Buffalo Wild Wings, Inc. Announces Second Quarter Earnings per Share of $0.55 and Adjusted Earnings per Share of $0.66

FY2017 Guidance Updated to $4.00 to $4.50 GAAP EPS and $4.50 to $5.00 adjusted EPS

MINNEAPOLIS - July 26, 2017 - (BUSINESS WIRE) - Buffalo Wild Wings, Inc. (NASDAQ: BWLD) announced today financial results for the second quarter ended June 25, 2017.

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

  • Total revenue increased 2.0% to $500.0 million.
  • Company-owned restaurant sales increased 1.9% to $475.7 million.
  • Same-store sales decreased 1.2% at company-owned restaurants.
  • Net earnings decreased 62.9% to $8.8 million from $23.7 million, and earnings per diluted share decreased 57.0% to $0.55 from $1.27.
  • Adjusted net earnings decreased 57.6% to $10.6 million from $25.0 million, and adjusted earnings per diluted share decreased 50.7% to $0.66 from $1.34.

Sally Smith, President and Chief Executive Officer, commented, "During the second quarter, we continued to work on stabilizing the business in the challenging restaurant environment. Our profitability was pressured this quarter driven by historically high wing costs, a mix shift to our promotional days, lower than expected same-store sales, and higher operating expenses."

Ms. Smith concluded, "As traditional chicken wing costs remain at historically high levels, we're adapting our value day on Tuesday to feature our boneless wings at company-owned restaurants. In addition, we continue to implement our cost savings plan to improve margins and profitability in areas we can control. Due to our disappointing second quarter earnings and an outlook for slowing traffic as we manage through the Tuesday promotional change, we are lowering our 2017 earnings outlook. We are optimistic about the transition to boneless wings which provides a more stable promotional platform for the future."

Revenue

  • Total revenue increased $9.8 million to $500.0 million in the second quarter, compared to $490.2 million in the second quarter of 2016. There was a $4.1 million revenue deferral for the Blazin' Rewards loyalty program in the second quarter.
  • Company-owned restaurant sales for the second quarter increased 1.9% over the same period in 2016 to $475.7 million, driven by 26 additional company-owned restaurants.
  • Franchise royalties and fees increased 3.1% to $24.3 million for the quarter, versus $23.6 million in the second quarter of 2016, driven by 28 additional franchised restaurants.

Restaurant-level costs and expenses

  • Cost of sales for the second quarter was 32.1% of restaurant sales, compared to 29.7% in the quarter last year, driven by higher traditional chicken wing prices compounded by a change in sales mix from promotional activity compared to the second quarter of 2016.

    Traditional wings were $2.05 per pound in the second quarter, representing an $0.11 increase, or 5.7%, higher than last year's second quarter average of $1.94. Traditional wings as a percent of cost of sales was 30.7% in the second quarter.
  • Cost of labor for the second quarter was 32.4% of restaurant sales, 40 basis points higher than second quarter last year, resulting from increased healthcare costs and management salaries, partially offset by lower hourly labor.
  • Restaurant operating expenses as a percentage of restaurant sales were 15.7%, an increase of 110 basis points from the second quarter of 2016, driven by an increase in general liability expenses, higher repair and maintenance expenses, and third-party delivery commissions.
  • Occupancy costs were 5.9% as a percentage of restaurant sales, 10 basis points higher compared to the same quarter last year.
  • Restaurant-level profit was $65.9 million, or 13.8%, of restaurant sales, compared to $83.3 million, or 17.9%, in the second quarter last year.

Other Expenses

  • Depreciation and amortization expense for the second quarter was $38.1 million, increasing 0.4%, due to new unit openings over the last 12 months.
  • General and administrative expenses were $39.2 million in the second quarter, increasing 31.3% from the same period last year, due to increased advisory fees and consulting services as well as stock-based compensation.

