Buffalo Wild Wings, Inc. Announces Third Quarter Earnings Per Share Of $1.17 And Adjusted Earnings Per Share Of $1.36

Increasing 2017 Forecasted GAAP EPS to $4.30 to $4.60 and Adjusted EPS to $4.85to$5.15

MINNEAPOLIS - (BUSINESS WIRE) - Oct. 25, 2017 - Buffalo Wild Wings, Inc. (NASDAQ: BWLD) announced today financial results for the third quarter ended September 24, 2017.

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

  • Total revenue increased 0.5% to $496.7 million.
  • Company-owned restaurant sales increased 0.5% to $473.0 million.
  • Same-store sales decreased 2.3% at company-owned restaurants and 3.2% at franchise locations.
  • Net earnings decreased 19.7% to $18.2 million from $22.7 million, and earnings per diluted share decreased 5.4% to $1.17 from $1.23.
  • Adjusted net earnings decreased 10.7% to $21.2 million from $23.7 million, and adjusted earnings per diluted share increased 5.4% to $1.36 from $1.29.

Sally Smith, President and Chief Executive Officer, commented, "Our teams are executing on the cost initiatives of our fiscal fitness program and we exceeded our goal in the third quarter. These savings helped deliver adjusted income from operations above our expectations. The recent Tuesday promotion shift from traditional to boneless wings at company-owned restaurants will continue to improve cost of sales while traditional wing prices remain elevated. Combined with our cost savings initiatives and service excellence focus, we are optimistic these actions will deliver an improving bottom line."

Revenue

  • Total revenue increased $2.5 million to $496.7 million in the third quarter, compared to $494.2 million in the third quarter of 2016. Revenue includes the recognition of $2.9 million of deferred revenue, as the company established an initial breakage estimate for the Blazin' Rewards loyalty program.
  • Company-owned restaurant sales for the third quarter increased 0.5% over the same period in 2016 to $473.0 million, driven by 21 additional company-owned restaurants.
  • Franchise royalties and fees increased 1.0% to $23.7 million for the quarter, versus $23.5 million in the third quarter of 2016, driven by 31 additional franchised restaurants.

Expenses

  • Cost of sales for the third quarter was 30.8% of restaurant sales, compared to 28.9% in the quarter last year, driven by higher traditional chicken wing prices.
    *Traditional wings were $2.16 per pound in the third quarter, representing a $0.44 increase, or 25.6% above last year's third quarter average of $1.72. Traditional wings as a percent of cost of sales was 28.8% in the third quarter.
  • Cost of labor for the third quarter was 31.4% of restaurant sales, 70 basis points lower than third quarter last year, driven primarily by 40 basis points of favorable hourly labor, 50 basis points from an out-of-period benefits adjustment, partially offset by wage inflation.
  • Restaurant operating expenses as a percentage of restaurant sales were 15.2%, 40 basis points lower than third quarter of 2016, driven by favorable insurance and repair and maintenance expenses.
  • Occupancy costs were 6.0% as a percentage of restaurant sales, 20 basis points higher compared to the same quarter last year based on sales deleveraging.
  • Restaurant-level profit was $78.5 million, or 16.6%, of restaurant sales, compared to $82.8 million, or 17.6%, in the third quarter last year.
  • Depreciation and amortization expense for the third quarter was $37.8 million, decreasing 1.5% from the prior year.
  • General and administrative expenses were $31.1 million in the third quarter, decreasing 3.8% from the same period last year, due to decreased salaries and travel expenses.
    *Stock-based compensation was $2.4 million in the third quarter, compared to $0.3 million of expense in the prior year, which included a reversal of previously recognized expense.
  • Total savings achieved from the company's fiscal fitness program in the third quarter were $9.2 million and $15.3 million year-to-date in 2017.
  • Preopening expenses for the quarter totaled $0.9 million, versus $1.5 million in the third quarter last year, due to 4 openings this year versus 9 last year.
  • Loss on asset disposal for the third quarter totaled $4.1 million, compared to last year of $1.4 million. The 2017 expense includes impairment of two restaurants totaling $2.2 million and the write-off of prepaid software licenses of approximately $1 million.
  • Interest expense was $3.8 million in the third quarter, compared to $0.9 million in the prior year period.
  • The effective tax rate during the quarter was 27.3%, compared to 30.4% in the prior year, due to the benefit of employee tax credits.

