UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 23, 2012
Commission File No. 000-24743
BUFFALO WILD WINGS, INC.
(Exact name of registrant as specified in its charter)
|
Minnesota |
No. 31-1455915 |
|
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
5500 Wayzata Boulevard, Suite 1600, Minneapolis, MN 55416
(Address of Principal Executive Offices) (Zip Code)
(952) 593-9943
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The number of shares outstanding of the registrant's common stock as of October 26, 2012: 18,599,276 shares.
TABLE OF CONTENTS
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Page |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
3 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
11 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
18 |
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Item 4. |
Controls and Procedures |
18 |
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PART II – OTHER INFORMATION |
| |
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Item 1. |
Legal Proceedings |
20 |
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Item 6. |
Exhibits |
20 |
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Signatures |
21 | |
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Exhibit Index |
22 | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
|
September 23, |
December 25, |
|||||||
|
Assets |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | 31,322 | 20,530 | |||||
|
Marketable securities |
52,511 | 39,956 | ||||||
|
Accounts receivable – net of allowance of $25 |
17,785 | 12,165 | ||||||
|
Inventory |
6,511 | 6,311 | ||||||
|
Prepaid expenses |
3,128 | 3,707 | ||||||
|
Refundable income taxes |
2,355 | 7,561 | ||||||
|
Deferred income taxes |
7,249 | 6,323 | ||||||
|
Restricted assets |
36,266 | 42,692 | ||||||
|
Total current assets |
157,127 | 139,245 | ||||||
|
Property and equipment, net |
346,963 | 310,170 | ||||||
|
Other assets |
27,979 | 28,174 | ||||||
|
Goodwill |
17,777 | 17,770 | ||||||
|
Total assets |
$ | 549,846 | 495,359 | |||||
|
Liabilities and Stockholders' Equity |
||||||||
|
Current liabilities: |
||||||||
|
Unearned franchise fees |
$ | 1,815 | 1,852 | |||||
|
Accounts payable |
37,591 | 30,089 | ||||||
|
Accrued compensation and benefits |
33,595 | 30,499 | ||||||
|
Accrued expenses |
11,614 | 7,580 | ||||||
|
System-wide payables |
36,503 | 44,250 | ||||||
|
Total current liabilities |
121,118 | 114,270 | ||||||
|
Long-term liabilities: |
||||||||
|
Other liabilities |
1,679 | 1,544 | ||||||
|
Deferred income taxes |
35,826 | 38,512 | ||||||
|
Deferred lease credits, net of current portion |
25,381 | 23,047 | ||||||
|
Total liabilities |
184,004 | 177,373 | ||||||
|
Commitments and contingencies (note 9) |
||||||||
|
Stockholders' equity: |
||||||||
|
Undesignated stock, 1,000,000 shares authorized; none issued |
— | — | ||||||
|
Common stock, no par value. Authorized 44,000,000 shares; issued and outstanding 18,590,352 and 18,377,920, respectively |
120,268 | 113,509 | ||||||
|
Retained earnings |
245,387 | 204,772 | ||||||
|
Accumulated other comprehensive income (loss) |
187 | (295 | ) | |||||
|
Total stockholders' equity |
365,842 | 317,986 | ||||||
|
Total liabilities and stockholders' equity |
$ | 549,846 | 495,359 | |||||
See accompanying notes to consolidated financial 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 23, September 25, September 23, September 25, Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset disposals and store closures Total costs and expenses Income from operations Investment income (loss) Earnings before income taxes Income tax expense Net earnings Earnings per common share – basic Earnings per common share – diluted Weighted average shares outstanding – basic Weighted average shares outstanding – diluted
2012
2011
2012
2011
$
228,418
181,036
681,284
514,459
18,441
16,727
55,420
49,555
246,859
197,763
736,704
564,014
71,263
51,655
213,213
143,654
68,804
54,783
203,710
154,970
34,626
28,537
99,772
78,134
13,458
11,195
39,349
32,081
16,818
12,748
48,439
35,701
21,813
18,336
62,213
53,394
4,535
3,864
8,662
10,367
788
612
2,122
1,515
232,105
181,730
677,480
509,816
14,754
16,033
59,224
54,198
418
(374
)
713
(170
)
15,172
15,659
59,937
54,028
4,464
4,393
19,322
17,228
$
10,708
11,266
40,615
36,800
$
0.58
0.61
2.19
2.01
0.57
0.61
2.17
2.00
18,589
18,352
18,573
18,330
18,723
18,520
18,675
18,433
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings Other comprehensive income (loss) Foreign currency translation adjustments, net of tax Other comprehensive income (loss), net of tax Comprehensive income
$
10,708
11,266
40,615
36,800
660
(419
)
482
(419
)
660
(419
)
482
(419
)
11,368
10,847
41,097
36,381
See accompanying notes to consolidated financial statements.
