Buffalo Wild Wings, Inc. Announces Third Quarter 2008 Results
- Same-store sales increases of 6.8% at company-owned and 2.1% at franchised restaurants
- Earnings per diluted share increase of 4% to $0.25
MINNEAPOLIS--(BUSINESS WIRE)--Oct. 27, 2008--Buffalo Wild Wings, Inc. (Nasdaq: BWLD), announced today financial results for the third quarter ended September 28, 2008. Highlights for the third quarter versus the same period a year ago were:
- Total revenue increased 28.8% to $106.1 million
- Company-owned restaurant sales grew 30.3% to $95.5 million
- Same-store sales increased 6.8% at company-owned restaurants and 2.1% at franchised restaurants
Net earnings increased 7.1% to $4.6 million from $4.3 million, and earnings per diluted share increased 4.2% to $0.25 from $0.24 Sally Smith, President and Chief Executive Officer, commented, "We are very pleased with our strong same-store sales during the quarter, with increases of 6.8% at our company-owned and 2.1% at our franchised restaurants, which, with our strong performance in new units, fueled a revenue increase of nearly 29%. We opened twelve new company-owned and twelve new franchised units and completed the acquisition of our nine franchised restaurants in Las Vegas, making for a busy quarter. Percentage decreases in our cost of sales, operating and occupancy expenses for company-owned restaurants contributed to a 120 basis point improvement in restaurant-level performance over prior year. Likewise, we leveraged our general and administrative expenses by 100 basis points over last year, despite a $582,000 increase in stock-based compensation. These operating gains were offset by year-over-year increases in our preopening costs and loss on asset disposals and impairment charges, delivering net earnings growth of 7.1%, or earnings per diluted share of $0.25."
Total revenue increased 28.8% to $106.1 million in the third quarter compared to $82.4 million in the third quarter of 2007. Company-owned restaurant sales for the quarter increased 30.3% to $95.5 million driven by a company-owned same-store sales increase of 6.8% and 39 more company-owned restaurants in operation at the end of third quarter 2008 relative to the same period in 2007. Franchise royalties and fees increased 16.5% to $10.6 million versus $9.1 million in the prior year. This increase was due to a franchised same-store sales increase of 2.1% and 35 more franchised restaurants at the end of the period versus a year ago.
Average weekly sales for company-owned restaurants were $42,400 for the third quarter of 2008 compared to $38,498 for the same quarter last year, a 10.1% increase. Franchised restaurants averaged $46,889 for the period versus $45,879 in the third quarter a year ago, a 2.2% increase.
For the third quarter, net earnings increased 7.1% to $4.6 million versus $4.3 million in the prior year. Earnings per diluted share were $0.25, as compared to third quarter 2007 earnings per diluted share of $0.24.
2008 and 2009 Outlook
Ms. Smith continued, "Throughout 2008, we have had great same-store sales as well as improved restaurant-level cash flows and leveraging of general and administrative expenses. We have also invested time, energy and dollars to remodel, relocate, and update our existing units, which we feel is critical to the long-term success of the Buffalo Wild Wings brand, but which impacts our near-term results. The level of preopening costs and loss on asset disposals and impairment in the third quarter reflect this commitment. For the full year of 2008, we expect about 15% unit growth, over 25% revenue growth, and 20 to 25% net earnings growth."
Ms. Smith added, "We are confident in our ability to grow Buffalo Wild Wings in 2009 and beyond. We are also conservative given the current economic environment. In 2009, we are committed to our goal of 15% unit growth, with about 40% of the new unit growth expected to be company-owned restaurants, and our development pipeline for both company-owned and franchised restaurants is strong. Our enthusiasm for achieving our unit growth is only moderated by the current economy and the turmoil in the financial markets, and the impact on real estate development and availability of financing for developers and franchisees. We are committed to driving revenue growth, through strong same-store sales and increasing our average weekly sales volumes. And, we are committed to growing net earnings, through improving our restaurant-level performance and leveraging our general and administrative expenses. Based on achieving our unit growth goal of 15% in 2009, we would expect revenue to grow by about 25% and net earnings to grow by 20 to 25%."
