Increasing 2017 Forecasted GAAP EPS to $4.30
to $4.60 and Adjusted EPS to $4.85 to $5.15
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171025006076/en/
Buffalo Wild Wings, Inc.Investor Relations Contact:Heather
Davis, 952-540-2095
Buffalo Wild Wings, Inc. (delisted) (NASDAQ:BWLD)
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