Buffalo Wild Wings, Inc. Announces First Quarter Earnings per Share of $1.25 and Adjusted Earnings per Share of $1.44

Cost Savings Initiatives of $40 to $50 million By the End of 2018

MINNEAPOLIS - April 26, 2017 -(BUSINESS WIRE) - Buffalo Wild Wings, Inc. (NASDAQ: BWLD) announced today financial results for the first quarter ended March 26, 2017.

Key metrics for the first quarter, versus the same period a year ago, were:

  • Total revenue increased 5.2% to $534.8 million
  • Company-owned restaurant sales increased 5.2% to $509.2 million
  • Same-store sales increased 0.5% at company-owned restaurants
  • Net earnings decreased 34.2% to $21.5 million from $32.8 million, and earnings per diluted share decreased 27.5% to $1.25 from $1.73
  • Adjusted net earnings decreased 26.6% to $24.7 million from $33.7 million, and adjusted earnings per diluted share decreased 19.1% to $1.44 from $1.78

Sally Smith, President and Chief Executive Officer, commented, "In the first quarter, we are pleased same-store sales turned positive for both company-owned and franchised locations, outperforming both the negative restaurant industry and a negative casual dining segment. This is due to the continued momentum of our strategic initiatives launched in 2016. The popularity of Half-Price Wing Tuesdays® combined with higher wing prices increased our cost of sales. Labor and operating expenses were also higher compared to the prior year, resulting in lower restaurant-level and operating margins and negatively impacting EPS for the quarter."

Ms. Smith continued, "In order to improve margins and profitability, we've undertaken a thorough review of our restaurant operating practices, field organization, and third-party spend with a leading consulting firm who worked with our Team Members and franchisees. We've identified areas to streamline work and improve efficiencies. As a result of these initiatives, we expect to realize $40 to $50 million in cost savings over the next two years. Our team is focused, on track, and making the strategic changes to improve sales and profitability for the long run."

Ms. Smith concluded, "With the consumer and competitive headwinds and inflation on wings, offsetting our cost savings initiatives and after absorbing the $0.25 to $0.40 impact of the proxy matters and other adjustments, our GAAP EPS range is $5.20 to $5.50."

Strategic Plan

In late 2016, Buffalo Wild Wings implemented several traffic-driving initiatives to return to positive same-store sales against a negative restaurant industry backdrop. Near-term initiatives include: Half-Price Wing Tuesdays, FastBreak Lunch™, Blazin' Rewards® loyalty program, and delivery. Longer term the company is developing sales drivers targeted at the dine-in experience to increase check average during game time and continue to differentiate the Buffalo Wild Wings' game-day experience.

The company completed a thorough review of its cost structure with a leading consulting firm utilizing benchmarks, streamlining work, and improving efficiencies. This included eight weeks of in-restaurant observations at company-owned restaurants and high-margin franchised locations to implement best practices across the Buffalo Wild Wings system. Also reviewed was the field organization, cost of goods sold, general and administrative costs, and third party contracts. As a result, Buffalo Wild Wings estimates it can reduce its spend by approximately $40 to $50 million over the next two years with approximately $20 million to be realized in fiscal 2017.

The company also determined to sell approximately 13% of company-owned Buffalo Wild Wings restaurants and engaged the Cypress Group to lead the sale process. The roughly 80 restaurants in the portfolio optimization process have average unit volumes of $2.5 million with restaurant-level margins of 9.8% on a trailing twelve month basis.

Revenue

  • Total revenue increased $26.5 million to $534.8 million in the first quarter, compared to $508.3 million in the first quarter of 2016.
  • Company-owned restaurant sales for the first quarter increased 5.2% over the same period in 2016 to $509.2 million, primarily driven by 31 additional company-owned restaurants and a 0.5% increase in same-store sales at company-owned restaurants.
  • Franchise royalties and fees increased 5.0% on higher revenues to $25.6 million for the quarter, versus $24.3 million in the first quarter of 2016, primarily driven by additional franchised restaurants and same-stores sales of 0.6%.