    Stock-based compensation was $3.4 million in the second quarter, compared to $0.7 million of expense in the prior year, which included a reversal of previously recognized expense.
  • Preopening expenses for the quarter totaled $0.9 million, versus $1.8 million in the second quarter last year, due to fewer openings.
  • Loss on asset disposal for the second quarter totaled $2.6 million, compared to last year of $1.9 million. The 2017 expense represented impairment of two restaurants totaling $1.7 million and the write-off of miscellaneous equipment. The expense in 2016 represented disposals due to remodels, and the write-off of miscellaneous equipment.
  • Interest expense was $3.3 million in the second quarter, compared to $0.8 million in the prior year period.
  • Other income was $5.9 million for the quarter, which is primarily from a gain on the sale of our minority investment in PizzaRev, compared to an expense of $1.0 million in 2016.
  • The effective tax rate during the quarter was 27.9%, compared to 29.9% in the prior year.

Earnings

  • Operating income was $9.4 million in the second quarter, or 1.9% of total revenue, compared to $35.5 million and 7.2% in the prior year. For the year to date period, operating income was $43.2 million, or 4.2% of total revenue, compared to $82.1 million and 8.2%.
  • Net earnings decreased 62.9% to $8.8 million in the second quarter, versus $23.7 million in the second quarter of 2016. For the year to date period, net earnings decreased 46.3% to $30.3 million, versus $56.5 million in 2016.
  • Earnings per diluted share were $0.55, compared to second quarter 2016 earnings per diluted share of $1.27. Earnings per diluted share decreased 39.3% to $1.83 for the year to date period, compared to $3.00 in the same period last year.
  • Adjusted earnings per diluted share were $0.66, compared to first quarter 2016 adjusted earnings per diluted share of $1.34. Adjusted earnings per diluted share for the year to date period decreased 31.7% to $2.13, compared to $3.12 in the same period last year.

Balance Sheet

  • Cash totaled $19.9 million at the end of the second quarter.
  • The credit facility had an outstanding balance of $390 million as of the end of the quarter.

Cash Flow

  • Cash flow from operations was $49.9 million for the quarter, a 31.0% decrease over the second quarter last year. For the year to date period, cash flow from operations was $98.8 million, a 33.9% decrease over 2016.
  • Free cash flow in the second quarter was $32.5 million, compared to $35.8 million in the prior year. Free cash flow in the year to date period was $64.2 million, compared to $78.8 million in the same period of the prior year.
  • 659,598 shares were repurchased for a total of $100.0 million during the second quarter of 2017. For the year to date period, 2,022,488 shares were repurchased for a total of $312.2 million.

2017 Outlook

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

  • 15 company-owned Buffalo Wild Wings restaurants in the United States, with 2 in the third quarter
  • 15 franchised Buffalo Wild Wings locations in the United States, with 6 in the third quarter
  • 20 franchised Buffalo Wild Wing locations internationally, with 5 in the third quarter
  • 2 company-owned and 10 to 13 franchised R Taco restaurants
  • The company expects the following in 2017:
  • Same-store sales growth of approximately -1% to -2%
  • Traditional chicken wing inflation of 8% to 10%
  • Depreciation and amortization expense of $153 to $155 million
  • General and administrative expense of $138 to $142 million, including stock-based compensation of $8 to $9 million
  • Interest expense of approximately $13 million
  • Earnings per diluted share of $4.00 to $4.50
  • Adjusted earnings per diluted share of $4.50 to $5.00
  • Capital expenditures of approximately $100 million

Buffalo Wild Wings will be hosting a conference call today, July 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 August 2, 2017. To access this replay, please dial 1-412-317-6671 password 5733019.