Buffalo Wild Wings will be hosting a conference call today, October 27, 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 November 3, 2008. To access this replay, please dial 1.303.590.3030, password 3930835.
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 545 Buffalo Wild Wings locations across 38 states.
Forward-looking Statements
Certain statements in this release that are not historical facts are forward-looking statements that involve risks and uncertainties. These statements include, without limitation, those relating to our projected unit, revenue and earnings growth rates for 2008, 2009 and beyond and improving same-store sales, average weekly sales volumes, restaurant-level performance and general and administrative expenses. Forward-looking 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, 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 transition of the recently-acquired Las Vegas restaurants, economic conditions, the availability of financing to real estate developers and franchisees, 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 Nine months ended
------------------- -------------------
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
Revenue:
Restaurant sales $ 95,492 73,280 269,850 211,874
Franchising royalties and
fees 10,582 9,086 31,354 26,393
--------- --------- --------- ---------
Total revenue 106,074 82,366 301,204 238,267
--------- --------- --------- ---------
Costs and expenses:
Restaurant operating costs:
Cost of sales 28,422 22,517 81,085 65,166
Labor 29,289 22,156 82,167 64,313
Operating 15,675 12,272 42,807 34,473
Occupancy 6,273 5,076 17,872 14,686
Depreciation 5,971 4,284 16,720 12,204
General and administrative
(1) 10,684 9,147 29,072 26,302
Preopening 2,476 988 5,419 2,293
Loss on asset disposals and
impairment 930 306 2,068 538
--------- --------- --------- ---------
Total costs and expenses 99,720 76,746 277,210 219,975
--------- --------- --------- ---------
Income from operations 6,354 5,620 23,994 18,292
Interest income 264 768 1,096 2,223
--------- --------- --------- ---------
Earnings before income taxes 6,618 6,388 25,090 20,515
Income tax expense 2,050 2,121 8,382 6,866
--------- --------- --------- ---------
Net earnings $ 4,568 4,267 16,708 13,649
========= ========= ========= =========
Earnings per common share -
basic $ 0.26 0.24 0.94 0.78
Earnings per common share -
diluted 0.25 0.24 0.93 0.77
Weighted average shares
outstanding - basic 17,823 17,597 17,800 17,535
Weighted average shares
outstanding - diluted 17,920 17,767 17,903 17,733
(1) Includes stock-based compensation of $1,297, $715, $3,221, and
$3,047, 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 Nine months ended
------------------- -------------------
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
Revenue:
Restaurant sales 90.0% 89.0% 89.6% 88.9%
Franchising royalties and
fees 10.0 11.0 10.4 11.1
--------- --------- --------- ---------
Total revenue 100.0 100.0 100.0 100.0
--------- --------- --------- ---------
Costs and expenses:
Restaurant operating costs:
Cost of sales 29.8 30.7 30.0 30.8
Labor 30.7 30.2 30.4 30.4
Operating 16.4 16.7 15.9 16.3
Occupancy 6.6 6.9 6.6 6.9
Depreciation 5.6 5.2 5.6 5.1
General and administrative 10.1 11.1 9.7 11.0
Preopening 2.3 1.2 1.8 1.0
Loss on asset disposals and
impairment 0.9 0.4 0.7 0.2
--------- --------- --------- ---------
Total costs and expenses 94.0 93.2 92.0 92.3
--------- --------- --------- ---------
Income from operations 6.0 6.8 8.0 7.7
Interest income 0.2 0.9 0.4 0.9
--------- --------- --------- ---------
Earnings before income taxes 6.2 7.8 8.3 8.6
Income tax expense 1.9 2.6 2.8 2.9
--------- --------- --------- ---------
Net earnings 4.3 5.2 5.5 5.7
========= ========= ========= =========
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
(unaudited)
September 28, December 30,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 4,531 1,521
Marketable securities 40,425 66,513
Accounts receivable - franchisees, net of