Restaurant-level costs and expenses

  • Cost of sales for the first quarter was 31.4% of restaurant sales, compared to 29.7% in the quarter last year, driven by increased promotional activity, a change in sales mix, and higher traditional wing prices.
    • Traditional wings were $2.05 per pound in the first quarter, representing an $0.08 increase, or 4.1%, higher than last year's first quarter average of $1.97. Traditional wings as a percent of cost of sales was 29.6% in the first quarter.
  • Cost of labor for the first quarter was 31.6% of restaurant sales, 80 basis points higher than first quarter last year, resulting from increased healthcare costs and compensation costs, partially offset by lower workers' compensation expense.
  • Restaurant operating expenses as a percentage of restaurant sales were 15.2%, an increase of 80 basis points from the first quarter of 2016, primarily driven by higher repair and maintenance expenses, third-party delivery commissions, and the timing of sports programming expenses.
  • Occupancy costs were 5.6% as a percentage of restaurant sales, 10 basis points higher compared to the same quarter last year.
  • Restaurant-level profit was $82.2 million, or 16.1%, of restaurant sales, compared to $94.6 million, or 19.5%, in the first quarter last year.

Other Expenses

  • Depreciation and amortization expense for the first quarter was $38.9 million, increasing 3.5%, due to new unit openings over the last 12 months.
  • General and administrative expenses were $32.8 million in the first quarter, increasing 3.4% from the same period last year, due to higher salary and bonus expense, and increased activist advisory fees and consulting services, partially offset by lower stock-based compensation.
  • Stock-based compensation was $0.6 million in the first quarter, compared to $1.4 million of expense in the prior year.
  • Preopening expenses for the quarter totaled $0.6 million, versus $1.9 million in the first quarter last year, due to fewer openings.
  • Loss on asset disposal for the first quarter totaled $1.7 million, compared to last year of $1.2 million.
  • Interest expense was $2.4 million in the first quarter, compared to $0.8 million in the prior year period. The increase is a result of increased borrowing on the line of credit.
  • Other expense was $1.2 million for the quarter, compared to $0.9 million of other income in 2016.
  • The effective tax rate during the quarter was 29.3%, compared to 29.9% in the prior year.

Earnings

  • Operating income was $33.8 million in the first quarter, or 6.3% of total revenue, compared to $46.6 million and 9.2% in the prior year.
  • Net earnings decreased 34.2% to $21.5 million in the first quarter, versus $32.8 million in the first quarter of 2016.
  • Earnings per diluted share were $1.25, compared to first quarter 2016 earnings per diluted share of $1.73.
  • Adjusted earnings per diluted share were $1.44, compared to first quarter 2016 adjusted earnings per diluted share of $1.78.

Balance Sheet

  • Cash totaled $38.6 million at the end of the first quarter.
  • The credit facility had an outstanding balance of $343 million as of the end of the quarter.
  • The quarter ended with over $968.3 million in total assets and $327.5 million in total equity.

Cash Flow

  • Cash flow from operations was $48.9 million for the quarter, a 36.6% decrease over the first quarter last year.
  • Free cash flow in the first quarter was $31.7 million, compared to $43.0 million in the prior year.
  • 1,362,890 shares were repurchased for a total of $212.3 million during the first quarter of 2017.

2017 Outlook

The company expects the following approximate new unit development in 2017:

  • 15 company-owned Buffalo Wild Wings restaurants in the United States
  • 15 franchised Buffalo Wild Wings locations in the United States
  • 20 franchised Buffalo Wild Wing locations internationally
  • 2 company-owned and 12 to 15 franchised R Taco restaurants

The company expects the following in 2017:

  • Same-store sales growth of approximately 1%
  • Traditional chicken wing cost inflation of 8% to 10%, and when combined with the sales mix shift result in headwind to restaurant-level margins
  • Depreciation and amortization expense of $153 to $157 million
  • General and administrative expense of $143 to $147 million, including stock-based compensation of $10 to $11 million and non-recurring consulting and advisory fees estimated between $6 and $8 million
  • Flat to nominal operating income growth, including the 53rd week and excluding adjusting items
  • Interest expense of approximately $16 million
  • Achieving leverage of 1.5x net debt to EBITDA by the end of the fiscal year
  • Share repurchases of $450 to $500 million
  • Earnings per diluted share of $5.20 to $5.50
  • Adjusted earnings per diluted share of $5.45 to $5.90
  • Capital expenditures of approximately $100 million

Buffalo Wild Wings will be hosting a conference call today, April 26, 2017 at 4:00 p.m. Central Daylight Time to discuss these results. There will be a simultaneous webcast conducted at our investor website IR.BuffaloWildWings.com.

A replay of the call will be available until May 3, 2017. To access this replay, please dial 1-412-317-6671 password 5551287.

About Buffalo Wild Wings, Inc.

Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, is a growing owner, operator and franchisor of Buffalo Wild Wings® 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 21 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 more than 1,230 Buffalo Wild Wings locations around the world.

