Buffalo Wild Wings, Inc. Announces Second Quarter 2008 Results

  • Same-store sales increases of 8.3% at company-owned and 4.5% at franchised restaurants
  • Earnings per diluted share increase of 41% to $0.31



MINNEAPOLIS--(BUSINESS WIRE)--Buffalo Wild Wings, Inc. (Nasdaq: BWLD), announced today financial results for the second quarter ended June 29, 2008. Highlights for the second quarter versus the same period a year ago were:

  • Total revenue increased 28.8% to $97.9 million
  • Company-owned restaurant sales grew 29.5% to $87.5 million
  • Same-store sales increased 8.3% at company-owned restaurants and 4.5% at franchised restaurants
  • Net earnings increased 46% to $5.6 million from $3.8 million, and earnings per diluted share increased 41% to $0.31 from $0.22
  • Net earnings increased 46% to $5.6 million from $3.8 million, and earnings per diluted share increased 41% to $0.31 from $0.22



Sally Smith, President and Chief Executive Officer, commented, "Buffalo Wild Wings just completed an outstanding quarter. Our same-store sales are industry-leading, with increases at our company-owned restaurants of 8.3% and our franchised locations of 4.5%. Equally impressive is the strength of our new restaurant openings, which have propelled our average weekly sales 10.7% higher at company-owned and 5.4% higher at franchised restaurants for the quarter. Our top-line increase of nearly 29% leveraged to a 46% increase in net earnings."

Total revenue increased 28.8% to $97.9 million in the second quarter compared to $76.0 million in the second quarter of 2007. Company-owned restaurant sales for the quarter increased 29.5% to $87.5 million driven by a company-owned same-store sales increase of 8.3% and 24 more company-owned restaurants in operation at the end of second quarter 2008 relative to the same period in 2007. Franchise royalties and fees increased 22.9% to $10.4 million versus $8.5 million in the prior year. This increase was due to a franchised same-store sales increase of 4.5% and 45 more franchised restaurants at the end of the period versus a year ago.

Average weekly sales for company-owned restaurants were $40,572 for the second quarter of 2008 compared to $36,655 for the same quarter last year, a 10.7% increase. Franchised restaurants averaged $46,390 for the period versus $43,998 in the second quarter a year ago, a 5.4% increase.

For the second quarter, net earnings increased 46% to $5.6 million versus $3.8 million in the prior year. Earnings per diluted share were $0.31, as compared to second quarter 2007 earnings per diluted share of $0.22.

2008 Outlook

Ms. Smith concluded, "Same-store sales continue to be strong in July, with increases of over 6% at company-owned and over 2% at franchised restaurants. We are in final preparation for the start of football season, with a redesigned menu rolling throughout the system this week, our HDTV and remodel projects nearing completion, our media and local marketing plans set, and our operations team trained and energized. We expect the purchase of our nine Las Vegas franchised locations to close in late September. With the momentum continuing from the first half of the year, we are confident in our ability to achieve our 15% unit growth, 20% revenue growth, and 25% net earnings growth targets for 2008."

Buffalo Wild Wings will be hosting a conference call today, July 29, 2008 at 4:00 p.m. Central Daylight Time to discuss these results. There will be a simultaneous webcast conducted at our website http://www.buffalowildwings.com.

A replay of the call will be available until August 5, 2008. To access this replay, please dial 1.303.590.3030, password 3900883.

About the Company

Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, Minnesota, is a growing owner, operator and franchisor of restaurants featuring a variety of boldly-flavored, made-to-order menu items including Buffalo-style chicken wings spun in one of 14 signature sauces. Buffalo Wild Wings is an inviting neighborhood destination with widespread appeal and is the recipient of dozens of "Best Wings" and "Best Sports Bar" awards from across the country. There are currently 521 Buffalo Wild Wings locations across 37 states.

