UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
| [X] | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Year Ended December 31, 2002 |
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Transition Period from __________ to __________ |
Commission File Number: 0-18859
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
Sonic Corp. Savings and Profit Sharing Plan
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Sonic Corp.
101 Park Avenue
Oklahoma City, Oklahoma 73102
Sonic Corp. Savings and Profit Sharing Plan
Financial Statements and Supplemental Schedule
As of December 31, 2002 and 2001, and for the Year Ended December 31, 2002
Report of Independent Auditors
The Plan Administrator
Sonic Corp. Savings and Profit Sharing Plan
We have audited the accompanying statement of net assets available for benefits of Sonic Corp. Savings and Profit Sharing Plan (the Plan) as of December 31, 2002, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The statement of net assets available for benefits of the Plan as of December 31, 2001 were audited by other auditors who have ceased operations. These auditors expressed an unqualified opinion on those financial statements on their report dated April 19, 2002.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2002, and the changes in net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets (held at the end of year) as of December 31, 2002, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
| /s/ Ernst & Young LLP | ||
| Oklahoma City, Oklahoma June 23, 2003 |
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This report is a copy of the previously issued report of Arthur Andersen LLP included in Form 11-K of the Sonic Corp. Savings and Profit Sharing Plan for the period from September 1, 2001 through December 31, 2001. This report has not been reissued by Arthur Andersen LLP.
Report of Independent Public Accountants
To the Plan Administrator of the
Sonic Corp. Savings and Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits of the Sonic Corp. Savings and Profit Sharing Plan (the “Plan”) as of December 31, 2001, and the related statements of changes in net assets available for benefits for the period from September 1, 2001 through December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2001, and the changes in net assets available for benefits for the period from September 1, 2001 through December 31, 2001, in conformity with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
| /s/ Arthur Andersen LLP | ||
| Oklahoma City, Oklahoma April 19, 2002 |
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Sonic Corp. Savings and Profit Sharing Plan
Statements of Net Assets Available for Benefits
| December 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2002 | 2001 | ||||||
| Cash | $ | 305 | $ | 99,993 | |||
| Investments | 8,406,033 | 7,788,001 | |||||
| Receivables: | |||||||
| Contributions: | |||||||
| Participants | 33,976 | 26,040 | |||||
| Employer | 39,876 | 15,867 | |||||
| Participant loans | 3,017 | — | |||||
| Accrued interest | 1,190 | 1,985 | |||||
| Total receivables | 78,059 | 43,892 | |||||
| Total assets | 8,484,397 | 7,931,886 | |||||
| Liabilities: | |||||||
| Excess deferrals | 10,332 | — | |||||
| Net assets available for benefits | $ | 8,474,065 | $ | 7,931,886 | |||
See accompanying notes.
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Sonic Corp. Savings and Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2002
| Additions: | |||||
| Investment income (loss): | |||||
| Net depreciation in fair value of investments | $ | (1,289,147 | ) | ||
| Interest and dividends | 136,435 | ||||
| Net investment loss | (1,152,712 | ) | |||
| Contributions: | |||||
| Participants | 1,383,727 | ||||
| Employer | 693,946 | ||||
| 2,077,673 | |||||
| Net additions | 924,961 | ||||
| Deductions: | |||||
| Benefit payments | 372,818 | ||||
| Administrative expenses | 9,964 | ||||
| Total deductions | 382,782 | ||||
| Increase in net assets available for benefits | 542,179 | ||||
| Net assets available for benefits at beginning of year | 7,931,886 | ||||
| Net assets available for benefits at end of year | $ | 8,474,065 | |||
See accompanying notes.
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Sonic Corp. Savings and Profit Sharing Plan
Notes to Financial Statements
December 31, 2002 and 2001
1. Description of the Plan
General
The Sonic Corp. Savings and Profit Sharing Plan (the Plan), is a defined contribution plan covering substantially all employees of Sonic Corp. (the Employer), who have completed three consecutive months of service or at least 1,000 hours of service in any eligibility computation period, as defined in the plan agreement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Reference should be made to the Plan agreement for more complete information.
Effective December 31, 2001, the Plan adopted a new plan document, changed administrators, and changed certain investment options available under the Plan. The provisions under the new plan document are substantially the same as those in effect under the previous plan document.
Contributions
Beginning January 1, 2002, participants may contribute up to 50% of pretax annual compensation, as defined in the plan document. Prior to the adoption of the new plan document, participants were limited to contributing a maximum of 11% of pretax annual compensation. Participants may also rollover amounts representing distributions from other qualified defined benefit or defined contribution plans, which totaled $264,801 in 2002. Participants direct the investment of their contributions into various investment options offered by the Plan. The Company voluntarily matched up to 4.5% (100% of the first 3%, plus 50% of the next 3%) of participants’ compensation for the year ended December 31, 2002. Additional profit sharing amounts may be contributed at the option of the Company’s Board of Directors. Contributions are subject to certain limitations.
