Buffalo Wild Wings, Inc. Announces Third Quarter Earnings Per Share of $1.00

28 Oct 2015, 15:05 PM EDT

MINNEAPOLIS–(BUSINESS WIRE)–Buffalo
Wild Wings, Inc. (NASDAQ: BWLD) announced today financial results
for the third quarter ended September 27, 2015. Highlights for the third
quarter versus the same period a year ago were:

Total revenue increased 22.0% to $455.5 million
Company–owned restaurant sales increased 23.2% to $431.8 million
Same–store sales increased 3.9% at company–owned
restaurants and 1.2% at franchised restaurants
Net earnings decreased 11.6% to $19.2 million from $21.8 million, and
earnings per diluted share decreased 12.2% to $1.00 from $1.14

Sally Smith, President and Chief Executive Officer, commented, “During
the third quarter we acquired 41 franchised locations in Texas, New
Mexico, and Hawaii, which includes two restaurants under development. We
sincerely thank the hundreds of Team Members across the country that
were part of the successful transition to company ownership. Combined
with our ongoing company-owned development and other franchise
acquisitions during the last 12 months, we’ve increased our
company-owned Buffalo Wild Wings locations by 24% compared to a year
ago.”

Ms. Smith continued, “Our same-store sales in the third quarter
increased 3.9% at company–owned restaurants and 1.2% at
franchised locations, despite a shift in the sports calendar resulting
in one less week of football and fewer pay-per-view events than last
year. We estimate this negatively impacted our same-store sales by 80
basis points. Cost of sales and labor as a percentage of restaurant
sales were higher compared to the prior year, and, with the additional
depreciation, amortization, and other expenses related to the recently
completed franchise acquisition, our earnings per diluted share
decreased year-over-year to $1.00.”

Total revenue increased 22.0% to $455.5 million in the third quarter,
compared to $373.5 million in the third quarter of 2014. Company–owned
restaurant sales for the quarter increased 23.2% over the same period in
2014, to $431.8 million, driven by a same–store sales increase at
company-owned Buffalo Wild Wings restaurants of 3.9% and 109 additional
Buffalo Wild Wings restaurants at the end of the third quarter of 2015.
Franchise royalties and fees increased 3.6% to $23.8 million for the
quarter versus $22.9 million in the third quarter of 2014. This increase
is attributed to increased international franchise fees and increased
same-store sales of 1.2% for the franchised Buffalo Wild Wings
restaurants in operation at the end of the period compared to the same
period in 2014.

Average weekly sales for company-owned Buffalo Wild Wings restaurants
were $61,831 for the third quarter of 2015, compared to $59,643 for the
same quarter last year, a 3.7% increase. Franchised Buffalo Wild Wings
restaurants in the United States averaged $62,819 for the period versus
$61,586 in the third quarter a year ago, a 2.0% increase.

For the third quarter, net earnings decreased 11.6% to $19.2 million
versus $21.8 million in the third quarter of 2014. Earnings per diluted
share were $1.00, compared to third quarter 2014 earnings per diluted
share of $1.14.

2015 and 2016 Outlook

Ms. Smith remarked, “Same-store sales increased 2.8% at company-owned
restaurants and 0.8% at franchised locations for the first four weeks of
the fourth quarter of 2015 compared to 5.4% and 5.1%, respectively, for
the same period last year. As we approach year end, we know our Guests
will be rooting for their favorite NFL teams to reach the Super Bowl and
their favorite college teams to reach a bowl game. We’re excited to be
the title sponsor of the Buffalo Wild Wings Citrus Bowl again this year.”

Ms. Smith continued, “In anticipation of our purchase of the 41
franchised locations, we previously revised our 2015 net earnings growth
goal to 13% to account for the incremental expense and transition costs
we expected to incur in the third and fourth quarters. Based on our
year-to-date results and updated outlook for the fourth quarter, we are
now anticipating single-digit net earnings growth for the year.”

