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OKLAHOMA CITY-Sonic Corp., the fast-food drive-in retailer boasting “service at the speed of sound,” reported positive results for the company’s third quarter ended May 31. 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.

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.

“This is the strongest period of time in terms of same-store sales we’ve seen since the late ‘90s when we had a number of good momentums coming together,” Clifford Hudson, chairman and chief executive officer, told investors during a conference call Tuesday.

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 36 cents from 31 cents in the year-earlier period. 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 82 cents compared with 68 cents 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.

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. The increased expenditures—$60 million this year from $32 million in fiscal 2004—reflects Sonic’s shifting advertising streams, with an emphasis on national cable advertising.

“National cable allows us to target more effectively and better reach a network cable audience; 54% of the viewers are getting news and entertainment from cable,” Hudson said. “The national cable allows us disproportionately and positively impact our developing markets.”

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. In 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 to 185 new drive-ins in fiscal 2005, including approximately 140 to 150 by franchisees.

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 39 cents to 40 cents for its fourth fiscal quarter ending August 31, 2005, versus 34 cents 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.

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