Buffalo Wild Wings, Inc. Announces Third Quarter 2009 Results

Buffalo Wild Wings, Inc. (NASDAQ: BWLD), announced today financial results for the third quarter ended September 27, 2009. Highlights for the third quarter versus the same period a year ago were:

• Total revenue increased 25.1% to $132.7 million
• Company-owned restaurant sales grew 26.0% to $120.3 million
• Same-store sales increased 0.8% at company-owned restaurants and 1.9% at franchised restaurants
• Net earnings increased 50.4% to $6.9 million from $4.6 million, and earnings per diluted share increased 52.0% to $0.38 from $0.25

Sally Smith, President and Chief Executive Officer, commented, “Buffalo Wild Wings continues to deliver category-leading operational and financial performance as demonstrated by our outstanding third quarter results. Our revenue growth of 25% produced impressive net earnings growth of 50% over last year, achieving earnings per diluted share of $0.38. Our results demonstrate the compelling You Have To Be Here ^® experience that we provide to our Guests. I credit our success to the entire Buffalo Wild Wings Team for their continued dedication to improvement which delivered these great results.”

Total revenue increased 25.1% to $132.7 million in the third quarter compared to $106.1 million in the third quarter of 2008. Company-owned restaurant sales for the quarter increased 26.0% over the same period in 2008, to $120.3 million driven by a company-owned same-store sales increase of 0.8% and 33 additional company-owned restaurants in operation at the end of third quarter 2009 relative to the same period in 2008. Franchise royalties and fees increased 17.7% to $12.5 million versus $10.6 million in the third quarter of 2008. This increase was the result of a franchised same-store sales increase of 1.9% and 52 additional franchised restaurants at the end of the period versus a year ago.

Average weekly sales for company-owned restaurants were $42,602 for the third quarter of 2009 compared to $42,400 for the same quarter last year, a 0.5% increase. Franchised restaurants averaged $48,458 for the period versus $46,889 in the third quarter a year ago, a 3.3% increase.

For the third quarter, net earnings increased 50.4% to $6.9 million versus $4.6 million in the third quarter of 2008. Earnings per diluted share were $0.38, as compared to third quarter 2008 earnings per diluted share of $0.25.

2009 and 2010 Outlook

Ms. Smith continued, “Football season is off to a great start and our same-store sales momentum to date in the fourth quarter should provide a strong finish to the year. We are confident we will achieve our 2009 growth goals of 15% unit growth, 25% revenue growth, and 20 to 25% net earnings growth, with net earnings likely to be at the higher end of our stated goal.”

Ms. Smith concluded, “With the strong foundation we have built, we have set goals for 2010 that will uphold Buffalo Wild Wings as a leader in the casual dining category. Based on our current development pipeline, we believe we can achieve 13% to 15% unit growth in 2010, which, along with strong restaurant-level performance and leveraging our infrastructure, should translate into net earnings growth of 20%.”

Buffalo Wild Wings will be hosting a conference call today, October 27, 2009 at 4:00 p.m. Central Daylight 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 November 3, 2009. To access this replay, please dial 1.303.590.3030, password 4169893.

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 633 Buffalo Wild Wings locations across 41 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 fourth quarter sales and projected unit, revenue and earnings growth rates for 2009, 2010, and beyond. 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, unforeseen obstacles in developing nontraditional sites, the cost of commodities, the success of our marketing and other initiatives, our ability to control restaurant labor and other restaurant operating costs, 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
(Amounts in thousands except per share data)
(unaudited)
		Three months ended					Nine months ended
		September 27, 2009			September 28, 2008		September 27, 2009		September 28, 2008
Revenue:
Restaurant sales		$	120,290		95,492		357,477		269,850
Franchise royalties and fees			12,451		10,582		36,441		31,354
Total revenue			132,741		106,074		393,918		301,204
Costs and expenses:
Restaurant operating costs:
Cost of sales			35,809		28,422		107,939		81,085
Labor			36,369		29,289		107,974		82,167
Operating			19,416		15,675		55,369		42,807
Occupancy			8,256		6,273		23,774		17,872
Depreciation and amortization			8,267		5,971		23,650		16,720
General and administrative (1)			12,943		10,684		36,136		29,072
Preopening			1,149		2,476		5,231		5,419
Loss on asset disposals and impairment			842		930		1,289		2,068
Total costs and expenses			123,051		99,720		361,362		277,210
Income from operations			9,690		6,354		32,556		23,994
Investment income			379		264		868		1,096
Earnings before income taxes			10,069		6,618		33,424		25,090
Income tax expense			3,197		2,050		11,091		8,382
Net earnings		$	6,872		4,568		22,333		16,708
Earnings per common share – basic		$	0.38		0.26		1.24		0.94
Earnings per common share – diluted			0.38		0.25		1.24		0.93
Weighted average shares outstanding – basic			18,024		17,823		18,001		17,800
Weighted average shares outstanding – diluted			18,098		17,920		18,068		17,903