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(unaudited)
Nine months ended September 23, September 25, Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to cash provided by operations: Depreciation Amortization Loss on asset disposals and store closures Deferred lease credits Deferred income taxes Stock-based compensation Excess tax benefit from stock issuance Change in operating assets and liabilities: Trading securities Accounts receivable Inventory Prepaid expenses Other assets Unearned franchise fees Accounts payable Income taxes Accrued expenses Net cash provided by operating activities Cash flows for investing activities: Acquisition of property and equipment Purchase of marketable securities Proceeds of marketable securities Net cash used in investing activities Cash flows for financing activities: Issuance of common stock Tax payments for restricted stock units Excess tax benefit from stock issuance Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
2012
2011
$
40,615
36,800
46,409
35,065
2,030
636
1,757
1,279
2,966
2,703
(3,612
)
8,220
6,207
8,642
(2,024
)
(700
)
(850
)
37
(7,712
)
(5,752
)
(199
)
(632
)
583
(1,019
)
(1,826
)
(2,216
)
(37
)
(124
)
2,088
5,704
7,230
2,877
13,162
13,322
106,787
104,842
(79,007
)
(84,651
)
(123,943
)
(78,690
)
112,238
94,387
(90,712
)
(68,954
)
1,147
870
(8,447
)
(2,481
)
2,024
700
(5,276
)
(911
)
(7
)
(86
)
10,792
34,891
20,530
15,309
$
31,322
50,200
See accompanying notes to consolidated financial statements.
BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 23, 2012 AND SEPTEMBER 25, 2011
(Dollar amounts in thousands except share and per share data)
(1) Basis of Financial Statement Presentation
The consolidated financial statements as of September 23, 2012 and December 25, 2011, and for the three-month and nine-month periods ended September 23, 2012 and September 25, 2011 have been prepared by Buffalo Wild Wings, Inc. pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The financial information as of September 23, 2012 and December 25, 2011 and for the three-month and nine-month periods ended September 23, 2012 and September 25, 2011 is unaudited, but, in the opinion of management, reflects all adjustments and accruals necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods.
References in the remainder of this document to “company,” “we,” “us” and “our” refer to the business of Buffalo Wild Wings, Inc. and our subsidiaries.
The financial information as of December 25, 2011 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 25, 2011, which is included in Item 8 in the Fiscal 2011 Annual Report on Form 10-K and should be read in conjunction with such financial statements.
The results of operations for the three-month and nine-month periods ended September 23, 2012 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 30, 2012.
(2) Summary of Significant Accounting Policies
(a) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Cash flows related to inventory sales are classified in net cash provided by operating activities in the Consolidated Statements of Cash Flows.
We purchase products from a number of suppliers and believe there are alternative suppliers. We have minimum purchase commitments from some of our vendors, but the terms of the contracts and nature of the products are such that our purchase requirements do not create a market risk. The primary food product used by our restaurants and our franchised restaurants is chicken wings. Chicken wings are purchased by us at market prices. For the three-month periods ended September 23, 2012 and September 25, 2011, chicken wings were 28.2% and 18.1%, respectively, of restaurant cost of sales. For the nine-month periods ended September 23, 2012 and September 25, 2011, chicken wings were 27.0% and 17.9%, respectively, of restaurant cost of sales.
(b) New Accounting Pronouncements
We reviewed all significant newly-issued accounting pronouncements and concluded that they either are not applicable to our operations or that no material effect is expected on our consolidated financial statements as a result of future adoption.
(3) Fair Value Measurements
The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:
• Level 1 – Observable inputs such as quoted prices in active markets;
• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of September 23, 2012:
|
Fair Value Measurements |
|||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||
|
Assets |
|||||||||||||||||
|
Cash Equivalents |
$ | 19,731 | 1,007 | — | 20,738 | ||||||||||||
|
Marketable Securities |
6,153 | 31,162 | — | 37,315 | |||||||||||||
The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of December 25, 2011:
Fair Value Measurements Level 1 Level 2 Level 3 Total Assets Cash Equivalents Marketable Securities
$
10,103
1,500
—
11,603
5,304
—
—
5,304
We classified a portion of our marketable securities as available-for-sale and trading securities which were reported at fair market value, using the “market approach” valuation technique. The “market approach” valuation method uses prices and other relevant information observable in market transactions involving identical or comparable assets to determine fair market value. Our cash equivalents include commercial paper and money market funds which are valued using a Level 1 approach. Our trading securities are valued using a Level 1 approach. Our available-for-sale marketable securities are valued using a Level 2 approach, using observable direct and indirect inputs for municipal bonds.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the nine-month periods ended September 23, 2012 or September 25, 2011.