allowance of $25 886 885
Accounts receivable - other 6,245 6,976
Inventory 2,958 2,362
Prepaid expenses 2,704 3,060
Refundable income tax 1,305 1,886
Deferred income taxes 2,371 1,303
------------- -------------
Total current assets 61,425 84,506
Property and equipment, net 142,166 102,742
Restricted cash 7,242 7,161
Other assets 9,874 2,320
Goodwill 10,972 369
------------- -------------
Total assets $ 231,679 197,098
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Unearned franchise fees $ 2,369 2,316
Accounts payable 18,333 10,692
Accrued compensation and benefits 12,924 12,615
Accrued expenses 6,416 6,207
Current portion of deferred lease credits 103 660
------------- -------------
Total current liabilities 40,145 32,490
Long-term liabilities:
Other liabilities 1,119 1,031
Marketing fund payables 7,242 7,161
Deferred income taxes 7,163 2,166
Deferred lease credits, net of current
portion 13,301 12,585
------------- -------------
Total liabilities 68,970 55,433
------------- -------------
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 17,823,001 and 17,657,020
respectively 85,161 80,825
Retained earnings 77,548 60,840
------------- -------------
Total stockholders' equity 162,709 141,665
------------- -------------
Total liabilities and stockholders'
equity $ 231,679 197,098
============= =============
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
Nine months ended
---------------------------
September 28, September 30,
2008 2007
Cash flows from operating activities:
Net earnings $ 16,708 13,649
Adjustments to reconcile net earnings to
cash provided by operations:
Depreciation 16,720 12,204
Amortization 80 (95)
Loss on asset disposals and impairment 2,054 538
Deferred lease credits 1,426 2,221
Deferred income taxes 3,929 (1,359)
Stock-based compensation 3,221 3,047
Excess tax benefit from the exercise of
stock options (435) (660)
Change in operating assets and
liabilities:
Trading securities (164) (315)
Accounts receivable (62) (421)
Inventory (327) (375)
Prepaid expenses 438 (1,860)
Other assets (429) (378)
Unearned franchise fees 53 198
Accounts payable 2,519 1,742
Refundable income tax 1,016 (699)
Accrued expenses 1,099 2,355
------------- -------------
Net cash provided by operating
activities 47,846 29,792
------------- -------------
Cash flows from investing activities:
Acquisition of property and equipment (48,378) (23,127)
Acquisition of franchised restaurants (22,645) --
Purchase of marketable securities (98,984) (128,782)
Proceeds of marketable securities 125,156 115,333
------------- -------------
Net cash used in investing activities (44,851) (36,576)
------------- -------------
Cash flows from financing activities:
Issuance of common stock 569 875
Tax payments for restricted stock units (989) (1,183)
Excess tax benefit from the exercise of
stock options 435 660
------------- -------------
Net cash provided by financing
activities 15 352
------------- -------------
Net increase (decrease) in cash and
cash equivalents 3,010 (6,432)
Cash and cash equivalents at beginning of
period 1,521 11,756
------------- -------------
Cash and cash equivalents at end of period $ 4,531 5,324
============= =============
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Restaurant Count
Company-owned Restaurants:
Q1 Q2 Q3 Q4
---- ---- ---- ----
2008 165 169 187
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 340 346 348
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% 6.8%
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% 2.1%
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%
Average Weekly Sales Volumes
Company-owned Restaurants:
Q1 Q2 Q3 Q4 Year
-------- -------- -------- -------- --------
2008 $41,438 40,572 42,400
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 46,889
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
CONTACT: Buffalo Wild Wings, Inc.
Investor Relations Contact:
Mary Twinem, 952-253-0731
SOURCE: Buffalo Wild Wings, Inc.
###
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