About the Company

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 1,240 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 third 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, 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

 

 

Six months ended

 

 

 

June 25,

 

 

June 26,

 

 

June 25,

 

 

June 26,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant sales

 

 

$

475,665

 

 

 

466,583

 

 

 

984,870

 

 

 

950,494

 

Franchise royalties and fees

 

 

24,315

 

 

 

23,595

 

 

 

49,873

 

 

 

47,941

 

Total revenue

 

 

499,980

 

 

 

490,178

 

 

 

1,034,743

 

 

 

998,435

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant operating costs:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

152,714

 

 

 

138,480

 

 

 

312,715

 

 

 

282,303

 

Labor

 

 

154,324

 

 

 

149,375

 

 

 

315,358

 

 

 

298,504

 

Operating

 

 

74,628

 

 

 

68,180

 

 

 

152,168

 

 

 

137,860

 

Occupancy

 

 

28,126

 

 

 

27,205

 

 

 

56,589

 

 

 

53,928

 

Depreciation and amortization

 

 

38,103

 

 

 

37,953

 

 

 

76,980

 

 

 

75,502

 

General and administrative

 

 

39,155

 

 

 

29,821

 

 

 

71,907

 

 

 

61,486

 

Preopening

 

 

917

 

 

 

1,838

 

 

 

1,504

 

 

 

3,701

 

Loss on asset disposals and impairment

 

 

2,628

 

 

 

1,874

 

 

 

4,356

 

 

 

3,096

 

Total costs and expenses

 

 

490,595

 

 

 

454,726

 

 

 

991,577

 

 

 

916,380

 

Income from operations

 

 

9,385

 

 

 

35,452

 

 

 

43,166

 

 

 

82,055

 

Interest expense

 

 

3,334

 

 

 

846

 

 

 

5,692

 

 

 

1,686

 

Other expense (income)

 

 

(5,940

)

 

 

1,028

 

 

 

(4,780

)

 

 

161

 

Earnings before income taxes

 

 

11,991

 

 

 

33,578

 

 

 

42,254

 

 

 

80,208

 

Income tax expense

 

 

3,342

 

 

 

10,033

 

 

 

12,218

 

 

 

23,985

 

Net earnings including noncontrolling interests

 

 

8,649

 

 

 

23,545

 

 

 

30,036

 

 

 

56,223

 

Net loss attributable to noncontrolling interests

 

 

(133

)

 

 

(157

)

 

 

(295

)

 

 

(252

)

Net earnings attributable to Buffalo Wild Wings

 

 

$

8,782

 

 

 

23,702

 

 

 

30,331

 

 

 

56,475

 

Earnings per common share - basic

 

 

$

0.55

 

 

 

1.27

 

 

 

1.83

 

 

 

3.01

 

Earnings per common share - diluted

 

 

$

0.55

 

 

 

1.27

 

 

 

1.83

 

 

 

3.00

 

Weighted average shares outstanding - basic

 

 

15,983

 

 

 

18,605

 

 

 

16,573

 

 

 

18,764

 

Weighted average shares outstanding - diluted

 

 

16,048

 

 

 

18,636

 

 

 

16,619

 

 

 

18,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 25,

 

 

June 26,

 

 

June 25,

 

 

June 26,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant sales

 

 

95.1

%

 

 

95.2

%

 

 

95.2

%

 

 

95.2

%

Franchise royalties and fees

 

 

4.9

 

 

 

4.8

 

 

 

4.8

 

 

 

4.8

 

Total revenue

 

 

100.0

 

 

 

100.0

 

 

 

100.0

 

 

 

100.0

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant operating costs:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

32.1

 

 

 

29.7

 

 

 

31.8

 

 

 

29.7

 

Labor

 

 

32.4

 

 

 

32.0

 

 

 

32.0

 

 

 

31.4

 

Operating

 

 

15.7

 

 

 

14.6

 

 

 

15.5

 

 

 

14.5

 

Occupancy

 

 

5.9

 

 

 

5.8

 

 

 

5.7

 

 

 

5.7

 

Depreciation and amortization

 

 

7.6

 

 

 

7.7

 

 

 

7.4

 

 

 

7.6

 

General and administrative

 

 

7.8

 