(4) Marketable Securities
Marketable securities consisted of the following:
As of September 23, December 25, Held-to-maturity Municipal securities Available-for-sale Municipal securities Trading Mutual funds Total
2012
2011
$
15,196
34,652
31,162
—
6,153
5,304
$
52,511
39,956
All held-to-maturity debt securities mature within one year and had aggregate fair values of $15,195 and $34,640 as of September 23, 2012 and December 25, 2011, respectively. Trading securities represent investments held for future needs of our non-qualified deferred compensation plan.
(5) Property and Equipment
Property and equipment consisted of the following:
September 23, 2012 December 25, 2011 Construction in process Buildings Furniture, fixtures, and equipment Leasehold improvements Property and equipment, gross Less accumulated depreciation Property and equipment, net
$
27,821
$
20,078
47,049
37,956
196,613
175,718
280,329
245,506
551,812
479,258
(204,849
)
(169,088
)
$
346,963
$
310,170
(6) Stockholders' Equity
(a) Stock Options
We have 5.4 million shares of common stock reserved for issuance under our Equity Incentive Plan (Plan) for our employees, officers, and directors. The exercise price for stock options issued under the Plan is to be not less than the fair market value on the date of grant with respect to incentive and nonqualified stock options. Incentive stock options become exercisable in four equal installments from the date of the grant and have a contractual life of seven to ten years. Nonqualified stock options issued pursuant to the Plan have varying vesting periods from immediately to four years and have a contractual life of seven to ten years. Incentive stock options may be granted under this Plan until March 12, 2022. We issue new shares of common stock upon exercise of stock options. Option activity is summarized for the nine months ended September 23, 2012 as follows:
Number of shares Weighted average exercise price
Average remaining contractual Life (years)
Aggregate intrinsic value Outstanding, December 25, 2011 Granted Exercised Cancelled Outstanding, September 23, 2012 Exercisable, September 23, 2012
182,629
$
34.06
4.0
$
6,242
27,691
94.42
(18,127
)
18.02
(6,934
)
53.26
185,259
$
43.93
3.8
$
7,703
109,084
30.30
2.9
5,862
The aggregate intrinsic value in the table above is before applicable income taxes, based on our closing stock price of $84.04 as of the last business day of the quarter ended September 23, 2012, which would have been received by the optionees had all options been exercised on that date. As of September 23, 2012, total unrecognized stock-based compensation expense related to nonvested stock options was approximately $1,404, which is expected to be recognized over a weighted average period of approximately 2.5 years. During the nine-month periods ended September 23, 2012 and September 25, 2011, the total intrinsic value of stock options exercised was $1,183 and $1,173, respectively. During the nine-month periods ended September 23, 2012 and September 25, 2011, the weighted average grant date fair value of options granted was $43.97 and $26.07. No shares vested during the nine-month periods ended September 23, 2012 or September 25, 2011.
The Plan has 1,589,101 shares available for grant as of September 23, 2012.
(b) Restricted Stock Units
Restricted stock units are granted annually under the Plan at the discretion of the Compensation Committee of the Board of Directors. Restricted stock units are subject to three-year cliff vesting and a cumulative three-year earnings target. The number of units which vest at the end of the three-year period is based on performance against the target. These restricted stock units are subject to forfeiture if they have not vested at the end of the three-year period. Stock-based compensation is recognized for the number of units expected to vest at the end of the period and is expensed beginning on the grant date through the end of the performance period.
