BWLD
$104.25
Buffalo Wild Wings
($.80)
(.76%)
Earnings Details
2nd Quarter June 2017
Wednesday, July 26, 2017 4:05:17 PM
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Summary

Buffalo Wild Wings Misses

Buffalo Wild Wings (BWLD) reported 2nd Quarter June 2017 earnings of $0.66 per share on revenue of $500.0 million. The consensus earnings estimate was $1.01 per share on revenue of $515.9 million. The Earnings Whisper number was $0.99 per share. Revenue grew 2.0% on a year-over-year basis.

The company said it expects 2017 earnings of $4.50 to $5.00 per share. The company's previous guidance was earnings of $5.45 to $5.90 per share and the current consensus earnings estimate is $5.25 per share for the year ending December 31, 2017.

Buffalo Wild Wings Inc and its subsidiaries operates restaurants as well as selling Buffalo Wild Wings and Rusty Taco restaurant franchises. The Company offers offers dining and bar areas that provide distinct seating choices for sports fans and families.

Results
Reported Earnings
$0.66
Earnings Whisper
$0.99
Consensus Estimate
$1.01
Reported Revenue
$500.0 Mil
Revenue Estimate
$515.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Buffalo Wild Wings, Inc. Announces Second Quarter Earnings per Share of $0.55 and Adjusted Earnings per Share of $0.66

Buffalo Wild Wings, Inc. (BWLD) announced today financial results for the second quarter ended June 25, 2017.

Key metrics for the second quarter, versus the same period a year ago, were:

-- Total revenue increased 2.0% to $500.0 million.

-- Company-owned restaurant sales increased 1.9% to $475.7 million.

-- Same-store sales decreased 1.2% at company-owned restaurants.

Net earnings decreased 62.9% to $8.8 million from $23.7 million, and earnings per diluted share decreased 57.0% to $0.55 from $1.27.

Adjusted net earnings decreased 57.6% to $10.6 million from $25.0 million, and adjusted earnings per diluted share decreased 50.7% to $0.66 from $1.34.

Sally Smith, President and Chief Executive Officer, commented, "During the second quarter, we continued to work on stabilizing the business in the challenging restaurant environment. Our profitability was pressured this quarter driven by historically high wing costs, a mix shift to our promotional days, lower than expected same-store sales, and higher operating expenses."

Ms. Smith concluded, "As traditional chicken wing costs remain at historically high levels, we’re adapting our value day on Tuesday to feature our boneless wings at company-owned restaurants. In addition, we continue to implement our cost savings plan to improve margins and profitability in areas we can control. Due to our disappointing second quarter earnings and an outlook for slowing traffic as we manage through the Tuesday promotional change, we are lowering our 2017 earnings outlook. We are optimistic about the transition to boneless wings which provides a more stable promotional platform for the future."

Revenue

Total revenue increased $9.8 million to $500.0 million in the second quarter, compared to $490.2 million in the second quarter of 2016. There was a $4.1 million revenue deferral for the Blazin’ Rewards loyalty program in the second quarter.

Company-owned restaurant sales for the second quarter increased 1.9% over the same period in 2016 to $475.7 million, driven by 26 additional company-owned restaurants.

Franchise royalties and fees increased 3.1% to $24.3 million for the quarter, versus $23.6 million in the second quarter of 2016, driven by 28 additional franchised restaurants.

Restaurant-level costs and expenses

Cost of sales for the second quarter was 32.1% of restaurant sales, compared to 29.7% in the quarter last year, driven by higher traditional chicken wing prices compounded by a change in sales mix from promotional activity compared to the second quarter of 2016. -- Traditional wings were $2.05 per pound in the second quarter, representing an $0.11 increase, or 5.7%, higher than last year’s second quarter average of $1.94. Traditional wings as a percent of cost of sales was 30.7% in the second quarter.

Cost of labor for the second quarter was 32.4% of restaurant sales, 40 basis points higher than second quarter last year, resulting from increased healthcare costs and management salaries, partially offset by lower hourly labor.