 

 

6.1

 

 

 

6.9

 

 

 

6.2

 

Preopening

 

 

0.2

 

 

 

0.4

 

 

 

0.1

 

 

 

0.4

 

Loss on asset disposals and impairment

 

 

0.5

 

 

 

0.4

 

 

 

0.4

 

 

 

0.3

 

Total costs and expenses

 

 

98.1

 

 

 

92.8

 

 

 

95.8

 

 

 

91.8

 

Income from operations

 

 

1.9

 

 

 

7.2

 

 

 

4.2

 

 

 

8.2

 

Interest expense

 

 

0.7

 

 

 

0.2

 

 

 

0.6

 

 

 

0.2

 

Other expense (income)

 

 

(1.2

)

 

 

0.2

 

 

 

(0.5

)

 

 

0.0

 

Earnings before income taxes

 

 

2.4

 

 

 

6.9

 

 

 

4.1

 

 

 

8.0

 

Income tax expense

 

 

0.7

 

 

 

2.0

 

 

 

1.2

 

 

 

2.4

 

Net earnings including noncontrolling interests

 

 

1.7

 

 

 

4.8

 

 

 

2.9

 

 

 

5.6

 

Net loss attributable to noncontrolling interests

 

 

(0.0

)

 

 

(0.0

)

 

 

(0.0

)

 

 

(0.0

)

Net earnings attributable to Buffalo Wild Wings

 

 

1.8

%

 

 

4.8

%

 

 

2.9

%

 

 

5.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

June 25,

 

 

December 25,

 

 

 

2017

 

 

2016

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

 

$

19,941

 

 

 

49,266

 

Accounts receivable, net of allowance of $251

 

 

37,927

 

 

 

34,225

 

Inventory

 

 

15,080

 

 

 

16,532

 

Prepaid expenses

 

 

7,503

 

 

 

9,075

 

Refundable income taxes

 

 

4,483

 

 

 

1,018

 

Restricted assets

 

 

24,532

 

 

 

66,471

 

Total current assets

 

 

109,466

 

 

 

176,587

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

551,317

 

 

 

592,806

 

Reacquired franchise rights, net

 

 

112,348

 

 

 

118,973

 

Other assets

 

 

39,889

 

 

 

41,625

 

Goodwill

 

 

117,228

 

 

 

117,228

 

Total assets

 

 

$

930,248

 

 

 

1,047,219

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Deferred revenue

 

 

$

8,316

 

 

 

3,089

 

Accounts payable

 

 

37,887

 

 

 

45,797

 

Accrued compensation and benefits

 

 

43,944

 

 

 

47,304

 

Accrued expenses

 

 

33,367

 

 

 

32,347

 

Current portion of long-term debt and capital lease obligations

 

 

3,599

 

 

 

3,745

 

Current portion of deferred lease credits

 

 

4,685

 

 

 

873

 

System-wide payables

 

 

58,588

 

 

 

108,814

 

Total current liabilities

 

 

190,386

 

 

 

241,969

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

Other liabilities

 

 

16,529

 

 

 

16,109

 

Deferred income taxes

 

 

15,166

 

 

 

21,588

 

Long-term debt and capital lease obligations, net of current portion

 

 

426,074

 

 

 

205,312

 

Deferred lease credits, net of current portion

 

 

40,866

 

 

 

44,341

 

Total liabilities

 

 

689,021

 

 

 

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 15,491,688 and 17,462,465 shares, respectively

 

 

139,334

 

 

 

147,234

 

Retained earnings

 

 

106,135

 

 

 

374,683

 

Accumulated other comprehensive loss

 

 

(3,808

)

 

 

(3,878

)

Total stockholders' equity

 

 

241,661

 

 

 

518,039

 

Noncontrolling interests

 

 

(434

)

 

 

(139

)

Total equity

 

 

241,227

 

 

 

517,900

 

Total liabilities and equity

 

 

$

930,248

 

