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| 8-K - 8-K - BUFFALO WILD WINGS INC | bwld201610268-k.htm |
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Investor Relations Contact: Heather Pribyl 952.540.2095 | |
Buffalo Wild Wings, Inc. Announces
Third Quarter Earnings per Share of $1.23
Third Quarter Earnings per Share of $1.23
Minneapolis, Minnesota, October 26, 2016 – Buffalo Wild Wings, Inc. (NASDAQ: BWLD) announced today financial results for the third quarter ended September 25, 2016. Highlights for the third quarter versus the same period a year ago were:
◦ | Total revenue increased 8.5% to $494.2 million |
◦ | Company-owned restaurant sales increased 9.0% to $470.6 million |
◦ | Same-store sales decreased 1.8% at company-owned Buffalo Wild Wings® restaurants and 1.6% at franchised Buffalo Wild Wings restaurants |
◦ | Net earnings increased 17.8% to $22.7 million from $19.2 million, and earnings per diluted share increased 23.0% to $1.23 from $1.00 |
Sally Smith, President and Chief Executive Officer, commented, “Our focus is to return to industry-leading same-store sales. To advance these efforts and drive traffic, in the third quarter we implemented a 15-minute guarantee for FastBreak™ lunch and Half-Price Wing Tuesdays®. Both programs are seeing initial success. To deliver value to shareholders, we increased our credit facility to $500 million in October allowing us to execute against our expanded share repurchase authorization.”
Ms. Smith concluded, "As we look forward to 2017, we remain committed to continued innovation in delivering a differentiated experience in casual dining and we're identifying areas of opportunity to improve margins. Our new menu launches next week and we are excited for our new burger launch. We're continuing to implement our Blazin' Rewards™ loyalty program and we have begun third-party delivery in 90 company-owned restaurants."
Total revenue increased 8.5% to $494.2 million in the third quarter, compared to $455.5 million in the third quarter of 2015. Company-owned restaurant sales for the quarter increased 9.0% over the same period in 2015, to $470.6 million, driven by 40 additional Buffalo Wild Wings restaurants at the end of the third quarter of 2016, partially offset by a same-store sales decrease of 1.8%. Franchise royalties and fees decreased 1.0% to $23.5 million for the quarter, versus $23.8 million in the third
quarter of 2015. This decrease is attributed to a same-store sales decrease of 1.6% at franchised Buffalo Wild Wings restaurants.
Average weekly sales for company-owned Buffalo Wild Wings restaurants were $59,690 for the third quarter of 2016, compared to $61,831 for the same quarter last year, a 3.5% decrease. Franchised Buffalo Wild Wings restaurants in the United States averaged $61,497 for the period, versus $62,819 in the third quarter a year ago, a 2.1% decrease.
Under the share repurchase authorization, 36,600 shares were repurchased during the third quarter of 2016 for a total of $5.9 million.
For the third quarter, net earnings increased 17.8% to $22.7 million, versus $19.2 million in the third quarter of 2015. Earnings per diluted share were $1.23, compared to third quarter 2015 earnings per diluted share of $1.00.
For 2016, the company expects the following new unit development:
• | 35 company-owned Buffalo Wild Wings restaurants in the United States |
• | 30 franchised Buffalo Wild Wings locations in the United States |
• | 10 franchised Buffalo Wild Wings locations internationally |
• | 5 company-owned and 2 franchised R Taco® restaurants |
For 2016, the company expects the following:
• | Deflationary food costs, excluding traditional chicken wings |
• | Traditional chicken wings higher than forecasted due to high demand and supply disruption |
• | Depreciation and amortization expense of $152 million |
• | Share repurchase activity of approximately $150 million for the year |
• | Earnings per diluted share slightly below the low end of the prior $5.65 to $5.85 range |
• | Capital expenditures of approximately $158 million |
For 2017, the company expects the following new unit development:
• | 30 - 35 company-owned Buffalo Wild Wings restaurants in the United States |
• | 15 franchised Buffalo Wild Wings locations in the United States |
• | 20 - 25 franchised Buffalo Wild Wings locations internationally |
• | 5 company-owned and 10 franchised R Taco restaurants |
Buffalo Wild Wings will be hosting a conference call today, October 26, 2016 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 2, 2016. To access this replay, please dial 1-412-317-6671 password 2296003.