To stay up-to-date on all the latest events and offers for sports fans and wing lovers, like Buffalo Wild Wings on Facebook, follow @BWWings on Twitter and visit www.BuffaloWildWings.com.

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 restaurant performance measures and growth goals, including but not limited to those relating to our second quarter trends, projected unit and net earnings growth rates, and projected share repurchase activity and capital expenditures. 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,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “scheduled,” 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 international locations), success of acquired restaurants, success of investments in new or emerging concepts, 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 system standards, the cost of commodities such as traditional chicken wings and supply chain consistency, 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, 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 25, 2016, 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
      March 26,   March 27,
      2017   2016
Revenue:          
Restaurant sales     $ 509,205     483,911  
Franchise royalties and fees     25,558     24,346  
Total revenue     534,763     508,257  
Costs and expenses:          
Restaurant operating costs:          
Cost of sales     160,001     143,823  
Labor     161,034     149,129  
Operating     77,540     69,680  
Occupancy     28,463     26,723  
Depreciation and amortization     38,877     37,549  
General and administrative     32,752     31,665  
Preopening     587     1,863  
Loss on asset disposals and impairment     1,728     1,222  
Total costs and expenses     500,982     461,654  
Income from operations     33,781     46,603  
Interest expense     2,358     840  
Other expense (income)     1,160     (867 )
Earnings before income taxes     30,263     46,630  
Income tax expense     8,876     13,952  
Net earnings including noncontrolling interests     21,387     32,678  
Net earnings (loss) attributable to noncontrolling interests     (162 )   (95 )
Net earnings attributable to Buffalo Wild Wings     $ 21,549     32,773  
Earnings per common share – basic     $ 1.26     1.73  
Earnings per common share – diluted     $ 1.25     1.73  
Weighted average shares outstanding – basic     17,163     18,922  
Weighted average shares outstanding – diluted     17,187     18,957  
               

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
      March 26,   March 27,
      2017   2016
Revenue:          
Restaurant sales     95.2 %   95.2 %
Franchise royalties and fees     4.8     4.8  
Total revenue     100.0     100.0  
Costs and expenses:          
Restaurant operating costs:          
Cost of sales     31.4     29.7  
Labor     31.6     30.8  
Operating     15.2     14.4  
Occupancy     5.6     5.5  
Depreciation and amortization     7.3     7.4  
General and administrative     6.1     6.2  
Preopening     0.1     0.4  
Loss on asset disposals and impairment     0.3     0.2  
Total costs and expenses     93.7     90.8  
Income from operations     6.3     9.2  
Interest expense     0.4     0.2  
Other expense (income)     0.2     (0.2 )
Earnings before income taxes     5.7     9.2  
Income tax expense     1.7     2.7  
Net earnings including noncontrolling interests     4.0     6.4  
Net earnings (loss) attributable to noncontrolling interests     (0.0 )   (0.0 )
Net earnings attributable to Buffalo Wild Wings     4.0 %   6.4 %
               

 

 

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(unaudited)

           
      March 26,   December 25,
      2017   2016
Assets          
Current assets:          
Cash     $ 38,611     49,266  
Accounts receivable, net of allowance of $251     41,941     34,225  
Inventory     14,917     16,532  
Prepaid expenses     7,831     9,075  
Refundable income taxes         1,018  
Restricted assets     22,530     66,471  
Total current assets     125,830     176,587  
           
Property and equipment, net     567,214     592,806  
Reacquired franchise rights, net     115,660     118,973  
Other assets     42,331     41,625  
Goodwill     117,228     117,228  
Total assets     $ 968,263     1,047,219  
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Deferred revenue     $ 4,515     3,089  
Accounts payable     33,370     45,797  
Accrued compensation and benefits     34,672     47,304  
Accrued expenses     31,135     32,347  
Income tax payable     10,407      
Current portion of long-term debt and capital lease obligations     4,043     3,745  
Current portion of deferred lease credits     4,542     873  
System-wide payables     63,322     108,814  
Total current liabilities     186,006     241,969  
           
Long-term liabilities:          
Other liabilities     15,976     16,109  
Deferred income taxes     18,686     21,588  
Long-term debt and capital lease obligations, net of current portion     379,231     205,312  
Deferred lease credits, net of current portion     40,913     44,341  
Total liabilities     640,812     529,319  
           