 

 

1,047,219

 

 

 

 

 

 

 

 

 

 

 

 

 

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

Six months ended

 

 

 

June 25,

 

 

June 26,

 

 

 

2017

 

 

2016

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings including noncontrolling interests

 

 

$

30,036

 

 

 

56,223

 

Adjustments to reconcile net earnings to net cash provided by operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

76,980

 

 

 

75,502

 

Loss on asset disposals and impairment

 

 

4,356

 

 

 

3,096

 

Deferred lease credits

 

 

1,548

 

 

 

3,380

 

Deferred income taxes

 

 

(6,489

)

 

 

2,397

 

Stock-based compensation

 

 

4,021

 

 

 

2,108

 

Excess tax benefit from stock issuance

 

 

 

 

 

(35

)

Change in fair value of contingent consideration

 

 

359

 

 

 

(1,106

)

Gain on sale of investment in affiliate

 

 

(5,692

)

 

 

 

Loss on investments in affiliate

 

 

1,488

 

 

 

1,247

 

Change in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(6,007

)

 

 

802

 

Inventory

 

 

1,458

 

 

 

1,418

 

Prepaid expenses

 

 

1,573

 

 

 

567

 

Other assets

 

 

(4,334

)

 

 

(2,462

)

Deferred revenue

 

 

5,227

 

 

 

118

 

Accounts payable

 

 

(2,004

)

 

 

(3,520

)

Income taxes

 

 

(3,465

)

 

 

16,607

 

Accrued expenses

 

 

(294

)

 

 

(6,943

)

Net cash provided by operating activities

 

 

98,761

 

 

 

149,399

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(34,553

)

 

 

(70,630

)

Acquisition of businesses

 

 

 

 

 

(3,862

)

Proceeds from sale of investment in affiliate

 

 

8,126

 

 

 

 

Net cash used in investing activities

 

 

(26,427

)

 

 

(74,492

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

330,000

 

 

 

286,873

 

Repayments of revolving credit facility

 

 

(110,000

)

 

 

(263,343

)

Borrowings from (payments to) restricted funds

 

 

(6,533

)

 

 

12,288

 

Repurchases of common stock

 

 

(312,249

)

 

 

(99,981

)

Other financing activities

 

 

(1,715

)

 

 

(1,065

)

Issuance of common stock

 

 

2,570

 

 

 

1,960

 

Excess tax benefit from stock issuance

 

 

 

 

 

35

 

Tax payments for restricted stock units

 

 

(3,796

)

 

 

(9,172

)

Net cash used in financing activities

 

 

(101,723

)

 

 

(72,405

)

Effect of exchange rate changes on cash

 

 

64

 

 

 

(87

)

Net increase (decrease) in cash

 

 

(29,325

)

 

 

2,415

 

Cash at beginning of period

 

 

49,266

 

 

 

11,220

 

Cash at end of period

 

 

$

19,941

 

 

 

13,635

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

635

 

 

 

 

 

 

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

 

 

624

 

 

 

 

 

 

2016

 

 

587

 

 

596

 

 

602

 

 

609

2015

 

 

593

 

 

593

 

 

569

 

 

579

2014

 

 

569

 

 

579

 

 

588

 

 

591

2013

 

 

514

 

 

525

 

 

534

 

 

559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant Count Rollforward:

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 25, 2017

 

 

June 26, 2016

 

 

 

Corporate

 

 

Franchise

 

 

Total

 

 

Corporate

 

 

Franchise

 

 

Total

Buffalo Wild Wings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

621

 

 

602

 

 

1,223

 

 

590

 

 

573

 

 

1,163

Opened

 

 

6

 

 

12

 

 

18

 

 

11

 

 

18

 

 

29

Acquired

 

 

 

 

 

 

 

 

1

 

 

(1)

 

 

Closed/Relocated

 

 

(1)

 

 

(3)

 

 

(4)

 

 

(1)