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 1,200 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, 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 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 27, 2015, 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 25, 2016 | September 27, 2015 | September 25, 2016 | September 27, 2015 | |||||||||
Revenue: | ||||||||||||
Restaurant sales | $ | 470,648 | 431,763 | 1,421,142 | 1,248,595 | |||||||
Franchise royalties and fees | 23,519 | 23,763 | 71,460 | 73,904 | ||||||||
Total revenue | 494,167 | 455,526 | 1,492,602 | 1,322,499 | ||||||||
Costs and expenses: | ||||||||||||
Restaurant operating costs: | ||||||||||||
Cost of sales | 136,185 | 126,878 | 418,488 | 370,398 | ||||||||
Labor | 150,813 | 138,897 | 449,317 | 398,585 | ||||||||
Operating | 73,435 | 63,343 | 211,295 | 178,716 | ||||||||
Occupancy | 27,396 | 24,210 | 81,324 | 68,554 | ||||||||
Depreciation and amortization | 38,345 | 33,610 | 113,847 | 90,887 | ||||||||
General and administrative | 32,264 | 33,714 | 93,750 | 97,937 | ||||||||
Preopening | 1,490 | 4,777 | 5,191 | 9,251 | ||||||||
Loss on asset disposals | 1,393 | 1,269 | 4,489 | 4,180 | ||||||||
Total costs and expenses | 461,321 | 426,698 | 1,377,701 | 1,218,508 | ||||||||
Income from operations | 32,846 | 28,828 | 114,901 | 103,991 | ||||||||
Interest and other expense | 528 | 1,400 | 2,375 | 1,434 | ||||||||
Earnings before income taxes | 32,318 | 27,428 | 112,526 | 102,557 | ||||||||
Income tax expense | 9,814 | 8,261 | 33,799 | 32,973 | ||||||||
Net earnings including noncontrolling interests | 22,504 | 19,167 | 78,727 | 69,584 | ||||||||
Net loss attributable to noncontrolling interests | (147 | ) | (69 | ) | (399 | ) | (214 | ) | ||||
Net earnings attributable to Buffalo Wild Wings | $ | 22,651 | 19,236 | 79,126 | 69,798 | |||||||
Earnings per common share – basic | $ | 1.24 | 1.01 | 4.25 | 3.67 | |||||||
Earnings per common share – diluted | $ | 1.23 | 1.00 | 4.24 | 3.65 | |||||||
Weighted average shares outstanding – basic | 18,296 | 19,022 | 18,609 | 19,006 | ||||||||
Weighted average shares outstanding – diluted | 18,353 | 19,167 | 18,650 | 19,118 | ||||||||
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 25, 2016 | September 27, 2015 | September 25, 2016 | September 27, 2015 | ||||||||
Revenue: | |||||||||||
Restaurant sales | 95.2 | % | 94.8 | % | 95.2 | % | 94.4 | % | |||
Franchise royalties and fees | 4.8 | 5.2 | 4.8 | 5.6 | |||||||
Total revenue | 100.0 | 100.0 | 100.0 | 100.0 | |||||||
Costs and expenses: | |||||||||||
Restaurant operating costs: | |||||||||||
Cost of sales | 28.9 | 29.4 | 29.4 | 29.7 | |||||||
Labor | 32.0 | 32.2 | 31.6 | 31.9 | |||||||
Operating | 15.6 | 14.7 | 14.9 | 14.3 | |||||||
Occupancy | 5.8 | 5.6 | 5.7 | 5.5 | |||||||
Depreciation and amortization | 7.8 | 7.4 | 7.6 | 6.9 | |||||||
General and administrative | 6.5 | 7.4 | 6.3 | 7.4 | |||||||
Preopening | 0.3 | 1.0 | 0.3 | 0.7 | |||||||
Loss on asset disposals | 0.3 | 0.3 | 0.3 | 0.3 | |||||||
Total costs and expenses | 93.4 | 93.7 | 92.3 | 92.1 | |||||||
Income from operations | 6.6 | 6.3 | 7.7 | 7.9 | |||||||
Interest and other expense | 0.1 | 0.3 | 0.2 | 0.1 | |||||||
Earnings before income taxes | 6.5 | 6.0 | 7.5 | 7.8 | |||||||
Income tax expense | 2.0 | 1.8 | 2.3 | 2.5 | |||||||
Net earnings including noncontrolling interests | 4.6 | 4.2 | 5.3 | 5.3 | |||||||
Net earnings attributable to noncontrolling interests | (0.0 | ) | (0.0 | ) | (0.0 | ) | (0.0 | ) | |||
Net earnings attributable to Buffalo Wild Wings | 4.6 | % | 4.2 | % | 5.3 | % | 5.3 | % | |||
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