For each grant, restricted stock units meeting the three-year performance criteria will vest as of the end of our fiscal year. The distribution of vested restricted stock units as common stock typically occurs in March of the following year. The common stock is issued to participants net of the number of shares needed for the required minimum employee withholding taxes. We issue new shares of common stock upon the disbursement of restricted stock units. Restricted stock units are contingently issuable shares, and the activity for the first nine months of fiscal 2012 is as follows:
Number of shares Weighted average grant date fair value Outstanding, December 25, 2011 Granted Vested Cancelled Outstanding, September 23, 2012
360,280
$
45.95
137,111
93.23
(4,865
)
86.33
(34,552
)
53.75
457,974
$
59.08
As of September 23, 2012, the total stock-based compensation expense related to nonvested awards not yet recognized was $11,177, which is expected to be recognized over a weighted average period of 1.8 years. The weighted average grant date fair value of restricted stock units granted during the nine-month periods ended September 23, 2012 and September 25, 2011 was $93.23 and $53.60, respectively. During the nine-month periods ended September 23, 2012 and September 25, 2011, we recognized $5,205 and $7,675, respectively, of stock-based compensation expense related to restricted stock units.
(c) Employee Stock Purchase Plan
We have reserved 600,000 shares of common stock for issuance under our Employee Stock Purchase Plan (ESPP). The ESPP is available to substantially all employees subject to employment eligibility requirements. Participants may purchase our common stock at 85% of the beginning or ending closing price, whichever is lower, for each six-month period ending in May and November. During the first nine months of 2012 and 2011, we issued 14,505 and 16,292 shares of common stock, respectively, under the ESPP. As of September 23, 2012, we have 260,157 shares available for future issuance under the ESPP.
(7) Earnings Per Share
The following is a reconciliation of basic and fully diluted earnings per common share for the three-month and nine-month periods ended September 23, 2012 and September 25, 2011:
Three months ended September 23, 2012 Earnings Shares Per-share Net earnings Earnings per common share Effect of dilutive securities – stock options Effect of dilutive securities – restricted stock units Earnings per common share – assuming dilution
(numerator)
(denominator)
amount
$
10,708
10,708
18,588,598
$
0.58
—
80,487
—
54,197
$
10,708
18,723,282
0.57
Three months ended September 25, 2011 Earnings Shares Per-share Net earnings Earnings per common share Effect of dilutive securities – stock options Effect of dilutive securities – restricted stock units Earnings per common share – assuming dilution
(numerator)
(denominator)
amount
$
11,266
11,266
18,352,012
$
0.61
—
75,381
—
92,257
$
11,266
18,519,650
0.61
Nine months ended September 23, 2012 Earnings Shares Per-share Net earnings Earnings per common share Effect of dilutive securities – stock options Effect of dilutive securities – restricted stock units Earnings per common share – assuming dilution
(numerator)
(denominator)
amount
$
40,615
40,615
18,572,953
$
2.19
—
83,819
—
18,066
$
40,615
18,674,838
2.17
Nine months ended September 25, 2011 Earnings Shares Per-share Net earnings Earnings per common share Effect of dilutive securities – stock options Effect of dilutive securities – restricted stock units Earnings per common share – assuming dilution
(numerator)
(denominator)
amount
$
36,800
36,800
18,329,565
$
2.01
—
73,054
—
30,752
$
36,800
18,433,371
2.00
The following is a summary of those securities outstanding at the end of the respective periods, which have been excluded from the fully diluted calculations because the effect on net earnings per common share would have been antidilutive or were performance-granted shares for which the performance criteria had not yet been met:
Three months ended Nine months ended September 23, 2012 September 25, 2011 September 23, 2012 September 25, 2011 Stock options Restricted stock units
27,506
6,773
18,399
15,960
403,777
556,242
439,908
617,747
(8) Supplemental Disclosures of Cash Flow Information
Nine months ended September 23, 2012 September 25, 2011 Cash paid during the period for: Income taxes Noncash financing and investing transactions: Property and equipment not yet paid for
$
15,880
6,339
5,374
12,534
(9) Contingencies
We are involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
(10) Subsequent Event
In the fourth quarter of 2012, we have completed the purchase of nine franchised locations and are positioned to acquire an additional nine franchised locations. We expect the total purchase price for these locations to be approximately $44,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report and the audited consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 25, 2011. This discussion and analysis contains certain statements that are not historical facts, including, among others, those relating to our anticipated financial performance for 2012, cash requirements, and our expected store openings and preopening costs. Such statements are forward-looking and speak only as of the date on which they are made. Actual results are subject to various risks and uncertainties including, but not limited to, those discussed in this Form 10-Q under Item 2 of Part I as well as in Item 1A of Part I of the fiscal 2011 Form 10-K. Information included in this discussion and analysis includes commentary on company-owned and franchised restaurant units, restaurant sales, same-store sales, and average weekly sales volumes. Management believes such sales information is an important measure of our performance, and is useful in assessing consumer acceptance of the Buffalo Wild Wings® Grill & Bar concept and the overall health of the concept. Franchise information also provides an understanding of our revenues because franchise royalties and fees are based on the opening of franchised units and their sales. However, franchise sales and same-store sales information does not represent sales 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 financial information as defined or used by other companies.