Ms. Smith concluded, “We remain confident the Buffalo Wild Wings brand
is strong and we’re continually investing in our Guest Experience to
increase sales. We’re looking forward to 2016 and plan to open 50
company-owned Buffalo Wild Wings. Buffalo Wild Wings franchisees in the
United States anticipate opening 30 restaurants and international
franchisees should open approximately 15 locations. R Taco and PizzaRev
will continue their growth plans through both company-owned and
franchise development next year. As a result of this unit expansion
combined with our ongoing sales-driving and operational initiatives, we
believe net earnings growth in 2016 should exceed 20%.”

Buffalo
Wild Wings will be hosting a conference call today, October 28, 2015
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 4, 2015. To access
this replay, please dial 1.858.384.5517 password 391456.

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 1,140 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 sales
trends and projected unit and net earnings growth rates for 2015, 2016,
and beyond. 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 non–U.S.
locations), success of acquired restaurants, success of investments in
new or emerging concepts, unforeseen obstacles in developing
nontraditional sites or non–U.S. locations, our ability to obtain
and maintain licenses and permits necessary to operate our existing and
new restaurants, our franchisees’ adherence to our system standards, the
cost of commodities such as traditional chicken wings and supply chain
consistency, the success of our key initiatives and our advertising and
marketing campaigns, our ability to control restaurant labor and other
restaurant operating costs, the continued service of key management
personnel, our ability to protect our name and logo and other
proprietary information, economic conditions (including changes in
consumer preferences or consumer discretionary spending), the impact of
federal, state or local government regulations relating to our
employees, the sale of food and alcoholic beverages, the effect of
competition in the restaurant industry, and other factors disclosed from
time to time in our filings with the U.S. Securities and Exchange
Commission, including the factors described under “Risk Factors” in Part
I, Item 1A of our Annual Report on Form 10–K for the fiscal year
ended December 28, 2014, 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 27, 2015			September 28, 2014		September 27, 2015		September 28, 2014
Revenue:
Restaurant sales	$	431,763		350,524		1,248,595		1,038,610
Franchise royalties and fees		23,763		22,934		73,904		68,697
Total revenue		455,526		373,458		1,322,499		1,107,307
Costs and expenses:
Restaurant operating costs:
Cost of sales		126,878		101,886		370,398		296,210
Labor		138,897		111,897		398,585		324,663
Operating		63,343		52,364		178,716		151,419
Occupancy		24,210		19,796		68,554		58,048
Depreciation and amortization		33,610		24,776		90,887		71,354
General and administrative		33,714		27,784		97,937		86,163
Preopening		4,777		3,594		9,251		8,369
Loss on asset disposals and impairment		1,269		1,371		4,180		3,369
Total costs and expenses		426,698		343,468		1,218,508		999,595
Income from operations		28,828		29,990		103,991		107,712
Other expense		(1,400	)	(236	)	(1,434	)	(128	)
Earnings before income taxes		27,428		29,754		102,557		107,584
Income tax expense		8,261		8,001		32,973		33,812
Net earnings including noncontrolling interests		19,167		21,753		69,584		73,772
Net loss attributable to noncontrolling interests		(69	)	—		(214	)	—
Net earnings attributable to Buffalo Wild Wings	$	19,236		21,753		69,798		73,772
Earnings per common share – basic	$	1.01		1.15		3.67		3.90
Earnings per common share – diluted	$	1.00		1.14		3.65		3.89
Weighted average shares outstanding – basic		19,022		18,923		19,006		18,900
Weighted average shares outstanding – diluted		19,167		19,021		19,118		18,985

