BWLD
$139.25
Buffalo Wild Wings
$1.00
.72%
Earnings Details
3rd Quarter September 2017
Wednesday, October 25, 2017 4:05:01 PM
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Summary

Buffalo Wild Wings Beats

Buffalo Wild Wings (BWLD) reported 3rd Quarter September 2017 earnings of $1.36 per share on revenue of $496.7 million. The consensus earnings estimate was $0.78 per share on revenue of $500.9 million. The Earnings Whisper number was $0.77 per share. Revenue grew 0.5% on a year-over-year basis.

The company said it expects 2017 earnings of $4.85 to $5.15 per share. The company's previous guidance was earnings of $4.50 to $5.00 per share and the current consensus earnings estimate is $4.40 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
$1.36
Earnings Whisper
$0.77
Consensus Estimate
$0.78
Reported Revenue
$496.7 Mil
Revenue Estimate
$500.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Buffalo Wild Wings, Inc. Announces Third Quarter Earnings per Share of $1.17 and Adjusted Earnings per Share of $1.36

Buffalo Wild Wings, Inc. (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(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 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
123,302
176,587
Total current assets
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
142,657
147,234
outstanding 15,512,253 and 17,462,465 shares, respectively
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.

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SOURCE: Buffalo Wild Wings, Inc.

Buffalo Wild Wings, Inc.
Investor Relations Contact:
Heather Davis, 952-540-2095