Earnings

  • Income from operations was $28.4 million in the third quarter, or 5.7% of total revenue, compared to $32.8 million and 6.6% in the prior year. For the year to date period, income from operations was $71.6 million, or 4.7% of total revenue, compared to $114.9 million and 7.7% in the prior year.
  • Adjusted income from operations was $32.5 million in the third quarter, or 6.6% of total revenue, versus $34.4 million and 7.0% in the same quarter of 2016. For the year to date period, adjusted income from operations was $88.5 million, or 5.8% of total revenue, versus $119.6 million and 8.0% in 2016.
  • Net earnings decreased 19.7% to $18.2 million in the third quarter, versus $22.7 million in the third quarter of 2016.
    For the year to date period, net earnings decreased 38.7% to $48.5 million, versus $79.1 million in 2016.
  • Earnings per diluted share were $1.17, compared to third quarter 2016 earnings per diluted share of a $1.23. Earnings per diluted share decreased 29.7% to $2.98 for the year to date period, compared to $4.24 in the same period last year.
  • Adjusted earnings per diluted share were $1.36, compared to third quarter 2016 adjusted earnings per diluted share of $1.29. Adjusted earnings per diluted share for the year to date period decreased 21.5% to $3.47, compared to $4.42 in the same period last year.

Balance Sheet

  • Cash totaled $30.7 million at the end of the third quarter.
  • The revolving credit facility had an outstanding balance of $385 million as of the end of the quarter.

Cash Flow

  • Cash flow from operations was $43.2 million for the quarter, a 33.1% decrease over the third quarter last year. For the year-to-date period, cash flow from operations was $141.9 million, a 33.7% decrease over 2016.
  • Capital expenditures in the quarter were $25.0 million compared to $47.2 million in the prior year.
  • Free cash flow in the third quarter was $18.2 million, compared to $17.3 million in the prior year. Free cash flow in the year to date period was $82.4 million, compared to $96.1 million in the same period of the prior year.

2017 Outlook

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

  • 14 company-owned Buffalo Wild Wings restaurants in the United States, with 5 in the fourth quarter
  • 15 franchised Buffalo Wild Wings locations in the United States, with 3 in the fourth quarter
  • 20 franchised Buffalo Wild Wing locations internationally, with 10 in the fourth quarter
  • 2 company-owned and 10 franchised R Taco restaurants

The company expects the following in 2017:

  • Same-store sales growth of approximately -1.5%
  • Traditional chicken wing inflation of 10% to 11%
  • Depreciation and amortization expense of $151 to $152 million
  • General and administrative expense of $133 to $135 million, including stock-based compensation of $8 to $9 million
  • Interest expense of approximately $14 million
  • Earnings per diluted share of $4.30 to $4.60
  • Adjusted earnings per diluted share of $4.85 to $5.15
  • Capital expenditures of approximately $80 million

Buffalo Wild Wings will be hosting a conference call today, October 25, 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 November 1, 2017. To access this replay, please dial 1-412-317-6671 password 8206882.

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 fourth quarter trends, projected unit and net earnings growth rates, projected capital expenditures and expected adjustments to the same. 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   Nine months ended
    September 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Revenue:                
Restaurant sales   $ 472,956     470,648     1,457,826     1,421,142  
Franchise royalties and fees   23,744     23,519     73,617     71,460  
Total revenue   496,700     494,167     1,531,443     1,492,602  
Costs and expenses:                
Restaurant operating costs:                
Cost of sales   145,645     136,185     458,360     418,488  
Labor   148,417     150,813     463,775     449,317  
Operating   71,981     73,435     224,149     211,295  
Occupancy   28,439     27,396     85,028     81,324  
Depreciation and amortization   37,766     38,345     114,746     113,847  
General and administrative   31,054     32,264     102,961     93,750  
Preopening   856     1,490     2,360     5,191  
Loss on asset disposals and impairment   4,118     1,393     8,474     4,489  
Total costs and expenses   468,276     461,321     1,459,853     1,377,701  
Income from operations   28,424     32,846     71,590     114,901  
Interest expense   3,814     885     9,506     2,571  
Other income   (203 )   (357 )   (4,983 )   (196 )
Earnings before income taxes   24,813     32,318     67,067     112,526  
Income tax expense   6,775     9,814     18,993     33,799  
Net earnings including noncontrolling interests   18,038     22,504     48,074     78,727  
Net loss attributable to noncontrolling interests   (142 )   (147 )   (437 )   (399 )
Net earnings attributable to Buffalo Wild Wings   $ 18,180     22,651     48,511     79,126  
Earnings per common share – basic   $ 1.17     1.24     2.99     4.25  
Earnings per common share – diluted   $ 1.17     1.23     2.98     4.24  
Weighted average shares outstanding – basic   15,502     18,296     16,216     18,609  
Weighted average shares outstanding – diluted   15,572     18,353     16,269     18,650  
                         