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 16,136,768 and 17,462,465 shares, respectively     139,927     147,234  
Retained earnings     191,635     374,683  
Accumulated other comprehensive loss     (3,810 )   (3,878 )
Total stockholders’ equity     327,752     518,039  
Noncontrolling interests     (301 )   (139 )
Total equity     327,451     517,900  
Total liabilities and equity     $ 968,263     1,047,219  
                 

 

 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
       
      Three months ended
      March 26,   March 27,
      2017   2016
Cash flows from operating activities:          
Net earnings including noncontrolling interests     $ 21,387     32,678  
Adjustments to reconcile net earnings to net cash provided by operations:          
Depreciation and amortization     38,877     37,549  
Loss on asset disposals     1,728     1,222  
Deferred lease credits     1,911     2,067  
Deferred income taxes     (2,902 )   858  
Stock-based compensation     617     1,404  
Excess tax benefit from stock issuance         (33 )
Change in fair value of contingent consideration     170     (1,106 )
Loss on investments in affiliates     1,363     158  
Change in operating assets and liabilities, net of effect of acquisitions:          
Trading securities         (104 )
Accounts receivable     (10,051 )   (1,297 )
Inventory     1,619     806  
Prepaid expenses     1,245     889  
Other assets     (2,927 )   (428 )
Deferred revenue     1,426     (181 )
Accounts payable     (4,378 )   (706 )
Income taxes     11,425     22,813  
Accrued expenses     (12,658 )   (19,488 )
Net cash provided by operating activities     48,852     77,101  
Cash flows from investing activities:          
Acquisition of property and equipment     (17,140 )   (34,094 )
Acquisition of businesses         (3,860 )
Net cash used in investing activities     (17,140 )   (37,954 )
Cash flows from financing activities:          
Proceeds from revolving credit facility     220,000     108,633  
Repayments of revolving credit facility     (47,000 )   (135,514 )
Borrowings from restricted funds     933     22,622  
Repurchases of common stock     (212,250 )   (25,000 )
Other financing activities     (1,123 )   (500 )
Issuance of common stock     769     434  
Excess tax benefit from stock issuance         33  
Tax payments for restricted stock units     (3,716 )   (9,172 )
Net cash used in financing activities     (42,387 )   (38,464 )
Effect of exchange rate changes on cash     20     (210 )
Net increase (decrease) in cash     (10,655 )   473  
Cash at beginning of period     49,266     11,220  
Cash at end of period     $ 38,611     11,693  
                 

 

 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
 
Restaurant Count
 

Company-owned Restaurants (includes Buffalo Wild Wings, R Taco, and Buffalo Wild Wings-owned PizzaRev locations):

 
   

Q1

 

Q2

 

Q3

 

Q4

2017

  634            
2016   603   609   617   631
2015   501   517   573   596
2014   443   449   463   491
2013   397   407   415   434
 

Franchised Restaurants (includes Buffalo Wild Wings and R Taco locations):

 
   

Q1

 

Q2

 

Q3

 

Q4

2017   616            
2016   587   596   602   609
2015   593   593   569   579
2014   569   579   588   591
2013   514   525   534   559
                 

 

 

Restaurant Count Rollforward:

       
      Three Months Ended
      March 26, 2017     March 27, 2016
      Corporate   Franchise   Total     Corporate   Franchise   Total
Buffalo Wild Wings                            
Beginning of period     621   602   1,223     590   573   1,163
Opened     3   7   10     6   8   14
Acquired             1   (1)  
Closed/Relocated     (1)   (2)   (3)     (1)     (1)
End of period     623   607   1,230     596   580   1,176
R Taco                            
Beginning of period     8   7   15     4   6   10
Opened     1   2   3     1   1   2
Acquired                
Closed/Relocated                
End of period     9   9   18     5   7   12
PizzaRev                            
Beginning of period     2   n/a   2     2   n/a   2
Opened       n/a         n/a  
Acquired       n/a         n/a  
Closed/Relocated       n/a         n/a  
End of period     2   n/a   2     2   n/a   2
Consolidated                            
End of the period     634   616   1,250     603   587   1,190
                             

 

 
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
 
 
Same-Store Sales at Buffalo Wild Wings in United States and Canada
 
Company-owned Restaurants:
 
       

Q1

 

Q2

 

Q3

 

Q4

 

Year

2017       0.5 %                
2016       (1.7 %)   (2.1 %)   (1.8 %)   (4.0 %)   (2.4 %)
2015       7.0 %   4.2 %   3.9 %   1.9 %   4.2 %
2014       6.6 %   7.7 %   6.0 %   5.9 %   6.5 %
2013       1.4 %   3.8 %   4.8 %   5.2 %   3.9 %
 

