Sonic (SONC) 8-K Results of Operations and Financial Condition

Contact:	Stephen C. Vaughan
	Vice President and
	Chief Financial Officer
	(405) 225-4800

SONIC'S THIRD QUARTER NET INCOME RISES 19%

AS SAME-STORE SALES MOMENTUM CONTINUES

System-wide Average Unit Volumes Surpass $1.0 Million

OKLAHOMA CITY (June 27, 2005) - Sonic Corp. (NASDAQ/NM: SONC) today reported record results for its third fiscal quarter ended May 31, 2005. Highlights of the quarter included:

· A 19% increase in net income for the period to $22.7 million;

· A 16% increase in earnings per diluted share to $0.36;

· A 15% increase in total revenues to $167.7 million;

· System-wide same-store sales growth of 5.5% – in line with the company's recently raised target for the second half of fiscal 2005;

· The continuation of the strong sales trends at partner drive-ins, with same-store sales for these drive-ins up 6.1% on average;

· Reaching the $1.0 million mark for system-wide average unit volumes (based on the trailing four quarters) for the first time in the company's 53-year history; and

· The opening of 40 new Sonic Drive-Ins during the quarter, including 27 by franchisees.

Commenting on the news, Clifford Hudson, Chairman and Chief Executive Officer, said, "Powered by our successful media strategy and new product news, Sonic registered another quarter of strong sales growth. Our same-store sales performance was broad-based across both partner and franchise drive-ins and highlighted ongoing growth throughout all day parts, especially those that are more non-traditional, like the afternoon and evening periods. This continued to provide a solid lift to our company's financials, resulting again in record revenues and earnings in the third quarter. Importantly, these healthy sales trends have extended into June, with estimated system-wide same-store sales growth at the high end of our prior guidance of 4% to 6% for the fourth quarter and setting the stage for a great finish to our fiscal year in August."

Net income for the third quarter increased 19% to $22.7 million versus $19.1 million last year, while net income per diluted share rose 16% to $0.36 from $0.31 in the year-earlier period, which included a previously reported gain of approximately $800 thousand or $.01 per share on the sale of real estate to a franchisee. Total revenues for the quarter increased 15% to $167.7 million from $145.9 million in the year-earlier period.

Net income for the first nine months of fiscal 2005 rose 23% to $51.3 million from $41.7 million in the same period last year. On a diluted per share basis, net income increased 21% to $0.82 compared with $0.68 last year. Total revenues for the first nine months of fiscal 2005 increased 18% to $442.5 million from $376.2 million in the same period last year.

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Commenting on the drivers for Sonic's results in the third quarter, Hudson noted that the company is increasing its media expenditures to approximately $125 million this year, up from $110 million in fiscal 2004. This higher amount – which reflects a growing emphasis on national cable advertising, with spending increasing to more than $60 million this year from $32 million in fiscal 2004 – has been instrumental in Sonic's efforts to improve the sales performance of its drive-ins, particularly in developing markets, and increase traffic counts across all day parts.

Additionally, Sonic's media strategy ties directly with its new product news and the company's unique menu choices that help it remain relevant and compelling to consumers. Together, these efforts continue to produce a strong sales and profit performance for both partner and franchise drive-ins, expanding the company's franchising income base through new drive-in expansion and by the operation of Sonic's ascending royalty rate. At the same time, Sonic continues to benefit from increased leverage of corporate-level expenses and strong operating cash flow.

System-wide same-store sales increased 5.5% and 6.8% in the third quarter and first nine months of fiscal 2005, respectively, versus 4.5% and 5.6% in the same year-earlier periods. Partner drive-ins continued to outperform franchise drive-ins, with same-store sales rising 6.1% in the third quarter and 8.6% for the first nine months of the fiscal year. This was the sixth consecutive quarter in which same-store sales growth in partner drive-ins exceeded franchise drive-ins. Same-store sales in developing markets also maintained their strong pace, surpassing core market growth with an increase of 6.8% for the quarter and 7.8% for the year-to-date period. This ongoing trend also marked the sixth consecutive quarter in which same-store sales growth in developing markets have outpaced core markets.

Hudson noted that the improved performance of partner drive-ins reflects the success of the company's efforts to boost sales and drive-in level profits with its "Zap the Gap" program, as well as a lift from its recently implemented "PAYS" program (credit card terminals at each drive-in stall) at partner drive-ins, which has raised average check amounts and improved speed of service for credit-card orders. The roll-out of the PAYS program to franchise drive-ins commenced in February and is expected to have a similarly positive impact on franchisee same-store sales, although on a more gradual basis, as the roll-out to the remainder of the system occurs through calendar 2006.