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 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
Revenue:
Restaurant sales	94.8	%	93.9	%	94.4	%	93.8	%
Franchise royalties and fees	5.2		6.1		5.6		6.2
Total revenue	100.0		100.0		100.0		100.0
Costs and expenses:
Restaurant operating costs:
Cost of sales	29.4		29.1		29.7		28.5
Labor	32.2		31.9		31.9		31.3
Operating	14.7		14.9		14.3		14.6
Occupancy	5.6		5.6		5.5		5.6
Depreciation and amortization	7.4		6.6		6.9		6.4
General and administrative	7.4		7.4		7.4		7.8
Preopening	1.0		1.0		0.7		0.8
Loss on asset disposals and impairment	0.3		0.4		0.3		0.3
Total costs and expenses	93.7		92.0		92.1		90.3
Income from operations	6.3		8.0		7.9		9.7
Other expense	(0.3	)	(0.1	)	(0.1	)	(0.0	)
Earnings before income taxes	6.0		8.0		7.8		9.7
Income tax expense	1.8		2.1		2.5		3.1
Net earnings including noncontrolling interests	4.2		5.8		5.3		6.7
Net loss attributable to noncontrolling interests	(0.0	)	—		(0.0	)	—
Net earnings attributable to Buffalo Wild Wings	4.2	%	5.8	%	5.3	%	6.7	%


BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(unaudited)

	September 27, 2015			December 28, 2014
Assets
Current assets:
Cash and cash equivalents	$	11,479		93,329
Marketable securities		8,721		19,547
Accounts receivable, net of allowance of $25		35,168		28,322
Inventory		13,378		11,893
Prepaid expenses		8,815		4,215
Refundable income taxes		10,322		9,779
Deferred income taxes		17,419		15,807
Restricted assets		48,400		81,037
Total current assets		153,702		263,929

Property and equipment, net		604,300		494,401
Reacquired franchise rights, net		132,993		37,631
Other assets		28,424		19,399
Goodwill		99,678		38,106
Total assets	$	1,019,097		853,466

Liabilities and Stockholders’ Equity
Current liabilities:
Unearned franchise fees	$	2,148		2,099
Accounts payable		55,573		37,241
Accrued compensation and benefits		40,613		59,161
Accrued expenses		19,624		16,573
Current portion of long-term debt		1,927		—
Current portion of deferred lease credits		—		743
Due to related party		31,634		—
System-wide payables		48,778		79,668
Total current liabilities		200,297		195,485

Long-term liabilities:
Other liabilities		17,674		6,388
Deferred income taxes		27,191		39,815
Long-term debt		74,856		—
Deferred lease credits		44,170		37,479
Total liabilities		364,188		279,167

Commitments and contingencies
Stockholders’ equity:
Undesignated stock, 1,000,000 shares authorized		—		—
Common stock, no par value. Authorized 44,000,000 shares; issued and outstanding 19,033,253 and 18,937,131, respectively		160,510		148,114
Retained earnings		497,493		427,695
Accumulated other comprehensive loss		(3,466	)	(2,096	)
Total stockholders’ equity		654,537		573,713
Noncontrolling interests		372		586
Total equity		654,909		574,299
Total liabilities and equity	$	1,019,097		853,466


BUFFALO WILD WINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(unaudited)

	Nine months ended
	September 27, 2015			September 28, 2014
Cash flows from operating activities:
Net earnings including noncontrolling interests	$	69,584		73,772
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation		86,119		67,932
Amortization		4,768		3,422
Loss on asset disposals and impairment		4,180		3,369
Deferred lease credits		4,260		4,209
Deferred income taxes		(13,561	)	(18,774	)
Stock-based compensation		11,689		10,251
Excess tax benefit from stock issuance		(1,088	)	217
Change in operating assets and liabilities, net of effect of acquisitions:
Trading securities		(173	)	(657	)
Accounts receivable		(4,982	)	(3,323	)
Inventory		(421	)	(400	)
Prepaid expenses		(868	)	(7,245	)
Other assets		74		(160	)
Unearned franchise fees		104		333
Accounts payable		6,901		4,128
Income taxes		545		6,541
Accrued expenses		(248	)	99
Net cash provided by operating activities		166,883		143,714
Cash flows from investing activities:
Acquisition of property and equipment		(124,233	)	(95,347	)
Acquisition of businesses		(209,713	)	(7,307	)
Purchase of marketable securities		(12,301	)	(17,993	)
Proceeds from marketable securities		23,300		—
Net cash used in investing activities		(322,947	)	(120,647	)
Cash flows from financing activities:
Proceeds from line of credit		197,422		—
Repayments of line of credit		(150,467	)	—
Proceeds from related party borrowing		31,634		—
Other financing activities		(580	)	—
Issuance of common stock		2,903		1,829
Excess tax benefit from stock issuance		1,088		(217	)
Tax payments for restricted stock units		(7,847	)	(7,474	)
Net cash provided by (used in) financing activities		74,153		(5,862	)
Effect of exchange rate changes on cash and cash equivalents		61		(612	)
Net increase (decrease) in cash and cash equivalents		(81,850	)	16,593
Cash and cash equivalents at beginning of period		93,329		57,502
Cash and cash equivalents at end of period	$	11,479		74,095