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Participants’ Accounts
Each participant’s account is credited with the participant’s contribution and allocations of the Company’s contributions and Plan earnings. Allocations are based on participant compensation or account balances, as defined. Forfeited balances of terminated participants’ nonvested accounts are used to reduce plan expenses, then future Company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. Included in the Plan assets at December 31, 2002 and 2001, were $47,491 and $10,570, respectively, of unallocated forfeited nonvested accounts.
Vesting
Participants are vested immediately in their contributions plus actual earnings thereon. Vesting in the Company’s contribution portion of their accounts is based on years of continuous service. A participant is 100% vested after six years of credited service.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. The loans are secured by the balance in the participant’s account and bear interest at rates which are commensurate with local prevailing rates as determined quarterly by the plan administrator.
Amounts Due to Participants
As of December 31, 2002 and 2001, there were no participants that had terminated and requested a distribution and had not received payment of the distribution.
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Payment of Benefits
On termination of service, death, disability, or retirement, a participant may elect to receive a lump-sum payment in an amount equal to the value of the participant’s vested interest or may elect to receive monthly, quarterly, or annual installments over a period of not more than the participant’s assumed life expectancy.
Administration
The Plan is administered by the Company. Certain administrative expenses incurred by the Plan are paid by the Company and were not material in 2002.
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of accounting. Benefits paid to participants are recorded when paid.
Termination
Although it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time. Upon termination of the Plan, the rights of participants under the Plan shall become 100% vested and nonforfeitable and the net assets of the Plan would be distributed by the Plan Administrator.
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2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. Shares of registered investment companies are valued at published market prices, which represent the net asset value of shares held by the Plan at December 31, 2002 and 2001. The Company’s common stock is valued at its published market price. Participant notes receivable are valued at cost which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates.
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3. Investments
The Plan’s investments were held by Nationwide Trust Company, FSB and BancOklahoma Trust Company as of December 31, 2002 and 2001, respectively. The following presents investments that represent 5% or more of the Plan’s net assets:
| December 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2002 | 2001 | ||||||
| American Performance Cash Management Fund | $ | — | $ | 448,517 | |||
| AIM Constellation Fund | — | 1,174,068 | |||||
| AIM Value Fund | — | 784,840 | |||||
| American AAdvantage Balanced Fund | — | 807,197 | |||||
| Federated Max Cap Fund | — | 1,219,338 | |||||
| Neuberger & Berman Guardian Trust Fund | — | 879,897 | |||||
| Sonic Corp. common stock | 1,697,248 | 1,349,821 | |||||
| Dreyfus Intermediate Term Income Fund | 1,251,734 | — | |||||
| Growth Fund of America/ A | 1,117,624 | — | |||||
| Putnam International Growth | 1,068,159 | — | |||||
| SEI Stable Asset | 643,579 | — | |||||
| State Street Research Aurora A | 475,496 | — | |||||
| Van Kampen Growth and Income A | 1,452,598 | — | |||||
The Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value as follows:
| For the Year Ended December 31, 2002 | |||||
|---|---|---|---|---|---|
| Mutual funds | $ | (971,581 | ) | ||
| Sonic Corp. common stock | (317,566 | ) | |||
| Net depreciation in fair value of investments | $ | (1,289,147 | ) | ||
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4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated March 25, 2003, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.
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Supplemental Schedule
Sonic Corp. Savings and Profit Sharing Plan
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
EIN: 73-1371046
December 31, 2002
| (a) | (b) Identity of Issuer, Borrower, Lessor or Similar Party | (c) Description of Investment including maturity date, rate of interest, collateral, par or maturity value | (e) Market Value | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| AIM Small Cap Growth Fund | 18,983 shares | $ | 350,811 | ||||||||
| Cash Management Trust of America | 77,146 shares | 77,146 | |||||||||
| Dreyfus Intermediate Term Income Fund | 97,792 shares | 1,251,734 | |||||||||
| Growth Fund of America/A | 60,510 shares | 1,117,624 | |||||||||
| Putnam International Growth | 65,092 shares | 1,068,159 | |||||||||
| SEI Stable Asset | 643,579 shares | 643,579 | |||||||||
| State Street Research Aurora A | 18,430 shares | 475,496 | |||||||||
| Van Kampen Growth and Income A | 101,651 shares | 1,452,598 | |||||||||
| * | Sonic Corp. common stock | 82,833 shares | 1,697,248 | ||||||||
| * | Participant Loans | Participant loans, | |||||||||
| interest rates from | |||||||||||
| 6.0% to 10.5% | 271,638 | ||||||||||
| Total assets held for investment | $ | 8,406,033 | |||||||||
| *Indicates party-in-interest to the Plan. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.
| Sonic Corp. Savings and Profit Sharing Plan | ||||
By: | /s/ Nancy L. Robertson Nancy L. Robertson, Chair of the Sonic Corp. Savings and Profit Sharing Plan Advisory Committee | |||
Date: June 30, 2003 | ||||