Restaurant operating expenses as a percentage of restaurant sales were 15.7%, an increase of 110 basis points from the second quarter of 2016, driven by an increase in general liability expenses, higher repair and maintenance expenses, and third-party delivery commissions.

Occupancy costs were 5.9% as a percentage of restaurant sales, 10 basis points higher compared to the same quarter last year.

Restaurant-level profit was $65.9 million, or 13.8%, of restaurant sales, compared to $83.3 million, or 17.9%, in the second quarter last year.

Other Expenses

Depreciation and amortization expense for the second quarter was $38.1 million, increasing 0.4%, due to new unit openings over the last 12 months.

General and administrative expenses were $39.2 million in the second quarter, increasing 31.3% from the same period last year, due to increased advisory fees and consulting services as well as stock-based compensation. -- Stock-based compensation was $3.4 million in the second quarter, compared to $0.7 million of expense in the prior year, which included a reversal of previously recognized expense.

Preopening expenses for the quarter totaled $0.9 million, versus $1.8 million in the second quarter last year, due to fewer openings.

Loss on asset disposal for the second quarter totaled $2.6 million, compared to last year of $1.9 million. The 2017 expense represented impairment of two restaurants totaling $1.7 million and the write-off of miscellaneous equipment. The expense in 2016 represented disposals due to remodels, and the write-off of miscellaneous equipment.

Interest expense was $3.3 million in the second quarter, compared to $0.8 million in the prior year period.

Other income was $5.9 million for the quarter, which is primarily from a gain on the sale of our minority investment in PizzaRev, compared to an expense of $1.0 million in 2016.

The effective tax rate during the quarter was 27.9%, compared to 29.9% in the prior year.

Earnings

Operating income was $9.4 million in the second quarter, or 1.9% of total revenue, compared to $35.5 million and 7.2% in the prior year. For the year to date period, operating income was $43.2 million, or 4.2% of total revenue, compared to $82.1 million and 8.2%.

Net earnings decreased 62.9% to $8.8 million in the second quarter, versus $23.7 million in the second quarter of 2016. For the year to date period, net earnings decreased 46.3% to $30.3 million, versus $56.5 million in 2016.

Earnings per diluted share were $0.55, compared to second quarter 2016 earnings per diluted share of $1.27. Earnings per diluted share decreased 39.3% to $1.83 for the year to date period, compared to $3.00 in the same period last year.

Adjusted earnings per diluted share were $0.66, compared to first quarter 2016 adjusted earnings per diluted share of $1.34. Adjusted earnings per diluted share for the year to date period decreased 31.7% to $2.13, compared to $3.12 in the same period last year.

Balance Sheet

-- Cash totaled $19.9 million at the end of the second quarter.

The credit facility had an outstanding balance of $390 million as of the end of the quarter.

Cash Flow

Cash flow from operations was $49.9 million for the quarter, a 31.0% decrease over the second quarter last year. For the year to date period, cash flow from operations was $98.8 million, a 33.9% decrease over 2016.

Free cash flow in the second quarter was $32.5 million, compared to $35.8 million in the prior year. Free cash flow in the year to date period was $64.2 million, compared to $78.8 million in the same period of the prior year.

659,598 shares were repurchased for a total of $100.0 million during the second quarter of 2017. For the year to date period, 2,022,488 shares were repurchased for a total of $312.2 million.