Forward-looking Statements

Certain statements in this release that are not historical facts, including, without limitation, those relating to our projected unit, revenue and earnings growth rates, future financial performance, and the timing of closing the Las Vegas transaction, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of our management. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of locations opening in the future, the sales at these and our other company-owned and franchised locations, the date acquisitions are closed, our ability to successfully operate in new markets, the cost of commodities, the success of our marketing and other initiatives, our ability to control restaurant labor and other restaurant operating costs, the financial impact of the Las Vegas transaction, economic conditions, competition, the impact of applicable regulations, and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission. 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 29, July 1, June 29, July 1,
2008 2007 2008 2007
--------- -------- --------- --------
Revenue:
Restaurant sales $87,462 67,535 174,358 138,594
Franchise royalties and fees 10,406 8,464 20,772 17,307
--------- -------- --------- --------

Total revenue 97,868 75,999 195,130 155,901
--------- -------- --------- --------

Costs and expenses:
Restaurant operating costs:
Cost of sales 26,248 20,591 52,663 42,649
Labor 27,020 21,050 52,878 42,157
Operating 13,857 10,729 27,132 22,201
Occupancy 5,902 4,892 11,599 9,610
Depreciation 5,510 4,028 10,749 7,920
General and administrative
(1) 9,047 8,538 18,388 17,155
Preopening 1,758 987 2,943 1,305
Loss on asset disposals and
impairment 385 153 1,138 232
--------- -------- --------- --------

Total costs and
expenses 89,727 70,968 177,490 143,229
--------- -------- --------- --------

Income from operations 8,141 5,031 17,640 12,672
Interest income 400 755 832 1,455
--------- -------- --------- --------

Earnings before income taxes 8,541 5,786 18,472 14,127
Income tax expense 2,926 1,945 6,332 4,745
--------- -------- --------- --------

Net earnings $ 5,615 3,841 12,140 9,382
========= ======== ========= ========

Earnings per common share -
basic $ 0.32 0.22 0.68 0.54
Earnings per common share -
diluted 0.31 0.22 0.68 0.53
Weighted average shares
outstanding - basic 17,810 17,560 17,788 17,504
Weighted average shares
outstanding - diluted 17,906 17,744 17,893 17,716

(1) Includes stock-based compensation of $904, $1,065, $1,924, and $2,332, 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 29, July 1, June 29, July 1,
2008 2007 2008 2007
--------- -------- -------- --------
Revenue:
Restaurant sales 89.4% 88.9% 89.4% 88.9%
Franchising royalties and fees 10.6 11.1 10.6 11.1
--------- -------- -------- --------

Total revenue 100.0 100.0 100.0 100.0
--------- -------- -------- --------

Costs and expenses:
Restaurant operating costs:
Cost of sales 30.0 30.5 30.2 30.8
Labor 30.9 31.2 30.3 30.4
Operating 15.8 15.9 15.6 16.0
Occupancy 6.7 7.2 6.7 6.9
Depreciation 5.6 5.3 5.5 5.1
General and administrative 9.2 11.2 9.4 11.0
Preopening 1.8 1.3 1.5 0.8
Loss on asset disposals and
impairment 0.4 0.2 0.6 0.1
--------- -------- -------- --------

Total costs and
expenses 91.7 93.4 91.0 91.9
--------- -------- -------- --------

Income from operations 8.3 6.6 9.0 8.1
Interest income 0.4 1.0 0.4 0.9
--------- -------- -------- --------

Earnings before income taxes 8.7 7.6 9.5 9.1
Income tax expense 3.0 2.6 3.2 3.0
--------- -------- -------- --------

Net earnings 5.7 5.1 6.2 6.0
========= ======== ======== ========

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
(unaudited)

June 29, December 30,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 8,678 1,521
Marketable securities 65,279 66,513
Accounts receivable - franchisees, net
of allowance of $25 842 885
Accounts receivable - other 6,045 6,976
Inventory 2,517 2,362
Prepaid expenses 1,962 3,060
Refundable income tax 1,228 1,886
Deferred income taxes 2,046 1,303
------------ ------------

Total current assets 88,597 84,506

Property and equipment, net 121,309 102,742
Restricted cash 6,764 7,161
Other assets 2,399 2,320
Goodwill 369 369
------------ ------------

Total assets $219,438 197,098
============ ============

Liabilities and Stockholders' Equity
Current liabilities:
Unearned franchise fees $ 2,405 2,316
Accounts payable 16,879 10,692
Accrued compensation and benefits 11,139 12,615
Accrued expenses 5,618 6,207
Current portion of deferred lease
credits 319 660
------------ ------------

Total current liabilities 36,360 32,490

Long-term liabilities:
Other liabilities 1,068 1,031
Marketing fund payables 6,764 7,161
Deferred income taxes 5,295 2,166
Deferred lease credits, net of current
portion 13,247 12,585
------------ ------------

