Buffalo Wild Wings, Inc. (Nasdaq: BWLD), announced today financial
results for the third quarter ended September 28, 2008. Highlights
for the third quarter versus the same period a year ago were: Total
revenue increased 28.8% to $106.1 million Company-owned restaurant
sales grew 30.3% to $95.5 million Same-store sales increased 6.8%
at company-owned restaurants and 2.1% at franchised restaurants Net
earnings increased 7.1% to $4.6 million from $4.3 million, and
earnings per diluted share increased 4.2% to $0.25 from $0.24 Sally
Smith, President and Chief Executive Officer, commented, �We are
very pleased with our strong same-store sales during the quarter,
with increases of 6.8% at our company-owned and 2.1% at our
franchised restaurants, which, with our strong performance in new
units, fueled a revenue increase of nearly 29%. We opened twelve
new company-owned and twelve new franchised units and completed the
acquisition of our nine franchised restaurants in Las Vegas, making
for a busy quarter. Percentage decreases in our cost of sales,
operating and occupancy expenses for company-owned restaurants
contributed to a 120 basis point improvement in restaurant-level
performance over prior year. Likewise, we leveraged our general and
administrative expenses by 100 basis points over last year, despite
a $582,000 increase in stock-based compensation. These operating
gains were offset by year-over-year increases in our preopening
costs and loss on asset disposals and impairment charges,
delivering net earnings growth of 7.1%, or earnings per diluted
share of $0.25.� Total revenue increased 28.8% to $106.1 million in
the third quarter compared to $82.4 million in the third quarter of
2007. Company-owned restaurant sales for the quarter increased
30.3% to $95.5 million driven by a company-owned same-store sales
increase of 6.8% and 39 more company-owned restaurants in operation
at the end of third quarter 2008 relative to the same period in
2007. Franchise royalties and fees increased 16.5% to $10.6 million
versus $9.1 million in the prior year. This increase was due to a
franchised same-store sales increase of 2.1% and 35 more franchised
restaurants at the end of the period versus a year ago. Average
weekly sales for company-owned restaurants were $42,400 for the
third quarter of 2008 compared to $38,498 for the same quarter last
year, a 10.1% increase. Franchised restaurants averaged $46,889 for
the period versus $45,879 in the third quarter a year ago, a 2.2%
increase. For the third quarter, net earnings increased 7.1% to
$4.6 million versus $4.3 million in the prior year. Earnings per
diluted share were $0.25, as compared to third quarter 2007
earnings per diluted share of $0.24. 2008 and 2009 Outlook Ms.
Smith continued, �Throughout 2008, we have had great same-store
sales as well as improved restaurant-level cash flows and
leveraging of general and administrative expenses. We have also
invested time, energy and dollars to remodel, relocate, and update
our existing units, which we feel is critical to the long-term
success of the Buffalo Wild Wings brand, but which impacts our
near-term results. The level of preopening costs and loss on asset
disposals and impairment in the third quarter reflect this
commitment. For the full year of 2008, we expect about 15% unit
growth, over 25% revenue growth, and 20 to 25% net earnings
growth.� Ms. Smith added, �We are confident in our ability to grow
Buffalo Wild Wings in 2009 and beyond. We are also conservative
given the current economic environment. In 2009, we are committed
to our goal of 15% unit growth, with about 40% of the new unit
growth expected to be company-owned restaurants, and our
development pipeline for both company-owned and franchised
restaurants is strong. Our enthusiasm for achieving our unit growth
is only moderated by the current economy and the turmoil in the
financial markets, and the impact on real estate development and
availability of financing for developers and franchisees. We are
committed to driving revenue growth, through strong same-store
sales and increasing our average weekly sales volumes. And, we are
committed to growing net earnings, through improving our
restaurant-level performance and leveraging our general and
administrative expenses. Based on achieving our unit growth goal of
15% in 2009, we would expect revenue to grow by about 25% and net
earnings to grow by 20 to 25%.� Buffalo Wild Wings will be hosting
a conference call today, October 27, 2008 at 4:00 p.m. Central
Daylight Time to discuss these results. There will be a
simultaneous webcast conducted at our website
http://www.buffalowildwings.com. A replay of the call will be
available until November 3, 2008. To access this replay, please
dial 1.303.590.3030, password 3930835. About the Company Buffalo
Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis,
Minnesota, is a growing owner, operator and franchisor of
restaurants featuring a variety of boldly-flavored, made-to-order
menu items including Buffalo-style chicken wings spun in one of 14
signature sauces. Buffalo Wild Wings is an inviting neighborhood
destination with widespread appeal and is the recipient of dozens
of �Best Wings� and �Best Sports Bar� awards from across the
country. There are currently 545 Buffalo Wild Wings locations
across 38 states. Forward-looking Statements Certain statements in
this release that are not historical facts are forward-looking
statements that involve risks and uncertainties. These statements
include, without limitation, those relating to our projected unit,
revenue and earnings growth rates for 2008, 2009 and beyond and
improving same-store sales, average weekly sales volumes,
restaurant-level performance and general and administrative
expenses. Forward-looking statements are based upon the current
beliefs and expectations of our management. Actual results may vary
materially from those contained in forward-looking statements based
on a number of factors including, without limitation, the actual
number of locations opening in the future, the sales at these and
our other company-owned and franchised locations, our ability to
successfully operate in new markets, the cost of commodities, the
success of our marketing and other initiatives, our ability to
control restaurant labor and other restaurant operating costs, the
transition of the recently-acquired Las Vegas restaurants, economic
conditions, the availability of financing to real estate developers
and franchisees, competition, the impact of applicable regulations,
and other factors disclosed from time to time in our filings with
the U.S. Securities and Exchange Commission. Investors should take
such risks into account when making investment decisions.
