Buffalo Wild Wings, Inc. Announces Fourth Quarter 2008 Results

Buffalo Wild Wings, Inc. (NASDAQ: BWLD), announced today financial results for the fourth quarter ended December 28, 2008. Highlights for the fourth quarter versus the same period a year ago were:

• Total revenue increased 32.6% to $121.2 million
• Company-owned restaurant sales grew 35.7% to $109.8 million

• Same-store sales increased 4.5% at company-owned restaurants and 2.5% at franchised restaurants
• Net earnings increased 28.7% to $7.7 million from $6.0 million, and earnings per diluted share increased 26.5% to $0.43 from $0.34

Sally Smith, President and Chief Executive Officer, commented, “We’re excited to share our impressive fourth quarter and full year 2008 results. Our outstanding revenue growth of 32.6% for fourth quarter translated to net earnings growth of 28.7%, providing a strong finish to the year. For the full year of 2008, we increased our number of locations by 67 units, built our top line revenue by over 28%, and delivered net earnings growth of more than 24% to our shareholders. Our performance demonstrates the strength of this brand and the high level of execution by our Franchisees and Team Members.”

Total revenue increased 32.6% to $121.2 million in the fourth quarter compared to $91.4 million in the fourth quarter of 2007. Company-owned restaurant sales for the quarter increased 35.7% to $109.8 million driven by a company-owned same-store sales increase of 4.5% and 36 more company-owned restaurants in operation at the end of fourth quarter 2008 relative to the same period in 2007. Franchise royalties and fees increased 9.0% to $11.4 million versus $10.4 million in the prior year. This increase was the result of a franchised same-store sales increase of 2.5% and 31 more franchised restaurants at the end of the period versus a year ago.

Average weekly sales for company-owned restaurants were $43,864 for the fourth quarter of 2008 compared to $40,485 for the same quarter last year, an 8.3% increase. Franchised restaurants averaged $48,424 for the period versus $47,293 in the fourth quarter a year ago, a 2.4% increase.

For the fourth quarter, net earnings increased 28.7% to $7.7 million versus $6.0 million in the prior year. Earnings per diluted share were $0.43, as compared to fourth quarter 2007 earnings per diluted share of $0.34.

2009 Outlook

Ms. Smith continued, “2009 is off to a great start! To date, our first quarter same-store sales are among the best in the industry with an 8% increase at company-owned restaurants and a 7% increase at franchised locations. Our first quarter marketing and media plans are firmly in place, including a new TV commercial that will air nationally during each week of the college basketball tournaments up through the championship game. Our restaurant Team Members are well-prepared, energized, and ready to "WOW" the crowds.”

Ms. Smith concluded, “We believe our 2009 annual goals of 15% unit growth, 25% revenue growth, and 20% to 25% net earnings growth are achievable. Our brand offers a unique and appealing experience that is more than just going out to eat. Buffalo Wild Wings is a haven where people go to relax and connect with friends and family, and we are thankful that, in this economy, they are choosing Buffalo Wild Wings as the place they want to be for hot wings and a cold beer.”

Buffalo Wild Wings will be hosting a conference call today, February 11, 2009 at 4:00 p.m. Central Standard Time to discuss these results. There will be a simultaneous webcast conducted at our website www.buffalowildwings.com.

A replay of the call will be available until February 18, 2009. To access this replay, please dial 1.303.590.3030, password 3967792.

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 567 Buffalo Wild Wings locations across 39 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 2009 and beyond and our ability to fund our growth. 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 (including changes in consumer preferences or consumer discretionary spending), 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						Fiscal years ended
		December 28, 2008				December 30, 2007		December 28, 2008		December 30, 2007
Revenue:
Restaurant sales		$	109,836			80,950		379,686		292,824
Franchising royalties and fees			11,377			10,435		42,731		36,828
Total revenue			121,213			91,385		422,417		329,652
Costs and expenses:
Restaurant operating costs:
Cost of sales			32,181			24,899		113,266		90,065
Labor			32,442			23,471		114,609		87,784
Operating			17,398			13,501		60,205		47,974
Occupancy			7,285			5,300		25,157		19,986
Depreciation and amortization			6,902			4,783		23,622		16,987
General and administrative (1)			11,079			9,438		40,151		35,740
Preopening			2,511			2,227		7,930		4,520
Loss on asset disposals and impairment			15			449		2,083		987
Total costs and expenses			109,813			84,068		387,023		304,043
Income from operations			11,400			7,317		35,394		25,609
Investment income (loss)			(126	)		686		970		2,909
Earnings before income taxes			11,274			8,003		36,364		28,518
Income tax expense			3,547			1,998		11,929		8,864
Net earnings		$	7,727			6,005		24,435		19,654
Earnings per common share – basic		$	0.43			0.34		1.37		1.12
Earnings per common share – diluted			0.43			0.34		1.36		1.10
Weighted average shares outstanding – basic			17,854			17,612		17,813		17,554
Weighted average shares outstanding – diluted			18,011			17,860		17,996		17,833