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 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Revenue:                
Restaurant sales   95.2 %   95.2 %   95.2 %   95.2 %
Franchise royalties and fees   4.8     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   30.8     28.9     31.4     29.4  
Labor   31.4     32.0     31.8     31.6  
Operating   15.2     15.6     15.4     14.9  
Occupancy   6.0     5.8     5.8     5.7  
Depreciation and amortization   7.6     7.8     7.5     7.6  
General and administrative   6.3     6.5     6.7     6.3  
Preopening   0.2     0.3     0.2     0.3  
Loss on asset disposals and impairment   0.8     0.3     0.6     0.3  
Total costs and expenses   94.3     93.4     95.3     92.3  
Income from operations   5.7     6.6     4.7     7.7  
Interest expense   0.8     0.2     0.6     0.2  
Other income   0.0     (0.1 )   (0.3 )   0.0  
Earnings before income taxes   5.0     6.5     4.4     7.5  
Income tax expense   1.4     2.0     1.2     2.3  
Net earnings including noncontrolling interests   3.6     4.6     3.1     5.3  
Net loss attributable to noncontrolling interests   (0.0 )   (0.0 )   (0.0 )   (0.0 )
Net earnings attributable to Buffalo Wild Wings   3.7 %   4.6 %   3.2 %   5.3 %
                         

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(unaudited)

         
    September 24,   December 25,
    2017   2016
Assets        
Current assets:        
Cash   $ 30,685     49,266  
Accounts receivable, net of allowance of $251   42,380     34,225  
Inventory   14,688     16,532  
Prepaid expenses   10,126     9,075  
Refundable income taxes   2,109     1,018  
Restricted assets   23,314     66,471  

Total current assets

  123,302     176,587  
         
Property and equipment, net   541,706     592,806  
Reacquired franchise rights, net   109,035     118,973  
Other assets   39,215     41,625  
Goodwill   117,228     117,228  
Total assets   $ 930,486     1,047,219  
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Deferred revenue   $ 6,892     3,089  
Accounts payable   40,857     45,797  
Accrued compensation and benefits   33,982     47,304  
Accrued expenses   31,043     32,347  
Current portion of long-term debt and capital lease obligations   4,627     3,745  
Current portion of deferred lease credits   4,736     873  
System-wide payables   54,570     108,814  
Total current liabilities   176,707     241,969  
         
Long-term liabilities:        
Other liabilities   16,828     16,109  
Deferred income taxes   12,937     21,588  
Long-term debt and capital lease obligations, net of current portion   420,376     205,312  
Deferred lease credits, net of current portion   40,803     44,341  
Total liabilities   667,651     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 15,512,253 and 17,462,465 shares, respectively   142,657     147,234  
Retained earnings   124,314     374,683  
Accumulated other comprehensive loss   (3,560 )   (3,878 )
Total stockholders’ equity   263,411     518,039  
Noncontrolling interests   (576 )   (139 )
Total equity   262,835     517,900  
Total liabilities and equity   $ 930,486     1,047,219  
               

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(unaudited)