⁽¹⁾ Includes stock-based compensation of $1,788, $1,297, and $4,278, and $3,221 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 27, 2009			September 28, 2008			September 27, 2009			September 28, 2008
Revenue:
Restaurant sales		90.6	%		90.0	%		90.7	%		89.6	%
Franchising royalties and fees		9.4			10.0			9.3			10.4
Total revenue		100.0			100.0			100.0			100.0
Costs and expenses:
Restaurant operating costs:
Cost of sales		29.8			29.8			30.2			30.0
Labor		30.2			30.7			30.2			30.4
Operating		16.1			16.4			15.5			15.9
Occupancy		6.9			6.6			6.7			6.6
Depreciation and amortization		6.2			5.6			6.0			5.6
General and administrative		9.8			10.1			9.2			9.7
Preopening		0.9			2.3			1.3			1.8
Loss on asset disposals and impairment		0.6			0.9			0.3			0.7
Total costs and expenses		92.7			94.0			91.7			92.0
Income from operations		7.3			6.0			8.3			8.0
Investment income		0.3			0.2			0.2			0.4
Earnings before income taxes		7.6			6.2			8.5			8.3
Income tax expense		2.4			1.9			2.8			2.8
Net earnings		5.2			4.3			5.7			5.5

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 27, 2009 and December 28, 2008
(Dollar amounts in thousands)
(unaudited)
		September 27, 2009			December 28, 2008
Assets
Current assets:
Cash and cash equivalents		$	12,083		$	8,347
Marketable securities			40,283			36,157
Accounts receivable – franchisees, net of allowance of $25			1,037			895
Accounts receivable – other			7,669			5,759
Inventory			3,227			3,104
Prepaid expenses			3,512			3,294
Refundable income taxes			1,510			1,611
Deferred income taxes			4,935			1,731
Total current assets			74,256			60,898
Property and equipment, net			181,186			154,432
Restricted cash			21,325			7,670
Other assets			9,439			9,846
Goodwill			11,246			10,972
Total assets		$	297,452			243,818
Liabilities and Stockholders’ Equity
Current liabilities:
Unearned franchise fees		$	2,769			2,514
Accounts payable			19,682			16,691
Accrued compensation and benefits			15,968			14,155
Accrued expenses			6,487			7,116
Current portion of deferred lease credits			76			56
Total current liabilities			44,982			40,532
Long-term liabilities:
Other liabilities			1,388			1,270
System-wide payables			21,325			7,670
Deferred income taxes			15,119			8,916
Deferred lease credits, net of current portion			15,595			13,837
Total liabilities			98,409			72,225
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 18,025,351 and 17,887,271 respectively			91,435			86,318
Retained earnings			107,608			85,275
Total stockholders’ equity			199,043			171,593
Total liabilities and stockholders’ equity		$	297,452			243,818

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
		Nine months ended
		September 27, 2009				September 28, 2008
Cash flows from operating activities:
Net earnings		$	22,333			16,708
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation			23,191			16,720
Amortization			459			80
Loss on asset disposals and impairment			1,289			2,068
Deferred lease credits			1,705			1,426
Deferred income taxes			2,999			3,929
Stock-based compensation			4,278			3,221
Excess tax benefit from the exercise of stock options			(418	)		(435	)
Change in operating assets and liabilities, net of effect of acquisition:
Trading securities			(1,731	)		(164	)
Accounts receivable			(1,979	)		(62	)
Inventory			(123	)		(327	)
Prepaid expenses			(218	)		438
Other assets			(52	)		(429	)
Unearned franchise fees			255			53
Accounts payable			2,792			2,519
Refundable income tax			519			1,016
Accrued expenses			2,662			1,511
Net cash provided by operating activities			57,961			47,272
Cash flows from investing activities:
Acquisition of property and equipment			(51,309	)		(48,378	)
Acquisition of franchised restaurants			—			(23,071	)
Purchase of marketable securities			(39,115	)		(98,984	)
Proceeds of marketable securities			36,720			125,156
Net cash used in investing activities			(53,704	)		(45,277	)
Cash flows from financing activities:
Issuance of common stock			574			569
Tax payments for restricted stock units			(1,513	)		(989	)
Excess tax benefit from the exercise of stock options			418			435
Net cash provided by (used in) financing activities			(521	)		15
Net increase in cash and cash equivalents			3,736			3,010
Cash and cash equivalents at beginning of period			8,347			1,521
Cash and cash equivalents at end of period		$	12,083			4,531

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Restaurant Count
Company-owned Restaurants:
		Q1			Q2			Q3			Q4
2009		206			215			220
2008		165			169			187			197
2007		140			145			148			161
2006		124			129			134			139
2005		106			110			116			122
Franchised Restaurants:
		Q1			Q2			Q3			Q4
2009		373			383			400
2008		340			346			348			363
2007		299			301			313			332
2006		260			270			278			290
2005		212			224			234			248
Same-Store Sales
Company-owned Restaurants:
		Q1			Q2			Q3			Q4			Year
2009		6.4	%		2.8	%		0.8	%
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	%
Franchised Restaurants:
		Q1			Q2			Q3			Q4			Year
2009		6.0	%		3.7	%		1.9	%
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	%
Average Weekly Sales Volumes
Company-owned Restaurants:
		Q1			Q2			Q3			Q4			Year
2009		$45,593			42,938			42,602
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
Franchised Restaurants:
		Q1			Q2			Q3			Q4			Year
2009		$50,729			48,619			48,458
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