⁽¹⁾ Includes stock-based compensation of $1,679, $707, $4,900, and $3,755, 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						Fiscal years ended
		December 28, 2008			December 30, 2007			December 28, 2008			December 30, 2007
Revenue:
Restaurant sales		90.6	%		88.6	%		89.9	%		88.8	%
Franchising royalties and fees		9.4			11.4			10.1			11.2
Total revenue		100.0			100.0			100.0			100.0
Costs and expenses:
Restaurant operating costs:
Cost of sales		29.3			30.8			29.8			30.8
Labor		29.5			29.0			30.2			30.0
Operating		15.8			16.7			15.9			16.4
Occupancy		6.6			6.5			6.6			6.8
Depreciation and amortization		5.7			5.2			5.6			5.2
General and administrative		9.1			10.3			9.5			10.8
Preopening		2.1			2.4			1.9			1.4
Loss on asset disposals and impairment		0.0			0.5			0.5			0.3
Total costs and expenses		90.6			92.0			91.6			92.2
Income from operations		9.4			8.0			8.4			7.8
Investment income (loss)		(0.1	)		0.8			0.2			0.9
Earnings before income taxes		9.3			8.8			8.6			8.7
Income tax expense		2.9			2.2			2.8			2.7
Net earnings		6.4			6.6			5.8			6.0

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share data)
(unaudited)
		December 28, 2008			December 30, 2007
Assets
Current assets:
Cash and cash equivalents		$	8,347		1,521
Marketable securities			36,157		66,513
Accounts receivable – franchisees, net of allowance of $25			895		885
Accounts receivable – other			5,759		6,976
Inventory			3,104		2,362
Prepaid expenses			3,294		3,060
Refundable income taxes			1,611		1,886
Deferred income taxes			1,731		1,303
Total current assets			60,898		84,506
Property and equipment, net			154,432		102,742
Restricted cash			7,670		7,161
Other assets			9,846		2,320
Goodwill			10,972		369
Total assets		$	243,818		197,098
Liabilities and Stockholders’ Equity
Current liabilities:
Unearned franchise fees		$	2,514		2,316
Accounts payable			16,691		10,692
Accrued compensation and benefits			14,155		12,615
Accrued expenses			7,116		6,207
Current portion of deferred lease credits			56		660
Total current liabilities			40,532		32,490
Long-term liabilities:
Other liabilities			1,270		1,031
Marketing fund payables			7,670		7,161
Deferred income taxes			8,916		2,166
Deferred lease credits, net of current portion			13,837		12,585
Total liabilities			72,225		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 and 20,200,000 shares, respectively; issued and outstanding 17,887,271 and 17,657,020 respectively			86,318		80,825
Retained earnings			85,275		60,840
Total stockholders’ equity			171,593		141,665
Total liabilities and stockholders’ equity		$	243,818		197,098

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
		Fiscal years ended
		December 28, 2008				December 30, 2007
Cash flows from operating activities:
Net earnings		$	24,435			19,654
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation			23,415			16,987
Amortization			207			(54	)
Loss on asset disposals and impairment			2,083			987
Deferred lease credits			1,955			2,374
Deferred income taxes			6,322			(894	)
Stock-based compensation			4,900			3,755
Excess tax benefit from the exercise of stock options			(615	)		(1,007	)
Change in operating assets and liabilities:
Trading securities			23			(302	)
Accounts receivable			375			(1,183	)
Inventory			(473	)		(595	)
Prepaid expenses			(152	)		(2,008	)
Other assets			(608	)		(600	)
Unearned franchise fees			198			(31	)
Accounts payable			809			3,683
Refundable income taxes			890			(1,143	)
Accrued expenses			2,343			3,956
Net cash provided by operating activities			66,107			43,579
Cash flows from investing activities:
Acquisition of property and equipment			(67,396	)		(41,359	)
Acquisition of franchised restaurants			(23,071	)		—
Purchase of marketable securities			(116,259	)		(158,170	)
Proceeds of marketable securities			146,592			144,842
Net cash used in investing activities			(60,134	)		(54,687	)
Cash flows from financing activities:
Issuance of common stock			1,227			1,446
Tax payments for restricted stock units			(989	)		(1,580	)
Excess tax benefit from the exercise of stock options			615			1,007
Net cash provided by financing activities			853			873
Net increase (decrease) in cash and cash equivalents			6,826			(10,235	)
Cash and cash equivalents at beginning of period			1,521			11,756
Cash and cash equivalents at end of period		$	8,347			1,521

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Restaurant Count
Company-owned Restaurants:
		Q1			Q2			Q3			Q4
2008		165			169			187			197
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			363
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	%		4.5	%		5.9	%
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	%		2.5	%		2.8	%
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	%

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Average Weekly Sales Volumes
Company-owned Restaurants:
		Q1		Q2		Q3		Q4		Year
2008		$41,438		40,572		42,400		43,864		42,141
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		48,424		47,382
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

 

Buffalo Wild Wings, Inc.
Investor Relations Contact:
Mary Twinem, 952-253-0731