Buffalo Wild Wings, Inc. (Nasdaq:BWLD), announced today financial results for the second quarter ended June 25, 2006. Highlights for the second quarter versus the same period a year ago were:
-- Total revenue increased 29.1% to $62.3 million
-- Company-owned restaurant sales grew 29.3% to $55.0 million
-- Same-store sales increased 8.2% at company-owned restaurants and 4.7% at franchised restaurants
-- Earnings per diluted share increased 27% to $0.28 from $0.22
Sally Smith, President and Chief Executive Officer, commented, "We're pleased, once again, to report strong sales and earnings growth. Our second quarter sales, which built on our previous quarter's advertising and new menu and product introductions, were augmented by a focus on hospitality and strong new restaurant openings. This top-line growth was key to the 27% increase in earnings per diluted share to $0.28, the top end of the range for our second quarter guidance."
Total revenue, which includes company-owned restaurant sales and franchise royalties and fees, increased 29.1% to $62.3 million in the second quarter compared to $48.2 million in the second quarter of 2005. Company-owned restaurant sales for the quarter grew 29.3% to $55.0 million driven by a company-owned same-store sales increase of 8.2% and 19 more company-owned locations in operation at the end of the second quarter 2006 relative to the same period in 2005. Franchise royalties and fees increased 27.8% to $7.2 million versus $5.7 million in the prior year, due to a franchised same-store sales increase of 4.7% and 46 more franchised restaurants at the end of the period versus a year ago.
Average weekly sales for company-owned restaurants were $33,660 for the second quarter of 2006 compared to $30,531 for the same quarter last year, a 10.2% increase. Franchised restaurants averaged $42,338 for the period versus $39,824 in the second quarter a year ago, a 6.3% increase.
For the second quarter, earnings per diluted share were $0.28, versus earnings per diluted share of $0.22 in the second quarter of 2005.
Third Quarter 2006 Outlook
For the third quarter ending September 24, 2006, we anticipate total revenue of approximately $65 to $66 million, based on estimated same-store sales increases of 5% to 7% for company-owned restaurants and 3% to 5% for franchised locations, as well as the addition of five new company-owned and eight new franchised restaurants. Earnings per diluted share for the third quarter are expected to range from $0.28 to $0.31. This guidance is based on the previously mentioned revenue assumptions, average chicken wing prices for the third quarter of $1.17 per pound, and stock-based compensation expense of $670,000. Diluted weighted average shares outstanding are estimated at 8.8 million.
Ms. Smith concluded, "There is excitement throughout the system with our sales momentum, the return of football season and the unveiling of two TV commercials with our new tagline, You Have to Be Here(TM), showcasing the unique Buffalo Wild Wings guest experience. These commercials will begin airing in September in our second national media campaign on ESPN. In addition, we are launching radio advertising highlighting our new hickory-smoked ribs, which will air on both local radio and national ESPN radio. Our sales growth, paired with a focus on operating efficiencies, should translate into a strong second half for 2006."
Included in this release is information regarding restaurant unit counts, same-store sales, and average weekly sales volumes. Our management team believes such information is an important measure of our performance and is useful in assessing consumer acceptance of the Buffalo Wild Wings Grill & Bar concept. Franchise information also provides an understanding of our revenues as franchise royalties and fees are based on the opening of franchised units and their sales. However, these sales measures are not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be comparable to sales measures as defined or used by other companies.
Buffalo Wild Wings will be hosting a conference call today, July 25, 2006 at 4:00 p.m. Central Daylight Time to discuss these results. There will be a simultaneous webcast conducted at our website http://www.buffalowildwings.com.
A replay of the call will be available until August 1, 2006. To access this replay, please dial (973) 341-3080, password 7639498.
About the Company
Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, Minnesota, is an established and growing owner, operator and franchisor of Buffalo Wild Wings Grill & Bar restaurants featuring a variety of boldly flavored, made-to-order menu items including Buffalo, New York-style chicken wings spun in one of our signature sauces. The widespread appeal of Buffalo Wild Wings establishes it as an inviting, neighborhood destination with over 400 restaurants in 36 states.