Critical Accounting Estimates
Our most critical accounting estimates, which are those that require significant judgment, include: valuation of long-lived assets and store closing reserves, goodwill, vendor allowances, self-insurance liabilities, and stock-based compensation. An in-depth description of these can be found in our Annual Report on Form 10-K for the fiscal year ended December 25, 2011. There have been no changes to those policies during this period.
Overview
As of September 23, 2012, we owned and operated 343 company-owned and franchised an additional 511 Buffalo Wild Wings® Grill & Bar restaurants in North America. We believe that we will grow the Buffalo Wild Wings brand to about 1,700 locations in North America, continuing the strategy of developing both company-owned and franchised restaurants.
For 2012, we believe we will have about 53 company-owned and 43 franchised restaurant openings and estimate our annual net earnings growth will be 15%. Our growth and success depend on several factors and trends. First, we will continue our focus on trends in company-owned and franchised same-store sales as an indicator of the continued acceptance of our concept by consumers. We also review the overall trend in average weekly sales as an indicator of our ability to increase the sales volume and, therefore, cash flow per location. We remain committed to high quality operations and guest experience.
Our revenue is generated by:
|
• |
Sales at our company-owned restaurants, which represented 93% of total revenue in the third quarter of 2012. Food and nonalcoholic beverages accounted for 79% of restaurant sales. The remaining 21% of restaurant sales was from alcoholic beverages. The menu items with the highest sales volume are traditional and boneless wings at 21% and 19%, respectively, of total restaurant sales. |
|
• |
Royalties and franchise fees received from our franchisees. |
A second factor is our success in developing restaurants in new markets. There are inherent risks in opening new restaurants, especially in new markets, including the lack of experience, logistical support, and brand awareness. These factors may result in lower than anticipated sales and cash flow for restaurants in new markets along with higher preopening costs. We believe our focus on new restaurant opening procedures, along with our expanding North American presence, will help to mitigate the overall risk associated with opening restaurants in new markets.
Third, we continue to monitor and react to changes in our cost of goods sold. The cost of goods sold is difficult to predict, as it has ranged from 27.2% to 31.6% of restaurant sales per quarter in our 2011 fiscal year and year-to-date in 2012, mostly due to price and yield fluctuations in chicken wings. We work to counteract the volatility of chicken wing prices with the introduction of new menu items, marketing promotions, focused efforts on food costs and waste, and menu price increases. We will continue to monitor the cost of chicken wings, as it can significantly change our cost of sales and cash flow from company-owned restaurants. We continue to explore purchasing strategies to lessen the severity of cost increases and fluctuations, and are reviewing menu additions and other strategies that may decrease the volatility of our cost of sales percentage and decrease the percentage that chicken wings represent in terms of total restaurant sales.
We generate cash from the operation of company-owned restaurants and from franchise royalties and fees. We highlight the specific costs associated with the on-going operation of our company-owned restaurants in the consolidated statement of earnings under “Restaurant operating costs.” Nearly all of our depreciation expense relates to assets used by our company-owned restaurants. Preopening costs are those costs associated with opening new company-owned restaurants and will vary quarterly based on the number of new locations opening and under construction. Loss on asset disposals and store closures expense is related to company-owned restaurants and includes the costs associated with closures of locations and normal asset retirements. Certain other expenses, such as general and administrative, relate to both company-owned restaurant and franchising operations.
We operate on a 52 or 53-week fiscal year ending on the last Sunday in December. Both of the third quarters of 2012 and 2011 consisted of 13 weeks. We have a 53-week fiscal year in 2012, with the fourth quarter having 14 weeks.
Quarterly Results of Operations
Our operating results for the periods indicated are expressed below as a percentage of total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant sales. The information for each three-month and nine-month period is unaudited, and we have prepared it on the same basis as the audited financial statements. In the opinion of management, all necessary adjustments, consisting only of normal recurring adjustments, have been included to present fairly the unaudited quarterly results.