Shareholders and other readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date on which they are made. We undertake no obligation to
update any forward-looking statements. BUFFALO WILD WINGS, INC. AND
SUBSIDIARIES � CONSOLIDATED STATEMENTS OF EARNINGS � (Dollar and
share amounts in thousands except per share data) � (unaudited) � �
Three months ended � Nine months ended September 28,2008 �
September 30,2007 September 28,2008 � September 30,2007 Revenue:
Restaurant sales $ 95,492 73,280 269,850 211,874 Franchising
royalties and fees � 10,582 9,086 31,354 26,393 � Total revenue �
106,074 82,366 301,204 238,267 � Costs and expenses: Restaurant
operating costs: Cost of sales 28,422 22,517 81,085 65,166 Labor
29,289 22,156 82,167 64,313 Operating 15,675 12,272 42,807 34,473
Occupancy 6,273 5,076 17,872 14,686 Depreciation 5,971 4,284 16,720
12,204 General and administrative (1) 10,684 9,147 29,072 26,302
Preopening 2,476 988 5,419 2,293 Loss on asset disposals and
impairment � 930 306 2,068 538 � Total costs and expenses � 99,720
76,746 277,210 219,975 � Income from operations 6,354 5,620 23,994
18,292 Interest income � 264 768 1,096 2,223 � Earnings before
income taxes 6,618 6,388 25,090 20,515 Income tax expense � 2,050
2,121 8,382 6,866 � Net earnings $ 4,568 4,267 16,708 13,649 �
Earnings per common share � basic $ 0.26 0.24 0.94 0.78 Earnings
per common share � diluted 0.25 0.24 0.93 0.77 Weighted average
shares outstanding � basic 17,823 17,597 17,800 17,535 Weighted
average shares outstanding � diluted 17,920 17,767 17,903 17,733 �
� (1) Includes stock-based compensation of $1,297, $715, $3,221,
and $3,047, respectively The following table expresses results of
operations as a percentage of total revenue for the periods
presented, except for restaurant operating costs which are
expressed as a percentage of restaurant sales: � � � Three months
ended � Nine months ended September 28,2008 � September 30,2007
September 28,2008 � September 30,2007 Revenue: Restaurant sales
90.0 % 89.0 % 89.6 % 88.9 % Franchising royalties and fees 10.0 �
11.0 � 10.4 � 11.1 � � Total revenue 100.0 � 100.0 � 100.0 � 100.0
� � Costs and expenses: Restaurant operating costs: Cost of sales
29.8 30.7 30.0 30.8 Labor 30.7 30.2 30.4 30.4 Operating 16.4 16.7
15.9 16.3 Occupancy 6.6 6.9 6.6 6.9 Depreciation 5.6 5.2 5.6 5.1
General and administrative 10.1 11.1 9.7 11.0 Preopening 2.3 1.2
1.8 1.0 Loss on asset disposals and impairment 0.9 � 0.4 � 0.7 �
0.2 � � Total costs and expenses 94.0 � 93.2 � 92.0 � 92.3 � �
Income from operations 6.0 6.8 8.0 7.7 Interest income 0.2 � 0.9 �
0.4 � 0.9 � � Earnings before income taxes 6.2 7.8 8.3 8.6 Income
tax expense 1.9 � 2.6 � 2.8 � 2.9 � � Net earnings 4.3 � 5.2 � 5.5
� 5.7 � BUFFALO WILD WINGS, INC. AND SUBSIDIARIES � CONSOLIDATED
BALANCE SHEETS � (Dollar amounts in thousands, except share data) �
(unaudited) � � September 28,2008 � December 30,2007 Assets Current
assets: Cash and cash equivalents $ 4,531 1,521 Marketable
securities 40,425 66,513 Accounts receivable � franchisees, net of
allowance of $25 886 885 Accounts receivable � other 6,245 6,976
Inventory 2,958 2,362 Prepaid expenses 2,704 3,060 Refundable
income tax 1,305 1,886 Deferred income taxes � 2,371 1,303 � Total
current assets 61,425 84,506 � Property and equipment, net 142,166
102,742 Restricted cash 7,242 7,161 Other assets 9,874 2,320
Goodwill � 10,972 369 � Total assets $ 231,679 197,098 �
Liabilities and Stockholders� Equity Current liabilities: Unearned
franchise fees $ 2,369 2,316 Accounts payable 18,333 10,692 Accrued
compensation and benefits 12,924 12,615 Accrued expenses 6,416
6,207 Current portion of deferred lease credits � 103 660 � Total
current liabilities 40,145 32,490 � Long-term liabilities: Other