 

 

(1)

 

 

(2)

End of period

 

 

626

 

 

611

 

 

1,237

 

 

601

 

 

589

 

 

1,190

R Taco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

8

 

 

7

 

 

15

 

 

4

 

 

6

 

 

10

Opened

 

 

1

 

 

6

 

 

7

 

 

2

 

 

1

 

 

3

Acquired

 

 

 

 

 

 

 

 

 

 

 

 

Closed/Relocated

 

 

 

 

 

 

 

 

 

 

 

 

End of period

 

 

9

 

 

13

 

 

22

 

 

6

 

 

7

 

 

13

PizzaRev

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

2

 

 

n/a

 

 

2

 

 

2

 

 

n/a

 

 

2

Opened

 

 

 

 

n/a

 

 

 

 

 

 

n/a

 

 

Acquired

 

 

 

 

n/a

 

 

 

 

 

 

n/a

 

 

Closed/Relocated

 

 

(2)

 

 

n/a

 

 

(2)

 

 

 

 

n/a

 

 

End of period

 

 

 

 

n/a

 

 

 

 

2

 

 

n/a

 

 

2

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

End of the period

 

 

635

 

 

624

 

 

1,259

 

 

609

 

 

596

 

 

1,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%

 

 

(1.2

%)

 

 

 

 

 

 

 

 

 

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

%

 

 

(2.1

%)

 

 

 

 

 

 

 

 

 

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

 

 

 

58,912

 

 

 

 

 

 

 

 

 

 

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

 

 

 

61,217

 

 

 

 

 

 

 

 

 

 

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

 

 

Six months ended

 

 

 

June 25, 2017

 

 

June 26, 2016

 

 

June 25, 2017

 

 

June 26, 2016

Restaurant sales

 

 

$

475,665

 

 

 

466,583

 

 

 

984,870

 

 

 

950,494

 

Restaurant operating costs

 

 

409,792

 

 

 

383,240

 

 

 

836,830

 

 

 

772,595

 

Restaurant-level profit

 

 

65,873

 

 

 

83,343

 

 

 

148,040

 

 

 

177,899

 

Restaurant-level margin

 

 

13.8

%

 

 

17.9

%

 

 

15.0

%

 

 

18.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Six months ended

 

 

 

June 25, 2017

 

 

June 26, 2016

 

 

June 25, 2017

 

 

June 26, 2016

Net earnings including noncontrolling interests

 

 

$

8,649

 

 

 

23,545

 

 

 

30,036

 

 

 

56,223

Income tax expense

 

 

3,342

 

 

 

10,033

 

 

 

12,218

 

 

 

23,985

Interest expense

 

 

3,334

 

 

 

846

 

 

 

5,692

 

 

 

1,686

Depreciation and amortization

 

 

38,103

 

 

 

37,953

 

 

 

76,980

 

 

 

75,502

EBITDA

 

 

$

53,428

 

 

 

72,377

 

 

 

124,926

 

 

 

157,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Earnings and Adjusted Earnings per Diluted Share

Adjusted net earnings and adjusted earnings per diluted share are not required by, nor presented in accordance with U.S. GAAP and are non-GAAP financial measures. The Company defines adjusted earnings diluted 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, restructuring costs, acquisition costs, and divestiture costs less gain on sale of investment in affiliate. 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 diluted 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 certain non-recurring or non-cash items.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 25,

 

 

June 26,

 

 

June 25,

 

 

June 26,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

Earnings before income taxes (a)

 

 

$

11,991

 

 

 

33,578

 

 

 

42,254

 

 

 

80,208

 

Loss on asset disposals and impairment (b)

 

 

2,566

 

 

 

1,858

 

 

 

4,261

 

 

 

3,063

 

Proxy costs for contested election (c)

 

 

3,991

 

 

 

 

 

 

5,901

 

 

 

 

Advisory and consulting fees, and restructuring costs (d)

 

 