Franchised Restaurants:

 
       

Q1

 

Q2

 

Q3

 

Q4

 

Year

2017       0.6 %                
2016       (2.4 %)   (2.6 %)   (1.6 %)   (3.9 %)   (2.7 %)
2015       6.0 %   2.5 %   1.2 %   0.1 %   2.5 %
2014       5.0 %   6.5 %   5.7 %   5.1 %   5.6 %
2013       2.2 %   4.1 %   3.9 %   3.1 %   3.3 %
 
Average Weekly Sales Volumes at Buffalo Wild Wings locations in United States and Canada
 
Company-owned Restaurants:
 
       

Q1

 

Q2

 

Q3

 

Q4

 

Year

2017     $ 62,970                  
2016       62,829     59,894     59,690     59,120     60,366  
2015       64,851     61,960     61,831     61,971     62,529  
2014       60,966     59,403     59,643     62,119     60,470  
2013       56,953     54,759     55,592     58,204     56,392  
 

Franchised Restaurants:

 
       

Q1

 

Q2

 

Q3

 

Q4

 

Year

2017     $ 65,713                  
2016       65,636     62,454     61,497     61,397     62,662  
2015       67,075     63,904     62,819     64,032     64,474  
2014       63,852     61,845     61,586     63,949     62,595  
2013       60,050     58,186     58,926     61,167     59,594  
                                   

Restaurant-Level Profit and Restaurant-Level Margin

Restaurant-level profit and restaurant-level margin are neither required by, nor presented in accordance with U.S. GAAP and are non-GAAP financial measures. Restaurant-level profit is defined restaurant sales less restaurant operating costs (cost of sales, labor, operating, and occupancy expense). Restaurant-level margin is defined as restaurant-level profit as a percentage of restaurant sales. Restaurant-level profit and restaurant-level margin have limitations as analytical tools, and should not be evaluated in isolation or as substitutes for analysis of results as reported under U.S. GAAP. Management believes the restaurant-level profit and restaurant-level margin are important tools for investors because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management uses restaurant-level profit and restaurant-level margin as key performance indicators to evaluate the profitability of company-owned restaurants.

A reconciliation of restaurant sales to restaurant-level margin is provided below:

             
      Three months ended
      March 26,     March 27,
      2017     2016
Restaurant sales     $ 509,205       483,911  
Restaurant operating costs     427,038       389,355  
Restaurant-level profit     82,167       94,556  
Restaurant-level margin     16.1 %     19.5 %
                 

EBITDA

Earnings before interest, taxes, and depreciation and amortization (EBITDA) is not required by, nor presented in accordance with U.S. GAAP and is a non-GAAP financial measure. The Company defines EBITDA as net earnings including non-controlling interests plus interest expense, income tax expense, and depreciation and amortization. EBITDA has limitations as an analytical tool, and should not be evaluated in isolation or as a substitute for analysis of results as reported under U.S. GAAP. Management utilizes this metric as a basis for evaluating our ongoing operations, and believes investors' understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for evaluating our ongoing results of operations, without the effects of interest, taxes, and depreciation and amortization.

A reconciliation of net earnings including noncontrolling interests to EBITDA is provided below:

           
      Three months ended
      March 26,   March 27,
      2017   2016
Net earnings including noncontrolling interests     $ 21,387     32,678
Income tax expense     8,876     13,952
Interest expense     2,358     840
Depreciation and amortization     38,877     37,549
EBITDA     $ 71,498     85,019
               

Adjusted Net Earnings and Adjusted Earnings per Share

Adjusted net earnings and adjusted earnings per share are not required by, nor presented in accordance with U.S. GAAP and are non-GAAP financial measures. The Company defines adjusted earnings per share as adjusted net earnings attributable to Buffalo Wild Wings divided by our weighted diluted average shares outstanding. Adjusted net earnings attributable to Buffalo Wild Wings is calculated as earnings before income taxes plus loss on asset disposals and impairment (excluding store closing reserve costs), proxy costs for contested election, advisory and consulting fees, and acquisition costs. This amount is then adjusted for an estimated income tax expense and net earnings (loss) attributable to noncontrolling interests. Adjusted net earnings and adjusted earnings per share have limitations as analytical tools, and should not be evaluated in isolation or as a substitute for analysis of results as reported under U.S. GAAP. Management utilizes these metrics as a basis for evaluating our ongoing operations, and believes investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations, without the effects of costs that are not expected to recur frequently, or costs that are subject to variations we do not believe are indicative of our ongoing results of operations.

