent accounts and notes receivable, gross | 7,723 | 6,810 |
Receivables From System Funds [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Current accounts and notes receivable, gross | 11,540 | 6,360 |
Noncurrent accounts and notes receivable, gross | 3,228 | 3,033 |
Other [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Current accounts and notes receivable, gross | $ 7,416 | $ 7,475 |
Contingencies (Details)
Contingencies (Details) | 3 Months Ended |
Nov. 30, 2017USD ($) | |
Note Repurchase Agreement [Member] | |
Loss Contingencies [Line Items] | |
Guarantor Obligations, Term | 2,018 |
Guaranteed obligations | $ 5,500,000 |
Guarantee Operating Lease Obligations [Member] | |
Loss Contingencies [Line Items] | |
Guarantor Obligations, Term | 2,029 |
Guaranteed obligations | $ 14,100,000 |
Guaranteed liability, carrying value | $ 0 |
Fair Value Of Financial Instr26
Fair Value Of Financial Instruments (Narrative) (Details) - USD ($) $ in Millions | Nov. 30, 2017 | Aug. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents carried at cost | $ 70.9 | $ 73.9 |
2016 and 2013 Fixed Rate Notes [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, carrying value, including accrued interest | 578.2 | 578.2 |
2016 and 2013 Fixed Rate Notes [Member] | Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, fair value | 578.2 | 578.2 |
2016 Variable Rate Notes [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, carrying value, including accrued interest | 98.2 | 60.1 |
2016 Variable Rate Notes [Member] | Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, fair value | $ 98.2 | $ 60.1 |
Other Operating Income (Details
Other Operating Income (Details) $ in Millions | 3 Months Ended |
Nov. 30, 2016USD ($) | |
Other Income and Expenses [Abstract] | |
Gain on sale of investments in franchise operations | $ 3.8 |
Refranchising Initiative (Narra
Refranchising Initiative (Narrative) (Details) | 3 Months Ended |
Nov. 30, 2016franchise | |
Refranchising Initiative 2017 [Member] | |
Franchisor Disclosure [Line Items] | |
Refranchised Company Drive-Ins | 56 |
Refranchising Initiative Summar
Refranchising Initiative Summary of the pretax activity recorded as a result of the refranchising initiative (Details) $ in Thousands | 3 Months Ended | |
Nov. 30, 2017USD ($) | Nov. 30, 2016USD ($)franchise | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Proceeds from sales of Company Drive-Ins | $ 685 | $ 10,826 |
Refranchising Initiative 2017 [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of refranchised Company Drive-Ins | franchise | 56 | |
Proceeds from sales of Company Drive-Ins | $ 8,950 | |
Initial lease payments for real estate option | (3,810) | |
Goodwill related to sales of Company Drive-Ins | (377) | |
Loss on assets held for sale | (259) | |
Refranchising initiative losses, net | $ (957) | |
Refranchised Company Drive-Ins with Direct Financing Lease | franchise | 53 | |
Equipment [Member] | Refranchising Initiative 2017 [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Assets sold, net of retained minority investment | $ (5,461) |