Hudson also pointed out that, based on the trailing four-quarter period ended in May, system-wide average unit volumes exceeded $1.0 million for the first time. This milestone reflects the consistent growth Sonic has achieved for several years and the success of its sales strategies, which are expected to provide continued momentum going forward.

During the third quarter, Sonic opened 40 new drive-ins, including 27 franchise restaurants, compared with a total of 53 in the year-earlier period, which included 45 by franchisees. For the first nine months of 2005, the company opened 106 new drive-ins, including 83 franchise restaurants, compared with 123 drive-ins opened during the same period last year. With its progress through May, the company now expects to open approximately 175-185 new drive-ins in fiscal 2005, including approximately 140-150 by franchisees.

In April, Sonic's Board of Directors increased the company's stock repurchase authorization to a total of $150 million from $60 million previously and extended the term of the program to August 31, 2006. During the third quarter, the company purchased approximately $20 million of common stock.

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Looking ahead to the fourth quarter of fiscal 2005, Sonic expects its net income to increase in the range of 16% to 18% over the same period last year. This growth should translate into diluted earnings per share of approximately $0.39 to $0.40 for its fourth fiscal quarter ending August 31, 2005, versus $0.34 in the year-earlier period. For the fiscal year ending in August, the company expects net income growth of 20% to 21%, resulting in diluted earnings per share of approximately $1.21 to $1.22 per share for fiscal 2005. The company bases its outlook on the following assumptions:

· Total revenue growth in the fourth quarter of 13% to 15% over the comparable 2004 period, slightly less than the pace of the first nine months as Sonic laps the summer 2004 acquisition of 22 franchise drive-ins. This expected revenue growth is based upon:

o System-wide same-store sales growth in the range of 4% to 6%;

o Approximately 65 to 75 new drive-in openings in the fourth quarter, including approximately 55 to 65 by franchisees; and

o Growth in franchising income of approximately $2.5 million to $3 million 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, as a percentage of sales, are anticipated to be relatively flat versus the same quarter last year as the benefit of increased sales volume leverage offsets higher other operating costs, primarily costs related to an increase in credit card transactions following the roll-out of Sonic's PAYS program;

· Continued leverage from the bottom part of the income statement, with corporate overhead expenses expected to increase in the range of 10% to 12% and depreciation and amortization expected to be approximately $9.4 million during the fourth quarter; and

· 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 (the company had $130 million authorized for stock repurchases at the end of the third quarter), reduce outstanding debt, or purchase franchise drive-ins.

This press release contains forward-looking statements within the meaning of the federal securities laws. There are certain important factors that could cause actual results to differ materially from those anticipated by the statements made herein. Among the factors that could cause actual results to differ from predicted or expected results are: delays in opening new stores because of weather, strikes, local permitting or other reasons; increased competition; cost increases or shortages in raw food products; risks of and publicity surrounding foodborne illness; and the possibility of unforeseen events affecting the industry generally. 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.

Sonic Corp. franchises and operates the largest chain of drive-in restaurants in the United States. For more information about the company, visit Sonic's website at sonicdrivein.com. 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 28, 2005. An on-demand replay, using the same link, will be available at approximately noon tomorrow and will continue until July 28, 2005.

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SONIC CORP. Summary Unaudited Financial Highlights (In thousands, except per share amounts)
	Third Quarter Ended May 31,				Nine Months Ended May 31,
	2005		2004		2005		2004
Revenues	$	167,653	$	145,942	$	442,493	$	376,245
Income from operations		36,702		32,020		84,860		71,284
Net income		22,746		19,097		51,341		41,691
Net income per share - diluted		0.36		0.31		0.82		0.68
Weighted average shares - diluted		62,716		61,832		62,630		61,572

SONIC CORP.
Unaudited Supplemental Information
	Third Quarter Ended May 31,						Nine Months Ended May 31,
	2005			2004			2005			2004
Drive-Ins in operation:
Partner Drive-Ins:
Total at beginning of period	548			503			539			497
Opened		13			8			23			12
Acquired from (sold to) franchisees		–			(3	)		–			(1	)
Closed		–			–			(1	)		–
Total at end of period		561			508			561			508
Franchise Drive-Ins:
Total at beginning of period		2,386			2,270			2,346			2,209
Opened		27			45			83			111
Acquired from (sold to) company		–			3			–			1
Closed (net of reopening)		(1	)		–			(17	)		(3	)
Total at end of period		2,412			2,318			2,412			2,318
System-wide:
Total at beginning of period		2,934			2,773			2,885			2,706
Opened		40			53			106			123
Closed (net of reopening)		(1	)		–			(18	)		(3	)
Total at end of period		2,973			2,826			2,973			2,826
Core markets		2,121			2,028			2,121			2,028
Developing markets		852			798			852			798
All markets		2,973			2,826			2,973			2,826

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.