           
      Three months ended
      March 26, 2017   March 27, 2016
Earnings before income taxes (a)     $ 30,263    

 

46,630  
Loss on asset disposals and impairment (b)     1,695     1,205  
Proxy costs for contested election, advisory and consulting fees (c)     2,830      
Acquisition costs (d)         145  
Adjusted earnings before income taxes     34,788     47,980  
Estimated income tax expense (e)     10,203     14,356  
Adjusted earnings including noncontrolling interests     24,585     33,624  
Net earnings (loss) attributable to noncontrolling interests (a)     (162 )   (95 )
Adjusted net earnings attributable to Buffalo Wild Wings     $ 24,747    

 

33,719  
Weighted average shares outstanding – diluted (a)     17,187     18,957  
Adjusted earnings per diluted share     $ 1.44     1.78  
                 

 

(a)   Equals the amount shown on our Consolidated Statements of Earnings.

(b)

 

Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $33 and $17, for the three-month periods ended March 26, 2017 and March 27, 2016, respectively.

(c)

 

Consists of costs related to the advisory fees and preparation of proxy materials in a contested election for the board of directors, and costs related to consulting services pertaining to the identification of best practices and improving efficiencies.

(d)

 

Consists of costs associated with an acquisition of a franchise-owned store.

(e)

 

Our effective tax rates for the three-month periods ended March 26, 2017 and March 27, 2016 were 29.3% and 29.9%, respectively. The calculated estimated income tax expense is based on these rates.

     

Adjusted Earnings per Diluted Share Forecast

Adjusted earnings per diluted share is not required by, nor presented in accordance with U.S. GAAP and is a non-GAAP financial measure. The Company defines adjusted earnings per diluted share as diluted earnings per share on a U.S. GAAP basis, plus diluted earnings per share impacts of loss on tangible and intangible asset disposals and impairment, costs related to the advisory fees and preparation of proxy materials in a contested election for the board of directors, and costs related to consulting services pertaining to the identification of best practices and improving efficiencies. Adjusted earnings per diluted share has limitations as an analytical tool, and should not be evaluated in isolation or as a substitute for analysis of results as reported under U.S. GAAP. Management utilizes this metric to forecast and evaluate our ongoing operations, and believes investors' understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for forecasting and evaluating our ongoing results of operations, without the effects of costs that are not expected to recur frequently, or costs that are subject to variations we do not believe are indicative of our ongoing results of operations.

       
      Twelve months ending December 31, 2017
      Low Projection   High Projection
Earnings per diluted share forecast (a)     $ 5.20    

 

5.50
Loss on tangible and intangible asset disposals and impairment (b)     0.00     0.05
Proxy costs for contested election, advisory and consulting fees (c)     0.25     0.35
Adjusted earnings per diluted share forecast (d)     $ 5.45    

 

5.90
                 

 

(a)   Equals the projected earnings per diluted share on a U.S. GAAP basis for fiscal year 2017.

(b)

 

Consists of the projected earnings per diluted share impact of our loss on tangible and intangible asset disposals and impairment for fiscal year 2017.

(c)

 

Consists of the projected earnings per diluted share impact of costs related to the advisory fees and preparation of proxy materials in a contested election for the board of directors, and costs related to consulting services pertaining to the identification of best practices and improving efficiencies for fiscal year 2017.

(d)

 

This estimate assumes diluted weighted average shares outstanding of 16,488 for fiscal year 2017.

     

Free Cash Flow

Free cash flow is not required by, nor presented in accordance with U.S. GAAP and is a non-GAAP financial measure. The Company defines free cash flow as net cash provided operating activities minus acquisition of property and equipment. Free cash flow has limitations as an analytical tool, and should not be evaluated in isolation or as a substitute for analysis of results as reported under U.S. GAAP. Management utilizes this metric, and also believes investors' understanding of our performance is enhanced by including this non-GAAP financial measure, as a basis for evaluating our cash flow available after capital expenditures.

           
      Three months ended
      March 26, 2017   March 27, 2016
Net cash provided by operating activities     $ 48,852     77,101  
Acquisition of property and equipment     (17,140 )   (34,094 )
Free cash flow     $ 31,712     43,007  
                 

Contact:

Heather Pribyl
Buffalo Wild Wings, Inc.
Investor Relations
952-540-2095

SOURCEBuffalo Wild Wings, Inc.

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