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Buffalo Wild Wings, Inc. Franchise Announces Second Quarter 2010 Results

By: Buffalo Wild Wings |  5 Shares     284 Reads

Same-store sales decreased 0.1% at company-owned and 0.7% at franchised restaurants

Earnings per diluted share increase of 28.2% to $0.50

MINNEAPOLIS (BUSINESS WIRE) -- Buffalo Wild Wings, Inc. (NASDAQ: BWLD), announced today financial results for the second quarter ended June 27, 2010. Highlights for the second quarter versus the same period a year ago were:

• Total revenue increased 12.4% to $145.7 million
• Company-owned restaurant sales grew 11.7% to $131.5 million
• Same-store sales decreased 0.1% at company-owned restaurants and 0.7% at franchised restaurants
• Net earnings increased 31.4% to $9.2 million from $7.0 million, and earnings per diluted share increased 28.2% to $0.50 from $0.39

Sally Smith, President and Chief Executive Officer, commented, "The recent strengthening of our sales is encouraging, and our focused efforts brought company-owned and franchised restaurants to nearly flat same-store sales in the second quarter. We continue our steady expansion, opening sixteen additional restaurants during the quarter, and revenue grew by 12%. Coupled with increased restaurant-level cash flow, we provided our shareholders with a substantial increase in net earnings of 31%, achieving earnings per share of $.50."

Total revenue increased 12.4% to $145.7 million in the second quarter compared to $129.6 million in the second quarter of 2009. Company-owned restaurant sales for the quarter increased 11.7% over the same period in 2009, to $131.5 million, mainly the result of operating 19 additional company-owned restaurants at the end of second quarter 2010 relative to the same period in 2009. Same-store sales at company-owned locations for the second quarter decreased 0.1%. Franchise royalties and fees increased 19.5% to $14.2 million versus $11.9 million in the second quarter of 2009. This increase is attributed to 64 additional franchised restaurants at the end of the period versus a year ago, partially offset by a franchised same-store sales decrease of 0.7%.

Average weekly sales for company-owned restaurants were $43,021 for the second quarter of 2010 compared to $42,938 for the same quarter last year, a 0.2% increase. Franchised restaurants averaged $49,051 for the period versus $48,619 in the second quarter a year ago, a 0.9% increase.

For the second quarter, net earnings increased 31.4% to $9.2 million versus $7.0 million in the second quarter of 2009. Earnings per diluted share were $0.50, as compared to second quarter 2009 earnings per diluted share of $0.39.

2010 Outlook

Ms. Smith remarked, "Company-owned locations are posting positive same-store sales of 2.2% in July. Franchised locations are also positive with same-store sales increases of 0.2%. Our restaurant Teams are well-prepared and excited as we head into the football season, and our marketing and media plans are stronger than ever."

Ms. Smith concluded, "We have previously stated that our 2010 growth goals are 13 to 15% unit growth and 20% net earnings growth. We are exceeding both of these annual targets for the first half of the year. Based on the anticipated new restaurants opening in the third and fourth quarters, we are on track for 13% unit growth for 2010. We have growing confidence that our 20% annual net earnings growth goal is achievable given the recent improvement in same-store sales and the moderation of wing costs."

Buffalo Wild Wings will be hosting a conference call today, July 27, 2010 at 4:00 p.m. Central Daylight Time to discuss these results. There will be a simultaneous webcast conducted at our website www.buffalowildwings.com.

A replay of the call will be available until August 3, 2010. To access this replay, please dial 1.858.384.5517, password 4329040.

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(TM) 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 eighteen mouth-watering signature sauces and seasonings with flavor sensations ranging from Sweet BBQ(TM) to Blazin'(R). 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 684 Buffalo Wild Wings locations across 44 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 third quarter sales trends and projected unit, revenue and net earnings growth rates for 2010 and beyond. 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, our ability to achieve and manage our planned expansion, the ability of our franchisees to open and manage new restaurants, the actual number of locations opened during 2010 and beyond, market acceptance in the new geographic regions we enter, unforeseen obstacles in developing nontraditional sites, 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 sales at company-owned and franchised locations, the cost of commodities, the success of our key initiatives and our advertising and marketing campaigns, our ability to control 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, or the smoking of tobacco, 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 27, 2009, 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 Six months
ended ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Revenue:
Restaurant sales $131,531 117,763 269,493 237,187
Franchise royalties and fees 14,170 11,859 28,479 23,990
Total revenue 145,701 129,622 297,972 261,177
Costs and expenses:
Restaurant operating costs:
Cost of sales 37,601 35,922 79,825 72,130
Labor 40,089 36,056 80,774 71,605
Operating 21,173 17,966 42,628 35,953
Occupancy 8,807 7,924 17,717 15,518
Depreciation and amortization 9,456 7,888 19,006 15,383
General and administrative (1) 12,929 11,773 24,955 23,193
Preopening 1,197 1,673 2,312 4,082
Loss on asset disposals and
store closures 526 272 937 447
Total costs and expenses 131,778 119,474 268,154 238,311
Income from operations 13,923 10,148 29,818 22,866
Investment income (loss) (156) 413 29 489
Earnings before income taxes 13,767 10,561 29,847 23,355
Income tax expense 4,601 3,586 10,120 7,894
Net earnings $9,166 6,975 19,727 15,461
Earnings per common share - basic $0.50 0.39 1.09 0.86
Earnings per common share - diluted 0.50 0.39 1.08 0.86
Weighted average shares outstanding
- basic 18,167 17,999 18,157 17,990
Weighted average shares outstanding
- diluted 18,234 18,070 18,230 18,052