2017 Outlook

The company expects approximately the following new unit development in 2017:

15 company-owned Buffalo Wild Wings restaurants in the United States, with 2 in the third quarter

15 franchised Buffalo Wild Wings locations in the United States, with 6 in the third quarter

20 franchised Buffalo Wild Wing locations internationally, with 5 in the third quarter

-- 2 company-owned and 10 to 13 franchised R Taco restaurants

The company expects the following in 2017:

-- Same-store sales growth of approximately -1% to -2%

-- Traditional chicken wing inflation of 8% to 10%

-- Depreciation and amortization expense of $153 to $155 million

General and administrative expense of $138 to $142 million, including stock-based compensation of $8 to $9 million

-- Interest expense of approximately $13 million

-- Earnings per diluted share of $4.00 to $4.50

-- Adjusted earnings per diluted share of $4.50 to $5.00

-- Capital expenditures of approximately $100 million

Buffalo Wild Wings will be hosting a conference call today, July 26, 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 August 2, 2017. To access this replay, please dial 1-412-317-6671 password 5733019.

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(R) 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(TM) to Blazin’(R). 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 third 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, 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
Six months ended
June 25,
June 26,
June 25,
June 26,
2017
2016
2017
2016
Revenue:
Restaurant sales
$
475,665
466,583
984,870
950,494
Franchise royalties and fees
24,315
23,595
49,873
47,941
Total revenue
499,980
490,178
1,034,743
998,435
Costs and expenses:
Restaurant operating costs:
Cost of sales
152,714
138,480
312,715
282,303
Labor
154,324
149,375
315,358
298,504
Operating
74,628
68,180
152,168
137,860
Occupancy
28,126
27,205
56,589
53,928
Depreciation and amortization
38,103
37,953
76,980
75,502
General and administrative
39,155
29,821
71,907
61,486
Preopening
917
1,838
1,504
3,701
Loss on asset disposals and impairment
2,628
1,874
4,356
3,096
Total costs and expenses
490,595
454,726
991,577
916,380
Income from operations
9,385
35,452
43,166
82,055
Interest expense
3,334
846
5,692
1,686
Other expense (income)
(5,940 )
1,028
(4,780 )
161
Earnings before income taxes
11,991
33,578
42,254
80,208
Income tax expense
3,342
10,033
12,218
23,985
Net earnings including noncontrolling interests
8,649
23,545
30,036
56,223
Net loss attributable to noncontrolling interests
(133 )
(157 )
(295 )
(252 )
Net earnings attributable to Buffalo Wild Wings
$
8,782
23,702
30,331
56,475
Earnings per common share - basic
$
0.55
1.27
1.83
3.01
Earnings per common share - diluted
$
0.55
1.27
1.83
3.00
Weighted average shares outstanding - basic
15,983
18,605
16,573
18,764
Weighted average shares outstanding - diluted
16,048
18,636
16,619
18,797