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
2015	501	517	573
2014	443	449	463	491
2013	397	407	415	434
2012	327	330	343	381
2011	263	277	288	319


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

	Q1	Q2	Q3	Q4
2015	593	593	569
2014	569	579	588	591
2013	514	525	534	559
2012	505	505	511	510
2011	488	492	498	498


Restaurant Count Rollforward:

	Nine months ended
	September 27, 2015			September 28, 2014
	Corporate	Franchise	Total	Corporate	Franchise	Total
Buffalo Wild Wings
Beginning of period	487	584	1,071	434	559	993
Opened	29	37	66	24	32	56
Acquired	54	(54)	—	3	(3)	—
Closed/Relocated	(2)	(4)	(6)	(2)	(7)	(9)
End of period	568	563	1,131	459	581	1,040
R Taco
Beginning of period	2	7	9	—	—	—
Opened	—	—	—	—	—	—
Acquired	1	(1)	—	2	7	9
Closed/Relocated	—	—	—	—	—	—
End of period	3	6	9	2	7	9
PizzaRev
Beginning of period	2	n/a	2	—	n/a	—
Opened	—	n/a	—	2	n/a	2
Acquired	—	n/a	—	—	n/a	—
Closed/Relocated	—	n/a	—	—	n/a	—
End of period	2	n/a	2	2	n/a	2
Consolidated
End of the period	573	569	1,142	463	588	1,051


BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Supplemental Information

Same-Store Sales at Buffalo Wild Wings locations in United States and Canada

Company-owned Restaurants:

		Q1	Q2	Q3	Q4	Year
2015		7.0%	4.2%	3.9%
2014		6.6%	7.7%	6.0%	5.9%	6.5%
2013		1.4%	3.8%	4.8%	5.2%	3.9%
2012		9.2%	5.3%	6.2%	5.8%	6.6%
2011		3.9%	5.9%	5.7%	8.9%	6.1%

Franchised Restaurants:

		Q1	Q2	Q3	Q4	Year
2015		6.0%	2.5%	1.2%
2014		5.0%	6.5%	5.7%	5.1%	5.6%
2013		2.2%	4.1%	3.9%	3.1%	3.3%
2012		7.3%	5.5%	5.8%	7.4%	6.5%
2011		1.6%	2.7%	4.2%	5.9%	3.6%

Average Weekly Sales Volumes at Buffalo Wild Wings locations in United States and Canada

Company-owned Restaurants:

		Q1	Q2	Q3	Q4	Year
2015	$	64,851	61,960	61,831
2014		60,966	59,403	59,643	62,119	60,470
2013		56,953	54,759	55,592	58,204	56,392
2012		55,131	51,524	52,561	55,595	53,783
2011		48,845	47,970	49,461	51,983	49,627

Franchised Restaurants:

		Q1	Q2	Q3	Q4	Year
2015	$	67,075	63,904	62,819
2014		63,852	61,845	61,586	63,949	62,595
2013		60,050	58,186	58,926	61,167	59,594
2012		57,282	54,766	55,608	58,490	56,570
2011		52,744	50,995	51,350	53,385	52,081