Quarterly and annual operating results may fluctuate significantly as a result of a variety of factors, including increases or decreases in same-store sales, changes in commodity prices, the timing and number of new restaurant openings and related expenses, asset impairment charges, store closing charges, general economic conditions, stock-based compensation, and seasonal fluctuations. As a result, our quarterly results of operations are not necessarily indicative of the results that may be achieved for any future period.
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Three months ended |
Nine months ended |
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September 23, |
September 25, |
September 23, |
September 25, |
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Revenue: |
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Restaurant sales |
92.5 | % | 91.5 | % | 92.5 | % | 91.2 | % | ||||||||
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Franchising royalties and fees |
7.5 | 8.5 | 7.5 | 8.8 | ||||||||||||
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Total revenue |
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
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Costs and expenses: |
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Restaurant operating costs: |
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Cost of sales |
31.2 | 28.5 | 31.3 | 27.9 | ||||||||||||
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Labor |
30.1 | 30.3 | 29.9 | 30.1 | ||||||||||||
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Operating |
15.2 | 15.8 | 14.6 | 15.2 | ||||||||||||
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Occupancy |
5.9 | 6.2 | 5.8 | 6.2 | ||||||||||||
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Depreciation and amortization |
6.8 | 6.4 | 6.6 | 6.3 | ||||||||||||
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General and administrative |
8.8 | 9.3 | 8.4 | 9.5 | ||||||||||||
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Preopening |
1.8 | 2.0 | 1.2 | 1.8 | ||||||||||||
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Loss on asset disposals and store closures |
0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||
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Total costs and expenses |
94.0 | 91.9 | 92.0 | 90.4 | ||||||||||||
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Income from operations |
6.0 | 8.1 | 8.0 | 9.6 | ||||||||||||
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Investment income (loss) |
0.2 | (0.2 | ) | 0.1 | 0.0 | |||||||||||
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Earnings before income taxes |
6.1 | 7.9 | 8.1 | 9.6 | ||||||||||||
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Income tax expense |
1.8 | 2.2 | 2.6 | 3.1 | ||||||||||||
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Net earnings |
4.3 | 5.7 | 5.5 | 6.5 | ||||||||||||
The number of company-owned and franchised restaurants open are as follows:
As of September 23, September 25, Company-owned restaurants Franchised restaurants
2012
2011
343
288
511
498
The restaurant sales for company-owned and franchised restaurants are as follows (amounts in thousands):
Three months ended Nine months ended September 23, September 25, September 23, September 25, Company-owned restaurant sales Franchised restaurant sales
2012
2011
2012
2011
$
228,418
181,036
681,284
514,459
364,467
329,053
1,096,097
978,520
Increases in comparable same-store sales are as follows (based on restaurants operating at least fifteen months):
Three months ended Nine months ended September 23, September 25, September 23, September 25, Company-owned same-store sales Franchised same-store sales
2012
2011
2012
2011
6.2
%
5.7
%
6.9
%
5.2
%
5.8
4.2
6.2
2.8
The average prices paid per pound for chicken wings are as follows:
Three months ended Nine months ended September 23, September 25, September 23, September 25, Average price per pound
2012
2011
2012
2011
$
1.97
1.16
1.93
1.13
Results of Operations for the Three Months Ended September 23, 2012 and September 25, 2011
Restaurant sales increased by $47.4 million, or 26.2%, to $228.4 million in 2012 from $181.0 million in 2011. The increase in restaurant sales was due to a $37.5 million increase associated with 29 new company-owned restaurants that opened in 2012 and 68 company-owned restaurants that opened or were acquired before 2012 that did not meet the criteria for same-store sales for all or part of the three-month period, and $9.9 million related to a 6.2% increase in same-store sales.
Franchise royalties and fees increased by $1.7 million, or 10.2%, to $18.4 million in 2012 from $16.7 million in 2011. The increase was primarily due to royalties related to additional sales at 13 more franchised restaurants in operation at the end of the period compared to prior year, and an increase in same-store sales for franchised restaurants of 5.8% in the third quarter of 2012.
Cost of sales increased by $19.6 million, or 38.0%, to $71.3 million in 2012 from $51.7 million in 2011 due primarily to more restaurants being operated in 2012. Cost of sales as a percentage of restaurant sales increased to 31.2% in 2012 from 28.5% in 2011. Cost of sales as a percentage of restaurant sales increased primarily due to higher chicken wing prices and a lower wing-per-pound yield. For the third quarter of 2012, the cost of chicken wings averaged $1.97 per pound which was a 69.8% increase over the same period in 2011.