     
    Nine months ended
    September 24,   September 25,
    2017   2016
Cash flows from operating activities:        
Net earnings including noncontrolling interests   $ 48,074     78,727  
Adjustments to reconcile net earnings to net cash provided by operations:        
Depreciation and amortization   114,746     113,847  
Loss on asset disposals and impairment   8,474     4,489  
Deferred lease credits   2,095     4,095  
Deferred income taxes   (8,958 )   962  
Stock-based compensation   6,465     2,453  
Excess tax benefit from stock issuance       57  
Change in fair value of contingent consideration   359     (1,591 )
Gain on sale of investment in affiliate   (5,692 )    
Loss on investments in affiliate   1,488     1,904  
Change in operating assets and liabilities, net of effect of acquisitions:        
Accounts receivable   (11,042 )   (5,025 )
Inventory   1,872     1,954  
Prepaid expenses   (1,496 )   (1,273 )
Other assets   (1,777 )   (4,450 )
Deferred revenue   3,803     477  
Accounts payable   (3,030 )   6,465  
Income taxes   (1,091 )   20,991  
Accrued expenses   (12,365 )   (10,145 )
Net cash provided by operating activities   141,925     213,937  
Cash flows from investing activities:        
Acquisition of property and equipment   (59,552 )   (117,850 )
Acquisition of businesses       (3,862 )
Purchase of marketable securities       (488 )
Proceeds from marketable securities       1,205  
Proceeds from sale of investment in affiliate   8,126      
Net cash used in investing activities   (51,426 )   (120,995 )
Cash flows from financing activities:        
Proceeds from revolving credit facility   370,000     464,521  
Repayments of revolving credit facility   (155,000 )   (440,448 )
Borrowings from (payments to) restricted funds   (9,468 )   1,478  
Repurchases of common stock   (312,249 )   (105,852 )
Other financing activities   (2,347 )   (1,557 )
Issuance of common stock   3,514     2,199  
Excess tax benefit from stock issuance       (57 )
Tax payments for restricted stock units   (3,861 )   (9,317 )
Net cash used in financing activities   (109,411 )   (89,033 )
Effect of exchange rate changes on cash   331     (371 )
Net increase (decrease) in cash   (18,581 )   3,538  
Cash at beginning of period   49,266     11,220  
Cash at end of period   $ 30,685     14,758  
               

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   638    
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   633    
2016   587   596   602   609
2015   593   593   569   579
2014   569   579   588   591
2013   514   525   534   559
                 

Restaurant Count Rollforward:

     
    Nine Months Ended
    September 24, 2017   September 25, 2016
    Corporate   Franchise   Total   Corporate   Franchise   Total
Buffalo Wild Wings                        
Beginning of period   621   602   1,223   590   573   1,163
Opened   9   22   31   19   25   44
Acquired         1   (1)  
Closed/Relocated   (2)   (5)   (7)   (2)   (2)   (4)
End of period   628   619   1,247   608   595   1,203
R Taco                        
Beginning of period   8   7   15   4   6   10
Opened   2   7   9   3   1   4
Acquired            
Closed/Relocated            
End of period   10   14   24   7   7   14
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   638   633   1,271   617   602   1,219
                         

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%)   (2.3%)        
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%)   (3.2%)        
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   57,930        
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   59,964        
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   Nine months ended
    September 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Restaurant sales   $ 472,956     470,648     1,457,826     1,421,142  
Restaurant operating costs   394,482     387,829     1,231,312     1,160,424  
Restaurant-level profit   78,474     82,819     226,514     260,718  
Restaurant-level margin   16.6 %   17.6 %   15.5 %   18.3 %
                         

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   Nine months ended
    September 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Net earnings including noncontrolling interests   $ 18,038     22,504     48,074     78,727
Income tax expense   6,775     9,814     18,993     33,799
Interest expense   3,814     885     9,506     2,571
Depreciation and amortization   37,766     38,345     114,746     113,847
EBITDA   $ 66,393     71,548     191,319     228,944
                         

Adjusted Net Earnings and Adjusted Earnings per Diluted Share (Adjusted EPS)

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. Excluding loss on asset disposals and impairment, all adjustments to earnings before income taxes are considered non-recurring.