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 25,
June 26,
June 25,
June 26,
2017
2016
2017
2016
Revenue:
Restaurant sales
95.1 %
95.2 %
95.2 %
95.2 %
Franchise royalties and fees
4.9
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
32.1
29.7
31.8
29.7
Labor
32.4
32.0
32.0
31.4
Operating
15.7
14.6
15.5
14.5
Occupancy
5.9
5.8
5.7
5.7
Depreciation and amortization
7.6
7.7
7.4
7.6
General and administrative
7.8
6.1
6.9
6.2
Preopening
0.2
0.4
0.1
0.4
Loss on asset disposals and impairment
0.5
0.4
0.4
0.3
Total costs and expenses
98.1
92.8
95.8
91.8
Income from operations
1.9
7.2
4.2
8.2
Interest expense
0.7
0.2
0.6
0.2
Other expense (income)
(1.2 )
0.2
(0.5 )
0.0
Earnings before income taxes
2.4
6.9
4.1
8.0
Income tax expense
0.7
2.0
1.2
2.4
Net earnings including noncontrolling interests
1.7
4.8
2.9
5.6
Net loss attributable to noncontrolling interests
(0.0 )
(0.0 )
(0.0 )
(0.0 )
Net earnings attributable to Buffalo Wild Wings
1.8 %
4.8 %
2.9 %
5.7 %
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
June 25,
December 25,
2017
2016
Assets
Current assets:
Cash
$
19,941
49,266
Accounts receivable, net of allowance of $251
37,927
34,225
Inventory
15,080
16,532
Prepaid expenses
7,503
9,075
Refundable income taxes
4,483
1,018
Restricted assets
24,532
66,471
Total current assets
109,466
176,587
Property and equipment, net
551,317
592,806
Reacquired franchise rights, net
112,348
118,973
Other assets
39,889
41,625
Goodwill
117,228
117,228
Total assets
$
930,248
1,047,219
Liabilities and Stockholders’ Equity
Current liabilities:
Deferred revenue
$
8,316
3,089
Accounts payable
37,887
45,797
Accrued compensation and benefits
43,944
47,304
Accrued expenses
33,367
32,347
Current portion of long-term debt and capital lease obligations
3,599
3,745
Current portion of deferred lease credits
4,685
873
System-wide payables
58,588
108,814
Total current liabilities
190,386
241,969
Long-term liabilities:
Other liabilities
16,529
16,109
Deferred income taxes
15,166
21,588
Long-term debt and capital lease obligations, net of current portion
426,074
205,312
Deferred lease credits, net of current portion
40,866
44,341
Total liabilities
689,021
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
139,334
147,234
outstanding 15,491,688 and 17,462,465 shares, respectively
Retained earnings
106,135
374,683
Accumulated other comprehensive loss
(3,808 )
(3,878 )
Total stockholders’ equity
241,661
518,039
Noncontrolling interests
(434 )
(139 )
Total equity
241,227
517,900
Total liabilities and equity
$
930,248
1,047,219
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
Six months ended
June 25,
June 26,
2017
2016
Cash flows from operating activities:
Net earnings including noncontrolling interests
$
30,036
56,223
Adjustments to reconcile net earnings to net cash provided by
operations:
Depreciation and amortization
76,980
75,502
Loss on asset disposals and impairment
4,356
3,096
Deferred lease credits
1,548
3,380
Deferred income taxes
(6,489 )
2,397
Stock-based compensation
4,021
2,108
Excess tax benefit from stock issuance
--
(35 )
Change in fair value of contingent consideration
359
(1,106 )
Gain on sale of investment in affiliate
(5,692 )
--
Loss on investments in affiliate
1,488
1,247
Change in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable
(6,007 )
802
Inventory
1,458
1,418
Prepaid expenses
1,573
567
Other assets
(4,334 )
(2,462 )
Deferred revenue
5,227
118
Accounts payable
(2,004 )
(3,520 )
Income taxes
(3,465 )
16,607
Accrued expenses
(294 )
(6,943 )
Net cash provided by operating activities
98,761
149,399
Cash flows from investing activities:
Acquisition of property and equipment
(34,553 )
(70,630 )
Acquisition of businesses
--
(3,862 )
Proceeds from sale of investment in affiliate
8,126
--
Net cash used in investing activities
(26,427 )
(74,492 )
Cash flows from financing activities:
Proceeds from revolving credit facility
330,000
286,873
Repayments of revolving credit facility
(110,000 )
(263,343 )
Borrowings from (payments to) restricted funds
(6,533 )
12,288
Repurchases of common stock
(312,249 )
(99,981 )
Other financing activities
(1,715 )
(1,065 )
Issuance of common stock
2,570
1,960
Excess tax benefit from stock issuance
--
35
Tax payments for restricted stock units
(3,796 )
(9,172 )
Net cash used in financing activities
(101,723 )
(72,405 )
Effect of exchange rate changes on cash
64
(87 )
Net increase (decrease) in cash
(29,325 )
2,415
Cash at beginning of period
49,266
11,220
Cash at end of period
$
19,941
13,635
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
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
2016
587
596
602
609
2015
593
593
569
579
2014
569
579
588
591
2013
514
525
534
559
Restaurant Count Rollforward:
Six Months Ended
June 25, 2017
June 26, 2016
Corporate
Franchise
Total
Corporate
Franchise
Total
Buffalo Wild Wings
Beginning of period
621
602
1,223
590
573
1,163
Opened
6
12
18
11
18
29
Acquired
--
--
--
1
(1)
--
Closed/Relocated
(1)
(3)
(4)
(1)
(1)
(2)
End of period
626
611
1,237
601
589
1,190
R Taco
Beginning of period
8
7
15
4
6
10
Opened
1
6
7
2
1
3
Acquired
--
--
--
--
--
--
Closed/Relocated
--
--
--
--
--
--
End of period
9
13
22
6
7
13
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
635
624
1,259
609
596
1,205
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 %)
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 %)
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
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
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
Six months ended
June 25, 2017
June 26, 2016
June 25, 2017
June 26, 2016
Restaurant sales
$
475,665
466,583
984,870
950,494
Restaurant operating costs
409,792
383,240
836,830
772,595
Restaurant-level profit
65,873
83,343
148,040
177,899
Restaurant-level margin
13.8 %
17.9 %
15.0 %
18.7 %

