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TheStreet Open House

Buffalo Wild Wings, Inc. Announces Second Quarter Earnings Per Share Of $0.58 And Quarterly Net Earnings Growth Of 16.4%

About the Company

Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, Minnesota, is a growing owner, operator and franchisor of Buffalo Wild Wings Grill & Bar restaurants featuring a variety of boldly-flavored, made-to-order menu items including its namesake Buffalo, New York-style chicken wings. The Buffalo Wild Wings’ menu specializes in 18 mouth-watering signature sauces and seasonings with flavor sensations ranging from Sweet BBQ to Blazin’ ®. Guests enjoy a welcoming neighborhood atmosphere that includes an extensive multi-media system for watching their favorite sporting events. Buffalo Wild Wings is the recipient of hundreds of "Best Wings" and "Best Sports Bar" awards from across the country. There are currently 773 Buffalo Wild Wings locations across 45 states in the United States, as well as in Canada.

Forward-looking Statements

Various remarks we make about future expectations, plans, and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements relate to our future financial and store performance measures and growth goals for 2011 and beyond, including but not limited to those relating to our second quarter sales trends and projected unit, revenue and net earnings growth rates for 2011 and beyond. All statements other than statements of historical fact are statements that could be deemed forward-looking statements and are based upon the current beliefs and expectations of our management. We have attempted to identify forward-looking statements by terminology, including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Actual results may vary materially from those contained in forward-looking statements based on a number of factors, including, but not limited to, our ability to achieve and manage our planned expansion, the ability of our franchisees to open and manage new restaurants, market acceptance in the new geographic regions we enter (particularly non-U.S. locations), unforeseen obstacles in developing nontraditional sites or non-U.S. locations, our ability to obtain and maintain licenses and permits necessary to operate our existing and new restaurants, our franchisees’ adherence to our practices, policies and procedures, the cost of commodities such as traditional chicken wings, the success of our key initiatives and our advertising and marketing campaigns, our ability to control restaurant labor and other restaurant operating costs, the continued service of key management personnel, our ability to protect our name and logo and other proprietary information, economic conditions (including changes in consumer preferences or consumer discretionary spending), the impact of federal, state or local government regulations relating to our employees, the sale of food and alcoholic beverages, disruption to sports seasons, the effect of competition in the restaurant industry, and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission, including the factors described under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 26, 2010, as updated in subsequent reports filed with the SEC. Investors should take such risks into account when making investment decisions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update any forward-looking statements.

 
 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar and share amounts in thousands except per share data)
(unaudited)
 
    Three months ended     Six months ended
June 26,     June 27, June 26,     June 27,
2011 2010 2011 2010
Revenue:
Restaurant sales $ 167,896 131,531 333,423 269,493
Franchise royalties and fees   16,205   14,170   32,828 28,479
Total revenue   184,101   145,701   366,251 297,972
 
Costs and expenses:
Restaurant operating costs:
Cost of sales 45,735 37,601 91,999 79,825
Labor 51,309 40,089 100,187 80,774
Operating 25,048 21,173 49,597 42,628
Occupancy 10,659 8,807 20,886 17,717
Depreciation and amortization 11,931 9,456 22,953 19,006
General and administrative (1) 18,766 12,929 35,058 24,955
Preopening 4,116 1,197 6,503 2,312
Loss on asset disposals and store closures   492   526   903 937
Total costs and expenses   168,056   131,778   328,086 268,154
 
Income from operations 16,045 13,923 38,165 29,818
Investment income (loss)   (152 ) (156 ) 204 29
Earnings before income taxes 15,893 13,767 38,369 29,847
Income tax expense   5,220   4,601   12,835 10,120
Net earnings $ 10,673   9,166   25,534 19,727
Earnings per common share – basic $ 0.58 0.50 1.39 1.09
Earnings per common share – diluted 0.58 0.50 1.39 1.08
Weighted average shares outstanding – basic 18,330 18,167 18,318 18,157
Weighted average shares outstanding – diluted 18,401 18,234 18,389 18,230
 

(1) Includes stock-based compensation of $3,399, $1,313, $5,952, and $2,538, respectively

The following table expresses results of operations as a percentage of total revenue for the periods presented, except for restaurant operating costs which are expressed as a percentage of restaurant sales:

 
    Three months ended     Six months ended
June 26,     June 27, June 26,     June 27,
2011 2010 2011 2010
Revenue:
Restaurant sales 91.2 % 90.3 % 91.0 % 90.4 %
Franchising royalties and fees 8.8   9.7   9.0   9.6  
Total revenue 100.0   100.0   100.0   100.0  
 
Costs and expenses:
Restaurant operating costs:
Cost of sales 27.2 28.6 27.6 29.6
Labor 30.6 30.5 30.0 30.0
Operating 14.9 16.1 14.9 15.8
Occupancy 6.3 6.7 6.3 6.6
Depreciation and amortization 6.5 6.5 6.3 6.4
General and administrative 10.2 8.9 9.6 8.4
Preopening 2.2 0.8 1.8 0.8
Loss on asset disposals and store closures 0.3   0.4   0.2   0.3  
Total costs and expenses 91.3   90.4   89.6   90.0  
 
Income from operations 8.7 9.6 10.4 10.0
Investment income (loss) (0.1 ) (0.1 ) 0.1   0.0  
Earnings before income taxes 8.6 9.4 10.5 10.0
Income tax expense 2.8   3.2   3.5   3.4  
Net earnings 5.8   6.3   7.0   6.6  
 