September 25, 2016 | December 27, 2015 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 14,758 | 11,220 | |||
Marketable securities | — | 9,043 | ||||
Accounts receivable, net of allowance of $251 and $25, respectively | 42,707 | 34,087 | ||||
Inventory | 13,437 | 15,351 | ||||
Prepaid expenses | 7,674 | 6,386 | ||||
Refundable income taxes | 543 | 21,591 | ||||
Restricted assets | 22,240 | 100,073 | ||||
Total current assets | 101,359 | 197,751 | ||||
Property and equipment, net | 605,188 | 604,712 | ||||
Reacquired franchise rights, net | 122,100 | 129,282 | ||||
Other assets | 38,590 | 26,536 | ||||
Goodwill | 117,228 | 114,101 | ||||
Total assets | $ | 984,465 | 1,072,382 | |||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Unearned franchise fees | $ | 2,621 | 2,144 | |||
Accounts payable | 42,963 | 44,760 | ||||
Accrued compensation and benefits | 35,360 | 55,578 | ||||
Accrued expenses | 25,831 | 21,678 | ||||
Current portion of long-term debt and capital lease obligations | 7,302 | 2,147 | ||||
Current portion of deferred lease credits | 511 | 59 | ||||
System-wide payables | 59,813 | 137,257 | ||||
Total current liabilities | 174,401 | 263,623 | ||||
Long-term liabilities: | ||||||
Other liabilities | 15,796 | 16,473 | ||||
Deferred income taxes | 24,689 | 23,726 | ||||
Long-term debt and capital lease obligations, net of current portion | 93,380 | 70,954 | ||||
Deferred lease credits, net of current portion | 44,310 | 41,869 | ||||
Total liabilities | 352,576 | 416,645 | ||||
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 18,278,601 and 18,917,776 shares, respectively | 156,872 | 160,353 | ||||
Retained earnings | 478,805 | 499,085 | ||||
Accumulated other comprehensive loss | (3,782 | ) | (4,094 | ) | ||
Total stockholders’ equity | 631,895 | 655,344 | ||||
Noncontrolling interests | (6 | ) | 393 | |||
Total equity | 631,889 | 655,737 | ||||
Total liabilities and equity | $ | 984,465 | 1,072,382 | |||
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
Nine months ended | ||||||
September 25, 2016 | September 27, 2015 | |||||
Cash flows from operating activities: | ||||||
Net earnings including noncontrolling interests | $ | 78,727 | 69,584 | |||
Adjustments to reconcile net earnings to net cash provided by operations: | ||||||
Depreciation and amortization | 113,847 | 90,887 | ||||
Loss on asset disposals | 4,489 | 4,180 | ||||
Deferred lease credits | 4,095 | 4,260 | ||||
Deferred income taxes | 962 | (13,561 | ) | |||
Stock-based compensation | 2,453 | 11,689 | ||||
Excess tax benefit from stock issuance | 57 | (1,088 | ) | |||
Change in fair value of contingent consideration | (1,591 | ) | — | |||
Loss on investments in affiliates | 1,904 | — | ||||
Change in operating assets and liabilities, net of effect of acquisitions: | ||||||
Trading securities | — | (173 | ) | |||
Accounts receivable | (5,025 | ) | (4,982 | ) | ||
Inventory | 1,954 | (421 | ) | |||
Prepaid expenses | (1,273 | ) | (868 | ) | ||
Other assets | (4,450 | ) | 74 | |||
Unearned franchise fees | 477 | 104 | ||||
Accounts payable | 6,465 | 6,901 | ||||
Income taxes | 20,991 | 545 | ||||
Accrued expenses | (10,145 | ) | (248 | ) | ||
Net cash provided by operating activities | 213,937 | 166,883 | ||||
Cash flows from investing activities: | ||||||
Acquisition of property and equipment | (117,850 | ) | (124,233 | ) | ||
Acquisition of businesses | (3,862 | ) | (209,713 | ) | ||
Purchase of marketable securities | (488 | ) | (12,301 | ) | ||
Proceeds from marketable securities | 1,205 | 23,300 | ||||
Net cash used in investing activities | (120,995 | ) | (322,947 | ) | ||