Forward-looking Statements
Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance and expected store openings for the third quarter 2006, are forward-looking statements that involve risks and uncertainties. Such 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 during the third quarter, the sales at these and our other company-owned and franchised locations, our ability to successfully operate in new markets, the cost of wings, the success of our marketing initiatives, our ability to control other restaurant operating costs 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 amounts in thousands except share and per share data)
(unaudited)
Three months ended Six months ended
--------------------- ---------------------
June 26, June 25, June 26, June 25,
2005 2006 2005 2006
---------- ---------- ---------- ----------
Revenue:
Restaurant sales $42,570 55,036 87,643 112,128
Franchise royalties
and fees 5,653 7,224 11,373 14,393
---------- ---------- ---------- ----------
Total revenue 48,223 62,260 99,016 126,521
---------- ---------- ---------- ----------
Costs and expenses:
Restaurant operating
costs:
Cost of sales 13,291 17,028 28,522 35,033
Labor 12,976 16,562 26,193 33,157
Operating 6,666 9,236 13,523 18,679
Occupancy 3,395 4,269 6,551 8,358
Depreciation 2,832 3,433 5,507 6,763
General and
administrative (1) 5,634 7,441 11,260 14,519
Preopening 600 1,034 913 1,521
Loss on equipment
disposal 4 44 22 254
---------- ---------- ---------- ----------
Total costs
and expenses 45,398 59,047 92,491 118,284
---------- ---------- ---------- ----------
Income from operations 2,825 3,213 6,525 8,237
Interest income 337 500 609 970
---------- ---------- ---------- ----------
Earnings before income
taxes 3,162 3,713 7,134 9,207
Income tax expense 1,226 1,281 2,747 3,259
---------- ---------- ---------- ----------
Net earnings $1,936 2,432 4,387 5,948
========== ========== ========== ==========
Earnings per common share
- basic $0.23 0.28 0.52 0.70
Earnings per common share
- diluted 0.22 0.28 0.51 0.68
Weighted average shares
outstanding - basic 8,448,459 8,555,589 8,407,764 8,543,691
Weighted average shares
outstanding - diluted 8,674,507 8,754,895 8,671,148 8,746,233
(1) Contains stock-based compensation of $330, $683, $854, and
$1,539
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 Six months ended
--------------------- ---------------------
June 26, June 25, June 26, June 25,
2005 2006 2005 2006
---------- ---------- ---------- ----------
Revenue:
Restaurant sales 88.3% 88.4% 88.5% 88.6%
Franchising royalties
and fees 11.7 11.6 11.5 11.4
---------- ---------- ---------- ----------
Total revenue 100.0 100.0 100.0 100.0
---------- ---------- ---------- ----------
Costs and expenses:
Restaurant operating
costs:
Cost of sales 31.2 30.9 32.5 31.2
Labor 30.5 30.1 29.9 29.6
Operating 15.7 16.8 15.4 16.7
Occupancy 8.0 7.8 7.5 7.5
Depreciation 5.9 5.5 5.6 5.3
General and
administrative 11.7 12.0 11.4 11.5
Preopening 1.2 1.7 0.9 1.2
Loss on equipment
disposal 0.0 0.1 0.0 0.2
---------- ---------- ---------- ----------
Total costs
and expenses 94.1 94.8 93.4 93.5
---------- ---------- ---------- ----------
Income from operations 5.9 5.2 6.6 6.5
Interest income 0.7 0.8 0.6 0.8
---------- ---------- ---------- ----------
Earnings before income
taxes 6.6 6.0 7.2 7.3
Income tax expense 2.5 2.1 2.8 2.6
---------- ---------- ---------- ----------
Net earnings 4.0 3.9 4.4 4.7
========== ========== ========== ==========
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
December 25, June 25,
2005 2006
------------ -------------
Assets
Current assets:
Cash and cash equivalents $3,986 6,523
Marketable securities 48,418 49,170
Accounts receivable--franchisees, net
of allowance of $25 731 765
Accounts receivable--other 3,700 4,184
Inventory 1,502 1,544
Income taxes receivable -- 97
Prepaid expenses 1,972 587
Deferred income taxes 770 1,472
------------ -------------
Total current assets 61,079 64,342
Property and equipment, net 68,693 74,057
Restricted cash 2,115 5,235
Other assets 867 903
Goodwill 369 369
------------ -------------
Total assets $133,123 144,906
============ =============
Liabilities and Stockholders' Equity
Current liabilities:
Unearned franchise fees $2,194 2,152