(1) Includes stock-based compensation of $1,313, $1,689, $2,538, and $2,490, 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 27, June 28, June 27, June 28,
2010 2009 2010 2009
Revenue:
Restaurant sales 90.3% 90.9% 90.4% 90.8%
Franchising royalties and fees 9.7 9.1 9.6 9.2
Total revenue 100.0 100.0 100.0 100.0
Costs and expenses:
Restaurant operating costs:
Cost of sales 28.6 30.5 29.6 30.4
Labor 30.5 30.6 30.0 30.2
Operating 16.1 15.3 15.8 15.2
Occupancy 6.7 6.7 6.6 6.5
Depreciation and amortization 6.5 6.1 6.4 5.9
General and administrative 8.9 9.1 8.4 8.9
Preopening 0.8 1.3 0.8 1.6
Loss on asset disposals and store closures 0.4 0.2 0.3 0.2
Total costs and expenses 90.4 92.2 90.0 91.2
Income from operations 9.6 7.8 10.0 8.8
Investment income (loss) (0.1) 0.3 0.0 0.2
Earnings before income taxes 9.4 8.1 10.0 8.9
Income tax expense 3.2 2.8 3.4 3.0
Net earnings 6.3 5.4 6.6 5.9

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(unaudited)


June 27, December 27,
2010 2009
Assets
Current assets:
Cash and cash equivalents $9,711 9,580
Marketable securities 59,489 43,632
Accounts receivable - franchisees, net of
allowance of $25 1,150 2,118
Accounts receivable - other 7,946 7,383
Inventory 3,400 3,644
Prepaid expenses 2,005 2,972
Refundable income taxes 974 1,872
Deferred income taxes 2,555 2,938
Restricted assets 24,505 24,384
Total current assets 111,735 98,523

Property and equipment, net 194,607 189,639
Other assets 9,670 9,665
Goodwill 11,246 11,246
Total assets $327,258 309,073
Liabilities and Stockholders' Equity
Current liabilities:
Unearned franchise fees $2,359 2,706
Accounts payable 14,720 13,436
Accrued compensation and benefits 16,790 19,554
Accrued expenses 5,191 6,540
Current portion of deferred lease credits 76 84
System-wide payables 24,505 24,384
Total current liabilities 63,641 66,704

Long-term liabilities:
Other liabilities 1,582 1,422
Deferred income taxes 12,434 14,940
Deferred lease credits, net of current portion 16,830 16,174
Total liabilities 94,487 99,240

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 18,181,009 and
18,054,375 respectively 97,098 93,887
Retained earnings 135,673 115,946
Total stockholders' equity 232,771 209,833
Total liabilities and stockholders' equity $327,258 309,073

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

Six months ended
June 27, June 28,
2010 2009
Cash flows from operating activities:
Net earnings $19,727 15,461
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation 18,699 15,077
Amortization 307 306
Loss on asset disposals and store closures 847 447
Deferred lease credits 929 840
Deferred income taxes (2,123) 1,639
Stock-based compensation 2,538 2,490
Excess tax benefit from the exercise of stock options (116) (31)
Change in operating assets and liabilities:
Trading securities (748) (1,204)
Accounts receivable 124 (734)
Inventory 244 (255)
Prepaid expenses 967 1,389
Other assets (312) (105)
Unearned franchise fees (347) 166
Accounts payable 2,472 (61)
Income taxes 1,014 1,895
Accrued expenses (2,749) 20
Net cash provided by operating activities 41,473 37,340
Cash flows from investing activities:
Acquisition of property and equipment (25,506) (33,115)
Purchase of marketable securities (61,114) (25,284)
Proceeds of marketable securities 46,005 24,778
Net cash used in investing activities (40,615) (33,621)
Cash flows from financing activities:
Issuance of common stock 782 555
Tax payments for restricted stock units (1,625) (1,513)
Excess tax benefit from the exercise of stock options 116 31
Net cash used in financing activities (727) (927)
Net increase in cash and cash equivalents 131 2,792
Cash and cash equivalents at beginning of period 9,580 8,347
Cash and cash equivalents at end of period $9,711 11,139

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

Supplemental Information

Restaurant Count

Company-owned Restaurants:

Q1 Q2 Q3 Q4
2010 235 234
2009 206 215 220 232
2008 165 169 187 197
2007 140 145 148 161
2006 124 129 134 139

Franchised Restaurants:


Q1 Q2 Q3 Q4
2010 430 447
2009 373 383 400 420
2008 340 346 348 363
2007 299 301 313 332
2006 260 270 278 290

Same-Store Sales

Company-owned Restaurants:

Q1 Q2 Q3 Q4 Year
2010 0.1 % (0.1 %)
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 %
2006 7.7 % 8.2 % 11.8 % 13.2 % 10.4 %

Franchised Restaurants:


Q1 Q2 Q3 Q4 Year
2010 0.7 % (0.7 %)
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 %
2006 6.7 % 4.7 % 6.4 % 6.5 % 6.1 %

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information

Average Weekly Sales Volumes

Company-owned Restaurants:

Q1 Q2 Q3 Q4 Year
2010 $ 45,327 43,021
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
2006 35,857 33,660 35,380 38,800 36,033

Franchised Restaurants:


Q1 Q2 Q3 Q4 Year
2010 $ 51,532 49,051
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
2006 44,342 42,338 42,963 46,008 43,975


SOURCE: Buffalo Wild Wings, Inc.

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