                 
    Three months ended   Nine months ended
    September 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Earnings before income taxes (a)   $ 24,813     32,318     67,067     112,526  
Loss on asset disposals and impairment (b)   4,118     1,352     8,379     4,415  
Proxy costs for contested election (c)       178     5,901     178  
Advisory and consulting fees, and restructuring(d)           2,502      
Gain on sale of investment in affiliate (e)           (5,692 )    
Acquisition costs (f)               145  
Divestiture costs (g)           80      
Adjusted earnings before income taxes   28,931     33,848     78,237     117,264  
Estimated income tax expense (h)   7,899     10,279     22,156     35,222  
Adjusted earnings including noncontrolling interests   21,032     23,569     56,081     82,042  
Net earnings (loss) attributable to noncontrolling interests (a)   (142 )   (147 )   (437 )   (399 )
Adjusted net earnings attributable to Buffalo Wild Wings   $ 21,174     23,716     56,518     82,441  
Weighted average shares outstanding – diluted (a)   15,572     18,353     16,269     18,650  
Adjusted earnings per diluted share   $ 1.36     1.29     3.47     4.42  
                           

(a)

  Equals the amounts shown on our consolidated statements of earnings.

(b)

  Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $0 and $41, for the three-month periods ended September 24, 2017 and September 25, 2016, respectively. Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $95 and $74, for the nine-month periods ended September 24, 2017 and September 25, 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 September 24, 2017 and September 25, 2016 were 27.3% and 30.4%, respectively. Our effective tax rates for the nine-month periods ended September 24, 2017 and September 25, 2016 were 28.3% and 30.0%, respectively. The calculated estimated income tax expense is based on these rates.
     

Adjusted Income from Operations

Adjusted income from operations is not required by, nor presented in accordance with U.S. GAAP and is a non-GAAP financial measure. The Company defines adjusted income from operations as income from operations 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. Adjusted income from operations 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 for incentive compensation and as a basis 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 certain non-recurring or non-cash items. Excluding loss on asset disposals and impairment, all adjustments to income from operations are considered non-recurring.

                 
    Three months ended   Nine months ended
    September 24,   September 25,   September 24,   September 25,
    2017   2016   2017   2016
Income from operations (a)   $ 28,424     32,846     71,590     114,901
Loss on asset disposals and impairment (b)   4,118     1,352     8,379     4,415
Proxy costs for contested election (c)       178     5,901     178
Advisory and consulting fees, and restructuring(d)           2,502    
Acquisition costs (e)               145
Divestiture costs (f)           80    
Adjusted income from operations   32,542     34,376     88,452     119,639
                       

(a)

  Equals the amounts shown on our consolidated statements of earnings.

(b)

  Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $0 and $41, for the three-month periods ended September 24, 2017 and September 25, 2016, respectively. Consists of loss on asset disposals and impairments, excluding store closing reserve costs of $95 and $74, for the nine-month periods ended September 24, 2017 and September 25, 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 costs associated with an acquisition of a franchise-owned store.

(f)

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

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.

         
    Nine months ended
    September 24, 2017   September 25, 2016
Net cash provided by operating activities   $ 141,925     213,937  
Acquisition of property and equipment   (59,552 )   (117,850 )
Free cash flow   $ 82,373     96,087  
               

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. Excluding loss on asset disposals and impairment, all adjustments to earnings before income taxes are considered non-recurring.

    Twelve months ending December 31, 2017
    Low Projection   High Projection
Earnings per diluted share forecast (a)   $ 4.30     4.60  
Loss on asset disposals and impairment (b)   0.43     0.43  
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)   $ 4.85     5.15  
               

(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 16,112 for fiscal year 2017.

Investor Relations Contact:

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20171025006076/en/

Source: Buffalo Wild Wings, Inc.

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

Arby's
Fast Crafted® Restaurant Brand Specializing in Freshly-Sliced, Deli-Inspired Meats & Sandwiches 
Learning Express
Learning Express is the nation's leading specialty toy store franchise - dedicated to providing toys that encourage learning through play, a...
American Family Care
The demand for health care services increases every year. People want and need access to health care on their terms - which usually means immediately!
Capriotti's Sandwich Shop
Capriotti's has mastered the art of sandwich making since 1976, achieving over 250 awards & counting. Our fans & franchise community agree,...
Perkins Restaurant & Bakery
In today's market, the opportunity to buy a Perkins® couldn't be better for experienced restaurateurs interested in aligning with a concept that has...

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)