Labor expenses increased by $14.0 million, or 25.6%, to $68.8 million in 2012 from $54.8 million in 2011 due primarily to more restaurants being operated in 2012. Labor expenses as a percentage of restaurant sales decreased to 30.1% in 2012 from 30.3% in 2011. Cost of labor as a percentage of restaurant sales decreased primarily due to lower workers compensation costs.
Operating expenses increased by $6.1 million, or 21.3%, to $34.6 million in 2012 from $28.5 million in 2011 due primarily to more restaurants being operated in 2012. Operating expenses as a percentage of restaurant sales decreased to 15.2% in 2012 from 15.8% in 2011. The decrease in operating expenses as a percentage of restaurant sales is primarily due to lower natural gas utility costs and debit card fees.
Occupancy expenses increased by $2.3 million, or 20.2%, to $13.5 million in 2012 from $11.2 million in 2011 due primarily to more restaurants being operated in 2012. Occupancy expenses as a percentage of restaurant sales decreased to 5.9% in 2012 from 6.2% in 2011 due primarily to leveraging rent cost with higher sales and a shift toward more company-owned buildings.
Depreciation and amortization increased by $4.1 million, or 31.9%, to $16.8 million in 2012 from $12.7 million in 2011. The increase was primarily due to the additional depreciation related to the 55 additional company-owned restaurants compared to the third quarter of 2011 and incremental amortization related to the acquisition of franchised restaurants.
General and administrative expenses increased by $3.5 million, or 19.0%, to $21.8 million in 2012 from $18.3 million in 2011 primarily due to additional headcount and higher costs for our deferred compensation plan partially offset by lower stock-based compensation expense. General and administrative expenses as a percentage of total revenue decreased to 8.8% in 2012 from 9.3% in 2011. Exclusive of stock-based compensation, our general and administrative expenses as a percentage of revenue remained consistent at 7.9% in 2012 and 2011. Higher costs for our deferred compensation plan were offset by lower legal fees.
Preopening costs increased by $671,000 to $4.5 million in 2012 from $3.9 million in 2011. In 2012, we incurred costs of $3.2 million for 15 new company-owned restaurants opened in the third quarter of 2012 and costs of $1.4 million for restaurants that will open in the fourth quarter of 2012 or later. In 2011, we incurred costs of $2.2 million for 10 new company-owned restaurants opened in the third quarter of 2011 and costs of $1.6 million for restaurants that opened in the fourth quarter of 2011 or later.
Loss on asset disposals and store closures increased by $176,000 to $788,000 in 2012 from $612,000 in 2011. In 2012, the loss was related to two store closures of $53,000, the write-off of equipment related to the rollout of new point-of-sale and back-office systems of $395,000, and the write-off of miscellaneous equipment. In 2011, the loss was related to store closing costs related to one store closure of $128,000 and the write-off of miscellaneous equipment and disposals due to remodels.
Investment income (loss) was $418,000 and ($374,000) in 2012 and 2011 respectively. The income in 2012 and the loss in 2011 were primarily related to investments held for our deferred compensation plan. Cash and marketable securities balances at the end of the third quarter totaled $83.8 million in 2012 compared to $91.3 million at the end of the third quarter of 2011.
Provision for income taxes increased $71,000 to $4.5 million in 2012 from $4.4 million in 2011. The effective tax rate as a percentage of income before taxes increased to 29.4% in 2012 from 28.1% in 2011. For 2012, we believe our effective annual tax rate will be approximately 32-32.5%.
Results of Operations for the Nine Months Ended September 23, 2012 and September 25, 2011
Restaurant sales increased by $166.8 million, or 32.4%, to $681.3 million in 2012 from $514.5 million in 2011. The increase in restaurant sales was due to a $135.3 million increase associated with 29 new company-owned restaurants that opened in 2012 and 109 company-owned restaurants that opened or acquired before 2012 that did not meet the criteria for same-store sales for all or part of the nine-month period, and $31.5 million related to a 6.9% increase in same-store sales.
Franchise royalties and fees increased by $5.9 million, or 11.8%, to $55.4 million in 2012 from $49.6 million in 2011. The increase was primarily due to royalties related to additional sales at 13 more franchised restaurants in operation at the end of the period compared to prior year, and an increase in same-store sales at franchised restaurants of 6.2% in the first nine months of 2012.