 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
 
    June 26,     December 26,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 37,836 15,309
Marketable securities 48,267 56,827
Accounts receivable – franchisees, net of allowance of $88 and $25 1,209 1,086
Accounts receivable – other 10,250 7,947
Inventory 4,344 4,158
Prepaid expenses 2,428 3,505
Refundable income taxes 834 6,366
Deferred income taxes 7,470 6,069
Restricted assets   32,731   32,937  
Total current assets 145,369 134,204
 
Property and equipment, net 257,434 224,970
Other assets 13,286 9,937
Goodwill   12,192   11,246  
Total assets $ 428,281   380,357  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Unearned franchise fees $ 2,049 2,109
Accounts payable 24,681 17,632
Accrued compensation and benefits 20,261 19,324
Accrued expenses 6,449 5,696
Current portion of deferred lease credits 293
System-wide payables   32,943   34,062  
Total current liabilities 86,383 79,116
 
Long-term liabilities:
Other liabilities 1,674 1,574
Deferred income taxes 31,638 24,557
Deferred lease credits, net of current portion   19,901   18,289  
Total liabilities   139,596   123,536  
 
Commitments and contingencies
Stockholders’ equity:
Undesignated stock, 1,000,000 shares authorized; none issued
Common stock, no par value. Authorized 44,000,000 shares; issued and
outstanding 18,343,604 and 18,214,065 respectively 108,813 102,484
Retained earnings 179,881 154,346
Accumulated other comprehensive loss   (9 ) (9 )
Total stockholders’ equity   288,685   256,821  
Total liabilities and stockholders’ equity $ 428,281   380,357  
 
 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
 
    Six months ended
June 26,     June 27,
2011 2010
Cash flows from operating activities:
Net earnings $ 25,534 19,727
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation 22,574 18,699
Amortization 379 307
Loss on asset disposals and store closures 904 847
Deferred lease credits 1,568 929
Deferred income taxes 4,795 (2,123 )
Stock-based compensation 5,952 2,538
Excess tax benefit from stock issuance (211 ) (116 )
Change in operating assets and liabilities:
Trading securities (246 ) (748 )
Accounts receivable (2,643 ) 124
Inventory (186 ) 244
Prepaid expenses 1,077 967
Other assets (1,534 ) (312 )
Unearned franchise fees (60 ) (347 )
Accounts payable 4,072 2,472
Income taxes 5,743 1,014
Accrued expenses   2,525   (2,749 )
Net cash provided by operating activities   70,243   41,473  
 
Cash flows for investing activities:
Acquisition of property and equipment (55,159 ) (25,506 )
Purchase of marketable securities (54,790 ) (61,114 )
Proceeds of marketable securities   63,597   46,005  
Net cash used in investing activities   (46,352 ) (40,615 )
 
Cash flows for financing activities:
Issuance of common stock 867 782
Tax payments for restricted stock units (2,481 ) (1,625 )
Excess tax benefit from stock issuance   211   116  
Net cash used in financing activities   (1,403 ) (727 )
Effect of exchange rate changes on cash and cash equivalents   39    
Net increase in cash and cash equivalents 22,527 131
Cash and cash equivalents at beginning of period   15,309   9,580  
Cash and cash equivalents at end of period $ 37,836   9,711  
 
 

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

Supplemental Information

 
Restaurant Count
 
Company-owned Restaurants:
      Q1       Q2       Q3       Q4
2011 263 277
2010 235 234 244 259
2009 206 215 220 232
2008 165 169 187 197
2007 140 145 148 161
 

Franchised Restaurants:

      Q1       Q2       Q3       Q4
2011 488 492
2010 430 447 457 473
2009 373 383 400 420
2008 340 346 348 363
2007 299 301 313 332
 
 
Same-Store Sales
 
Company-owned Restaurants:
                             
Q1 Q2 Q3 Q4 Year
2011 3.9 % 5.9 %
2010 0.1 % (0.1 %) 2.6 % (0.3 %) 0.6 %
2009 6.4 % 2.8 % 0.8 % 2.6 % 3.1 %
2008 4.1 % 8.3 % 6.8 % 4.5 % 5.9 %
2007 8.7 % 8.1 % 8.3 % 3.4 % 6.9 %
 

Franchised Restaurants:

 
      Q1       Q2       Q3       Q4       Year
2011 1.6 % 2.7 %
2010 0.7 % (0.7 %) 0.3 % (1.1 %) (0.2 %)
2009 6.0 % 3.7 % 1.9 % 2.0 % 3.4 %
2008 2.1 % 4.5 % 2.1 % 2.5 % 2.8 %
2007 3.3 % 4.0 % 5.9 % 2.3 % 3.9 %
 
 
 

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

Supplemental Information

 
Average Weekly Sales Volumes
 
Company-owned Restaurants:
 
      Q1       Q2       Q3       Q4       Year
2011 $ 48,845 47,970
2010 45,327 43,021 44,394 45,595 44,601
2009 45,593 42,938 42,602 44,583 43,912
2008 41,438 40,572 42,400 43,864 42,141
2007 39,254 36,655 38,498 40,485 38,757
 

Franchised Restaurants:

                             
Q1 Q2 Q3 Q4 Year
2011 $ 52,744 50,995
2010 51,532 49,051 49,005 49,837 49,835
2009 50,729 48,619 48,458 50,115 49,479
2008 47,812 46,390 46,889 48,424 47,382
2007 46,439 43,998 45,879 47,293 45,901




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