Total liabilities 62,734 55,433
------------ ------------

Commitments and contingencies
Stockholders' equity:
Undesignated stock, 1,000,000 shares
authorized; none issued -- --
Common stock, no par value. Authorized
20,200,000 shares; issued and
outstanding 18,265,464 and 17,933,497
respectively 83,724 80,825
Retained earnings 72,980 60,840
------------ ------------

Total stockholders' equity 156,704 141,665
------------ ------------

Total liabilities and stockholders'
equity $219,438 197,098
============ ============

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)

Six months ended
------------------
June 29, July 1,
2008 2007
Cash flows from operating activities:
Net earnings $ 12,140 9,382
Adjustments to reconcile net earnings to cash
provided by operations:
Depreciation 10,749 7,920
Amortization 36 (43)
Loss on asset disposals and impairment 1,138 232
Deferred lease credits 1,113 391
Deferred income taxes 2,386 (952)
Stock-based compensation 1,924 2,332
Excess tax benefit from the exercise of
stock options (302) (720)
Change in operating assets and liabilities:
Trading securities (76) (210)
Accounts receivable 182 (392)
Inventory (155) (185)
Prepaid expenses 1,098 (419)
Other assets (79) (32)
Unearned franchise fees 89 17
Accounts payable 376 217
Refundable income tax 960 (1,073)
Accrued expenses (928) 1,176
--------- --------

Net cash provided by operating
activities 30,651 17,641
--------- --------

Cash flows from investing activities:
Acquisition of property and equipment (24,643) (11,769)
Purchase of marketable securities (68,578) (93,339)
Proceeds of marketable securities 69,852 81,916
--------- --------

Net cash used in investing
activities (23,369) (23,192)
--------- --------

Cash flows from financing activities:
Issuance of common stock 562 860
Tax payments for restricted stock (989) (1,183)
Excess tax benefit from the exercise of stock
options 302 720
--------- --------

Net cash provided by (used in)
financing activities (125) 397
--------- --------

Net increase (decrease) in cash and
cash equivalents 7,157 (5,154)

Cash and cash equivalents at beginning of period 1,521 11,756
--------- --------

Cash and cash equivalents at end of period $ 8,678 6,602
========= ========

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information

Restaurant Count
Company-owned Restaurants:

Q1 Q2 Q3 Q4
-------- -------- -------- --------
2008 165 169
2007 140 145 148 161
2006 124 129 134 139
2005 106 110 116 122
2004 88 92 97 103

Franchised Restaurants:

Q1 Q2 Q3 Q4
-------- -------- -------- --------
2008 340 346
2007 299 301 313 332
2006 260 270 278 290
2005 212 224 234 248
2004 168 175 189 203

Same-Store Sales
Company-owned Restaurants:

Q1 Q2 Q3 Q4 Year
-------- -------- -------- -------- ----------
2008 4.1% 8.3%
2007 8.7% 8.1% 8.3% 3.4% 6.9%
2006 7.7% 8.2% 11.8% 13.2% 10.4%
2005 6.1% 2.7% 1.8% 2.5% 3.2%
2004 11.1% 10.6% 9.9% 7.6% 9.7%

Franchised Restaurants:

Q1 Q2 Q3 Q4 Year
-------- -------- -------- -------- ----------
2008 2.1% 4.5%
2007 3.3% 4.0% 5.9% 2.3% 3.9%
2006 6.7% 4.7% 6.4% 6.5% 6.1%
2005 3.2% 1.8% 1.1% 2.6% 2.2%
2004 12.0% 10.4% 5.7% 3.7% 7.6%

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information

Average Weekly Sales Volumes

Company-owned Restaurants:

Q1 Q2 Q3 Q4 Year
----------- ---------- ---------- --------- ----------
2008 $ 41,438 40,572
2007 39,254 36,655 38,498 40,485 38,757
2006 35,857 33,660 35,380 38,800 36,033
2005 33,195 30,531 31,361 33,953 32,304
2004 32,289 30,248 30,983 33,038 31,663

Franchised Restaurants:

Q1 Q2 Q3 Q4 Year
-------- --------- --------- -------- ---------
2008 $47,812 46,390
2007 46,439 43,998 45,879 47,293 45,901
2006 44,342 42,338 42,963 46,008 43,975
2005 41,309 39,824 40,149 42,533 40,999
2004 39,678 38,072 38,727 40,926 39,402


SOURCE: Buffalo Wild Wings, Inc.

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