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
Six months ended
June 25, 2017
June 26, 2016
June 25, 2017
June 26, 2016
Net earnings including noncontrolling interests
$
8,649
23,545
30,036
56,223
Income tax expense
3,342
10,033
12,218
23,985
Interest expense
3,334
846
5,692
1,686
Depreciation and amortization
38,103
37,953
76,980
75,502
EBITDA
$
53,428
72,377
124,926
157,396

Adjusted Net Earnings and Adjusted Earnings per Diluted Share

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.

Three months ended
Six months ended
June 25,
June 26,
June 25,
June 26,
2017
2016
2017
2016
Earnings before income taxes (a)
$
11,991
33,578
42,254
80,208
Loss on asset disposals and impairment (b)
2,566
1,858
4,261
3,063
Proxy costs for contested election (c)
3,991
--
5,901
--
Advisory and consulting fees, and restructuring costs (d)
1,582
--
2,502
--
Gain on sale of investment in affiliate (e)
(5,692 )
--
(5,692 )
--
Acquisition costs (f)
--
--
--
145
Divestiture costs (g)
80
--
80
--
Adjusted earnings before income taxes
14,518
35,436
49,306
83,416
Estimated income tax expense (h)
4,046
10,588
14,257
24,944
Adjusted earnings including noncontrolling interests
10,472
24,848
35,049
58,472
Net earnings (loss) attributable to noncontrolling interests (a)
(133 )
(157 )
(295 )
(252 )
Adjusted net earnings attributable to Buffalo Wild Wings
$
10,605
25,005
35,344
58,724
Weighted average shares outstanding - diluted (a)
16,048
18,636
16,619
18,797
Adjusted earnings per diluted share
$
0.66
1.34
2.13
3.12
(a)
Equals the amount shown on our Consolidated Statements of Earnings.
(b)
Consists of loss on asset disposals and impairments, excluding
store closing reserve costs of $62 and $16, for the three-month
periods ended June 25, 2017 and June 26, 2016, respectively.
Consists of loss on asset disposals and impairments, excluding
store closing reserve costs of $95 and $33, for the six-month
periods ended June 25, 2017 and June 26, 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 June 25,
2017 and June 26, 2016 were 27.9% and 29.9%, respectively.
Our effective tax rates for the six-month periods ended June 25,
2017 and June 26, 2016 were 28.9% and 29.9%, respectively. The
calculated estimated income tax expense is based on these rates.

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.

Twelve months ending December 31, 2017
Low Projection
High Projection
Earnings per diluted share forecast (a)
$
4.00
4.50
Loss on asset disposals and impairment (b)
0.38
0.38
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)
$
4.50
5.00
(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 16,070 for fiscal year 2017.

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.

Six months ended
June 25, 2017
June 26, 2016
Net cash provided by operating activities
$
98,761
149,399
Acquisition of property and equipment
(34,553 )
(70,630 )
Free cash flow
$
64,208
78,769

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SOURCE: Buffalo Wild Wings, Inc.

Buffalo Wild Wings, Inc.
Heather Pribyl, 952-540-2095