Cash flows from financing activities: | ||||||
Proceeds from credit facility | 464,521 | 197,422 | ||||
Repayments of credit facility | (440,448 | ) | (150,467 | ) | ||
Borrowings from restricted funds | 1,478 | 31,634 | ||||
Repurchases of common stock | (105,852 | ) | — | |||
Other financing activities | (1,557 | ) | (580 | ) | ||
Issuance of common stock | 2,199 | 2,903 | ||||
Excess tax benefit from stock issuance | (57 | ) | 1,088 | |||
Tax payments for restricted stock units | (9,317 | ) | (7,847 | ) | ||
Net cash provided by (used in) financing activities | (89,033 | ) | 74,153 | |||
Effect of exchange rate changes on cash and cash equivalents | (371 | ) | 61 | |||
Net increase (decrease) in cash and cash equivalents | 3,538 | (81,850 | ) | |||
Cash and cash equivalents at beginning of period | 11,220 | 93,329 | ||||
Cash and cash equivalents at end of period | $ | 14,758 | 11,479 | |||
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 | |
2016 | 603 | 609 | 617 | |
2015 | 501 | 517 | 573 | 596 |
2014 | 443 | 449 | 463 | 491 |
2013 | 397 | 407 | 415 | 434 |
2012 | 327 | 330 | 343 | 381 |
Franchised Restaurants (includes Buffalo Wild Wings and R Taco locations):
Q1 | Q2 | Q3 | Q4 | |
2016 | 587 | 596 | 602 | |
2015 | 593 | 593 | 569 | 579 |
2014 | 569 | 579 | 588 | 591 |
2013 | 514 | 525 | 534 | 559 |
2012 | 505 | 505 | 511 | 510 |
Restaurant Count Rollforward:
Nine Months Ended | |||||||||||
September 25, 2016 | September 27, 2015 | ||||||||||
Corporate | Franchise | Total | Corporate | Franchise | Total | ||||||
Buffalo Wild Wings | |||||||||||
Beginning of period | 590 | 573 | 1,163 | 487 | 584 | 1,071 | |||||
Opened | 19 | 25 | 44 | 29 | 37 | 66 | |||||
Acquired | 1 | (1) | — | 54 | (54) | — | |||||
Closed/Relocated | (2) | (2) | (4) | (2) | (4) | (6) | |||||
End of period | 608 | 595 | 1,203 | 568 | 563 | 1,131 | |||||
R Taco | |||||||||||
Beginning of period | 4 | 6 | 10 | 2 | 7 | 9 | |||||
Opened | 3 | 1 | 4 | — | — | — | |||||
Acquired | — | — | — | 1 | (1) | — | |||||
Closed/Relocated | — | — | — | — | — | — | |||||
End of period | 7 | 7 | 14 | 3 | 6 | 9 | |||||
PizzaRev | |||||||||||
Beginning of period | 2 | n/a | 2 | 2 | n/a | 2 | |||||
Opened | — | n/a | — | — | n/a | — | |||||
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 | 617 | 602 | 1,219 | 573 | 569 | 1,142 | |||||
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 | |
2016 | (1.7%) | (2.1%) | (1.8%) | ||
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% |
2012 | 9.2% | 5.3% | 6.2% | 5.8% | 6.6% |
Franchised Restaurants:
Q1 | Q2 | Q3 | Q4 | Year | |
2016 | (2.4%) | (2.6%) | (1.6%) | ||
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% |
2012 | 7.3% | 5.5% | 5.8% | 7.4% | 6.5% |
Average Weekly Sales Volumes at Buffalo Wild Wings locations in United States and Canada
Company-owned Restaurants:
Q1 | Q2 | Q3 | Q4 | Year | ||
2016 | $ | 62,829 | 59,894 | 59,690 | ||
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 | |
2012 | 55,131 | 51,524 | 52,561 | 55,595 | 53,783 | |
Franchised Restaurants:
Q1 | Q2 | Q3 | Q4 | Year | ||
2016 | $ | 65,636 | 62,454 | 61,497 | ||
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 | |
2012 | 57,282 | 54,766 | 55,608 | 58,490 | 56,570 | |
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 25, 2016 | September 27, 2015 | September 25, 2016 | September 27, 2015 | |||||||||
Restaurant sales | $ | 470,648 | 431,763 | 1,421,142 | 1,248,595 | |||||||
Restaurant operating costs | 387,829 | 353,328 | 1,160,424 | 1,016,253 | ||||||||
Restaurant-level profit | $ | 82,819 | 78,435 | 260,718 | 232,342 | |||||||
Restaurant-level margin | 17.6 | % | 18.2 | % | 18.3 | % | 18.6 | % | ||||