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Sonic Corp. (SONC - Snapshot Report), the largest chain of drive-in restaurants of the US, has approved an additional share repurchase, thereby maintaining the trend of returning wealth to its shareholders from time to time, depending on market conditions.

Under this program, the company is authorized to repurchase up to $55.0 million of its common stock. The authorization expires in Aug 31, 2013.

The latest sanction expands the company’s existing share repurchase authorization of $40.0 million that had approximately $15.0 million worth of shares still available for repurchase.

Since Sept 2011, this Oklahoma-based company spent approximately $55 million for the repurchase of 6.6 million shares, representing approximately 11% of its outstanding common stock.

Sonic received net cash proceeds of approximately $30 million and a 24-month note of approximately $9 million through the sale of certain real estate in Dec 2012.  Management plans to use these receipts in the form of debt pay down and maximization of shareholder value.

At the end of the first quarter of fiscal 2013, cash and cash equivalents were $42.7 million versus $52.6 million at the end of Aug 2012. Its long-term debt due after one year was $462.9 million versus long-term debt of $466.6 million as of Aug-end 2012.

The increase in share buyback authorization reflects the company’s confidence in its fundamentals. At the same time, the share buyback will help the company reduce the share count, thereby increasing earnings per share and return on equity. Apart from bolstering shareholders’ value, this strategic move will also lift the relatively undervalued share price.

Overall, Sonic is gradually moving in a positive direction. Increasing focus on franchising, expansion of drive-in facilities, improvement in the company-owned same-store sales, margins expansion and effective utilization of cash are Sonic’s key strategies to win.

Sonic currently carries a Zacks Rank #2 (Buy). Apart from Sonic, other restaurateurs, who are expected to perform well, include Bob Evans Farms Inc. (BOBE - Snapshot Report), and AFC Enterprises Inc. carrying a Zacks Rank #2 while Krispy Kreme Doughnut Inc. (KKD - Snapshot Report) currently carries Zacks Rank #1 (Strong Buy).
 

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