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SONIC CORP.
Unaudited Supplemental Information
($ in thousands)
	Third Quarter Ended May 31,						Nine Months Ended May 31,
	2005			2004			2005			2004
Sales Analysis
Partner Drive-Ins:
Total sales	$	141,797		$	121,630		$	374,663		$	315,480
Average drive-in sales		257			239			688			628
Change in same-store sales		6.1	%		6.6	%		8.6	%		6.6	%
Franchise Drive-Ins:
Total sales	$	669,191		$	600,391		$	1,777,235		$	1,572,453
Average drive-in sales		279			265			748			704
Change in same-store sales		5.3	%		4.0	%		6.4	%		5.4	%
System-wide:
Change in total sales		12.3	%		10.9	%		14.0	%		12.2	%
Average drive-in sales		275			260			737			690
Change in same-store sales		5.5	%		4.5	%		6.8	%		5.6	%
Core and Developing Markets
System-wide average drive-in sales:
Core markets	$	285		$	271		$	767		$	721
Developing markets		250			233			660			606
System-wide change in same-store sales
Core markets		5.1	%		4.3	%		6.5	%		5.6	%
Developing markets		6.8	%		5.2	%		7.8	%		5.7	%

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

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SONIC CORP.
Unaudited Supplemental Information
(In thousands, except per share amounts)
	Third Quarter Ended May 31,						Nine Months Ended May 31,
	2005			2004			2005			2004
Income Statement Data
Revenues:
Partner Drive-In sales	$	141,797		$	121,630		$	374,663		$	315,480
Franchise Drive-In sales:
Franchise royalties		23,869			21,142			62,144			54,182
Franchise fees		781			1,370			2,590			3,237
Other		1,206			1,800			3,096			3,346
		167,653			145,942			442,493			376,245
Costs and expenses:
Partner Drive-Ins:
Food and packaging		36,811			32,017			98,799			82,726
Payroll and other employee benefits		42,157			35,961			114,032			95,684
Minority interest in earnings of Partner Drive-Ins		6,658			6,195			15,285			13,609
Other operating expenses		26,065			21,550			73,041			59,876
		111,691			95,723			301,157			251,895
Selling, general and administrative		10,209			9,914			29,762			28,118
Depreciation and amortization		9,051			8,285			26,327			24,273
Provision for impairment of long-lived assets		–			–			387			675
		130,951			113,922			357,633			304,961
Income from operations		36,702			32,020			84,860			71,284
Interest expense		1,456			1,914			4,947			5,824
Interest income		(164	)		(328	)		(518	)		(980	)
Net interest expense		1,292			1,586			4,429			4,844
Income before income taxes		35,410			30,434			80,431			66,440
Provision for income taxes		12,664			11,337			29,090			24,749
Net income	$	22,746		$	19,097		$	51,341		$	41,691
Net income per share:
Basic	$	0.38		$	0.32		$	0.85		$	0.70
Diluted	$	0.36		$	0.31		$	0.82		$	0.68
Weighted average shares used in calculation:
Basic		60,197			59,512			60,157			59,219
Diluted		62,716			61,832			62,630			61,572

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SONIC CORP.
Unaudited Supplemental Information
	Third Quarter Ended May 31,						Nine Months Ended May 31,
	2005			2004			2005			2004
Margin Analysis
Partner Drive-Ins:
Food and packaging		26.0	%		26.3	%		26.4	%		26.2	%
Payroll and employee benefits		29.7			29.6			30.4			30.3
Minority interest in earnings of Partner
Drive-Ins		4.7			5.1			4.1			4.3
Other operating expenses		18.4			17.7			19.5			19.0
		78.8	%		78.7	%		80.4	%		79.8	%

	May 31,		August 31,
	2005		2004
	(In thousands)
Balance Sheet Data
Total assets	$	553,502	$	518,633
Current assets		37,488		34,583
Current liabilities		55,830		49,120
Obligations under capital leases, long-term debt,
and other non-current liabilities		118,035		134,751
Stockholders' equity		379,637		334,762

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