1,582

 

 

 

 

 

 

2,502

 

 

 

 

Gain on sale of investment in affiliate (e)

 

 

(5,692

)

 

 

 

 

 

(5,692

)

 

 

 

Acquisition costs (f)

 

 

 

 

 

 

 

 

 

 

 

145

 

Divestiture costs (g)

 

 

80

 

 

 

 

 

 

80

 

 

 

 

Adjusted earnings before income taxes

 

 

14,518

 

 

 

35,436

 

 

 

49,306

 

 

 

83,416

 

Estimated income tax expense (h)

 

 

4,046

 

 

 

10,588

 

 

 

14,257

 

 

 

24,944

 

Adjusted earnings including noncontrolling interests

 

 

10,472

 

 

 

24,848

 

 

 

35,049

 

 

 

58,472

 

Net earnings (loss) attributable to noncontrolling interests (a)

 

 

(133

)

 

 

(157

)

 

 

(295

)

 

 

(252

)

Adjusted net earnings attributable to Buffalo Wild Wings

 

 

$

10,605

 

 

 

25,005

 

 

 

35,344

 

 

 

58,724

 

Weighted average shares outstanding - diluted (a)

 

 

16,048

 

 

 

18,636

 

 

 

16,619

 

 

 

18,797

 

Adjusted earnings per diluted share

 

 

$

0.66

 

 

 

1.34

 

 

 

2.13

 

 

 

3.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 $62 and $16, for the three-month periods ended June 25, 2017 and June 26, 2016, respectively. Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $95 and $33, for the six-month periods ended June 25, 2017 and June 26, 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.

(d)

 

 

Consists of costs related to consulting services pertaining to the identification of best practices and improving efficiencies, and organizational restructuring costs.

(e)

 

 

Consists of the gain recorded from the sale of our investment in affiliate, Pie Squared Holdings.

(f)

 

 

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

(g)

 

 

Consists of costs associated with the proposed divestiture of company-owned stores.

(h)

 

 

Our effective tax rates for the three-month periods ended June 25, 2017 and June 26, 2016 were 27.9% and 29.9%, respectively.

Our effective tax rates for the six-month periods ended June 25, 2017 and June 26, 2016 were 28.9% 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 certain non-recurring or non-cash items.

 

 

 

 

 

 

 

Twelve months ending December 31, 2017

 

 

 

Low Projection

 

 

High Projection

Earnings per diluted share forecast (a)

 

 

$

4.00

 

 

 

4.50

 

Loss on asset disposals and impairment (b)

 

 

0.38

 

 

 

0.38

 

Proxy costs for contested election(c)

 

 

0.26

 

 

 

0.26

 

Advisory and consulting fees, and restructuring costs (d)

 

 

0.11

 

 

 

0.11

 

Gain on sale of investment in affiliate (e)

 

 

(0.25

)

 

 

(0.25

)

Adjusted earnings per diluted share forecast (f)

 

 

$

4.50

 

 

 

5.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

(d)

 

 

Consists of the projected earnings per diluted share impact of costs related to consulting services pertaining to the identification of best practices and improving efficiencies, and organizational restructuring costs for fiscal year 2017.

(e)

 

 

Consists of the projected earnings per diluted share impact of the gain recorded from the sale of our investment in affiliate, Pie Squared Holdings.

(f)

 

 

This estimate assumes diluted weighted average shares outstanding of 16,070 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.

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

June 25, 2017

 

 

June 26, 2016

Net cash provided by operating activities

 

 

$

98,761

 

 

 

149,399

 

Acquisition of property and equipment

 

 

(34,553

)

 

 

(70,630

)

Free cash flow

 

 

$

64,208

 

 

 

78,769

 

 

 

 

 

 

 

 

 

 

 

View source version on businesswire.com: http://www.businesswire.com/news/home/20170726006208/en/

Contact:

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

SOURCE Buffalo Wild Wings, Inc.

###

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