Accounts payable 6,628 8,620
Accrued income tax payable 102 --
Accrued compensation and benefits 6,775 6,737
Accrued expenses 3,900 3,566
Current portion of deferred lease
credits 604 687
------------ -------------
Total current liabilities 20,203 21,762
Long-term liabilities:
Marketing fund payables 2,115 5,235
Deferred income taxes 4,755 3,715
Deferred lease credits, net of current
portion 9,202 9,297
------------ -------------
Total liabilities 36,275 40,009
------------ -------------
Commitments and contingencies
Stockholders' equity:
Undesignated stock, 5,600,000 shares
authorized -- --
Common stock, no par value. Authorized
15,600,000 shares; issued and
outstanding 8,616,222 and 8,740,572,
respectively 74,503 74,036
Deferred compensation (2,568) --
Retained earnings 24,913 30,861
------------ -------------
Total stockholders' equity 96,848 104,897
------------ -------------
Total liabilities and
stockholders' equity $133,123 144,906
============ =============
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
Six months ended
-----------------
June 26, June 25,
2005 2006
Cash flows from operating activities:
Net earnings $4,387 5,948
Adjustments to reconcile net earnings to cash
provided by operations:
Depreciation 5,507 6,763
Amortization (20) (101)
Loss on equipment disposal 22 254
Deferred lease credits 643 220
Deferred income taxes (892) (1,742)
Stock-based compensation 854 1,539
Excess tax benefit from the exercise of
stock options -- (181)
Change in operating assets and liabilities:
Accounts receivable (752) (560)
Inventory 85 (42)
Prepaid expenses 712 1,385
Other assets (18) (36)
Unearned franchise fees (295) (42)
Accounts payable (360) 1,992
Income taxes 982 (18)
Accrued expenses (972) 206
-------- --------
Net cash provided by operating
activities 9,883 15,585
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (8,322) (12,381)
Purchase of marketable securities (47,079) (54,759)
Proceeds of marketable securities 37,071 54,108
-------- --------
Net cash used in investing
activities (18,330) (13,032)
-------- --------
Cash flows from financing activities:
Issuance of common stock 717 490
Tax payments for restricted stock (326) (687)
Excess tax benefit from the exercise of stock
options -- 181
-------- --------
Net cash provided by (used in)
financing activities 391 (16)
-------- --------
Net increase (decrease) in cash
and cash equivalents (8,056) 2,537
Cash and cash equivalents at beginning of period 12,557 3,986
-------- --------
Cash and cash equivalents at end of period $4,501 6,523
======== ========
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Restaurant Count
Company-owned Restaurants:
Q1 Q2 Q3 Q4
-- -- -- --
2006 124 129
2005 106 110 116 122
2004 88 92 97 103
2003 73 74 77 84
2002 56 60 63 70
Franchised Restaurants:
Q1 Q2 Q3 Q4
-- -- -- --
2006 260 270
2005 212 224 234 248
2004 168 175 189 203
2003 131 138 142 161
2002 108 119 123 129
Quarterly Same-Store Sales
Company-owned Restaurants:
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
2006 7.7% 8.2%
2005 6.1% 2.7% 1.8% 2.5% 3.2%
2004 11.1% 10.6% 9.9% 7.6% 9.7%
2003 (1.4%) 2.7% 6.7% 8.5% 4.3%
2002 5.6% 4.6% (0.7%) (1.8%) 1.6%
Franchised Restaurants:
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
2006 6.7% 4.7%
2005 3.2% 1.8% 1.1% 2.6% 2.2%
2004 12.0% 10.4% 5.7% 3.7% 7.6%
2003 (0.4%) 2.3% 8.5% 10.7% 5.6%
2002 4.2% 4.5% 0.0% (1.8%) 1.5%
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Supplemental Information
Average Weekly Sales Volumes
Company-owned Restaurants:
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
2006 $35,857 $33,660
2005 33,195 30,531 $31,361 $33,953 $32,304
2004 32,289 30,248 30,983 33,038 31,663
2003 28,782 27,132 28,281 31,171 28,886
2002 29,564 26,330 25,916 28,466 27,547
Franchised Restaurants:
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
2006 $44,342 $42,338
2005 41,309 39,824 $40,149 $42,533 $40,999
2004 39,678 38,072 38,727 40,926 39,402
2003 33,920 33,393 35,289 39,014 35,491
2002 32,956 31,623 31,619 34,023 32,574
Average Quarterly Wing Prices Per Pound
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
2006 $1.24 $1.10
2005 1.45 1.14 $1.08 $1.17 $1.20
2004 1.49 1.46 1.35 1.30 1.39
2003 1.01 1.02 1.00 1.21 1.06
2002 1.11 .87 .84 .78 .89