liabilities 1,119 1,031 Marketing fund payables 7,242 7,161
Deferred income taxes 7,163 2,166 Deferred lease credits, net of
current portion � 13,301 12,585 � Total liabilities � 68,970 55,433
� Commitments and contingencies Stockholders� equity: Undesignated
stock, 1,000,000 shares authorized; none issued � � Common stock,
no par value. Authorized 44,000,000 shares; issued and outstanding
17,823,001 and 17,657,020 respectively 85,161 80,825 Retained
earnings � 77,548 60,840 � Total stockholders� equity � 162,709
141,665 � Total liabilities and stockholders� equity $ 231,679
197,098 BUFFALO WILD WINGS, INC. AND SUBSIDIARIES � CONSOLIDATED
STATEMENTS OF CASH FLOWS � (Dollar amounts in thousands) �
(unaudited) � � Nine months ended September 28,2008 � September
30,2007 Cash flows from operating activities: Net earnings $ 16,708
13,649 Adjustments to reconcile net earnings to cash provided by
operations: Depreciation 16,720 12,204 Amortization 80 (95 ) Loss
on asset disposals and impairment 2,054 538 Deferred lease credits
1,426 2,221 Deferred income taxes 3,929 (1,359 ) Stock-based
compensation 3,221 3,047 Excess tax benefit from the exercise of
stock options (435 ) (660 ) Change in operating assets and
liabilities: Trading securities (164 ) (315 ) Accounts receivable
(62 ) (421 ) Inventory (327 ) (375 ) Prepaid expenses 438 (1,860 )
Other assets (429 ) (378 ) Unearned franchise fees 53 198 Accounts
payable 2,519 1,742 Refundable income tax 1,016 (699 ) Accrued
expenses � 1,099 � 2,355 � � Net cash provided by operating
activities � 47,846 � 29,792 � � Cash flows from investing
activities: Acquisition of property and equipment (48,378 ) (23,127
) Acquisition of franchised restaurants (22,645 ) � Purchase of
marketable securities (98,984 ) (128,782 ) Proceeds of marketable
securities � 125,156 � 115,333 � � Net cash used in investing
activities � (44,851 ) (36,576 ) � Cash flows from financing
activities: Issuance of common stock 569 875 Tax payments for
restricted stock units (989 ) (1,183 ) Excess tax benefit from the
exercise of stock options � 435 � 660 � � Net cash provided by
financing activities � 15 � 352 � � Net increase (decrease) in cash
and cash equivalents 3,010 (6,432 ) � Cash and cash equivalents at
beginning of period � 1,521 � 11,756 � � Cash and cash equivalents
at end of period $ 4,531 � 5,324 � BUFFALO WILD WINGS, INC. AND
SUBSIDIARIES Supplemental Information Restaurant Count �
Company-owned Restaurants: � � � � � � � Q1 Q2 Q3 Q4 2008 165 169
187 2007 140 145 148 161 2006 124 129 134 139 2005 106 110 116 122
2004 88 92 97 103 � � Franchised Restaurants: � Q1 Q2 Q3 Q4 2008
340 346 348 � 2007 299 301 313 332 2006 260 270 278 290 2005 212
224 234 248 2004 168 175 189 203 Same-Store Sales � � � � � � � �
Company-owned Restaurants: � Q1 Q2 Q3 Q4 Year 2008 4.1 % 8.3 % 6.8
% 2007 8.7 % 8.1 % 8.3 % 3.4 % 6.9 % 2006 7.7 % 8.2 % 11.8 % 13.2 %
10.4 % 2005 6.1 % 2.7 % 1.8 % 2.5 % 3.2 % 2004 11.1 % 10.6 % 9.9 %
7.6 % 9.7 % � � Franchised Restaurants: � Q1 Q2 Q3 Q4 Year 2008 2.1
% 4.5 % 2.1 % 2007 3.3 % 4.0 % 5.9 % 2.3 % 3.9 % 2006 6.7 % 4.7 %
6.4 % 6.5 % 6.1 % 2005 3.2 % 1.8 % 1.1 % 2.6 % 2.2 % 2004 12.0 %
10.4 % 5.7 % 3.7 % 7.6 % Average Weekly Sales Volumes �
Company-owned Restaurants: � � � � � � � � Q1 Q2 Q3 Q4 Year 2008 $
41,438 40,572 42,400 2007 39,254 36,655 38,498 40,485 38,757 2006
35,857 33,660 35,380 38,800 36,033 2005 33,195 30,531 31,361 33,953
32,304 2004 32,289 30,248 30,983 33,038 31,663 � � Franchised
Restaurants: � Q1 Q2 Q3 Q4 Year 2008 $ 47,812 46,390 46,889 2007
46,439 43,998 45,879 47,293 45,901 2006 44,342 42,338 42,963 46,008
43,975 2005 41,309 39,824 40,149 42,533 40,999 2004 39,678 38,072
38,727 40,926 39,402
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