Cost of sales increased by $69.6 million, or 48.4%, to $213.2 million in 2012 from $143.7 million in 2011 due primarily to more restaurants being operated in 2012. Cost of sales as a percentage of restaurant sales increased to 31.3% in 2012 from 27.9% in 2011. Cost of sales as a percentage of restaurant sales increased primarily due to higher chicken wing prices and a lower wing-per-pound yield. For the first nine months of 2012, the cost of chicken wings averaged $1.93 per pound which was a 70.8% increase over the same period in 2011.
Labor expenses increased by $48.7 million, or 31.5%, to $203.7 million in 2012 from $155.0 million in 2011 due primarily to more restaurants being operated in 2012. Labor expenses as a percentage of restaurant sales decreased to 29.9% in 2012 from 30.1% in 2011. Cost of labor as a percentage of restaurant sales decreased primarily due to same-store sales leveraging of payroll and related taxes partially offset by higher medical insurance costs.
Operating expenses increased by $21.6 million, or 27.7%, to $99.8 million in 2012 from $78.1 million in 2011 due primarily to more restaurants being operated in 2012. Operating expenses as a percentage of restaurant sales decreased to 14.6% in 2012 from 15.2% in 2011. The decrease in operating expenses as a percentage of restaurant sales was primarily due to lower natural gas utility costs and debit card fees.
Occupancy expenses increased by $7.3 million, or 22.7%, to $39.3 million in 2012 from $32.1 million in 2011 due primarily to more restaurants being operated in 2012. Occupancy expenses as a percentage of restaurant sales decreased to 5.8% in 2012 from 6.2% in 2011 due primarily to leveraging rent cost with higher sales and a shift toward more company-owned buildings.
Depreciation and amortization increased by $12.7 million, or 35.7%, to $48.4 million in 2012 from $35.7 million in 2011. The increase was primarily due to the additional depreciation related to the 55 additional company-owned restaurants compared to the third quarter of 2011 and incremental amortization related to the acquisition of franchised restaurants.
General and administrative expenses increased by $8.8 million, or 16.5%, to $62.2 million in 2012 from $53.4 million in 2011 primarily due to additional headcount and higher professional fees. General and administrative expenses as a percentage of total revenue decreased to 8.4% in 2012 from 9.5% in 2011. Exclusive of stock-based compensation, our general and administrative expenses as a percentage of revenue decreased to 7.6% in 2012 from 7.9% in 2011 due primarily to leveraging of salaries and cash incentive plan expenses.
Preopening costs decreased by $1.7 million, to $8.7 million in 2012 from $10.4 million in 2011. In 2012, we incurred costs of $7.0 million for 29 new company-owned restaurants opened in the first nine months of 2012 and costs of $1.6 million for restaurants that will open in the fourth quarter of 2012 or later. In 2011, we incurred costs of $8.5 million for 32 new company-owned restaurants opened in the first nine months of 2011 and costs of $1.7 million for restaurants that opened in the fourth quarter of 2011 or later. Preopening costs per restaurant averaged $274,000 and $279,000 in the first nine months of 2012 and 2011, respectively.
Loss on asset disposals and store closures increased by $607,000, to $2.1 million in 2012 from $1.5 million in 2011. In 2012, the loss was related to store closing costs related to five store closures of $400,000, write-offs related to the rollout of new point-of-sale and back-office systems of $670,000 and the write-off of miscellaneous equipment and disposals due to remodels. In 2011, the loss was related to store closing costs related to seven store closures of $200,000 and the write-off of miscellaneous equipment and disposals due to remodels.
Investment income(loss) was $713,000 and ($170,000) in 2012 and 2011 respectively. The investment income in 2012 and loss in 2011 were primarily related to investments held for our deferred compensation plan. Cash and marketable securities balances at the end of the third quarter totaled $83.8 million in 2012 compared to $91.3 million at the end of the third quarter of 2011.
Provision for income taxes increased by $2.1 million to $19.3 million in 2012 from $17.2 million in 2011. The effective tax rate as a percentage of income before taxes increased to 32.2% in 2012 from 31.9% in 2011.
Liquidity and Capital Resources
Our primary liquidity and capital requirements have been for constructing, remodeling and maintaining our new and existing company-owned restaurants; working capital; acquisitions; and other general business needs. We fund these expenses, except for acquisitions, primarily with cash from operations. Depending on the size of the transaction, acquisitions would generally be funded from cash and marketable securities balances. The cash and marketable securities balance at September 23, 2012 was $83.8 million. We invest our cash balances in debt securities with the focus on protection of principal, adequate liquidity, and return on investment based on risk. As of September 23, 2012, nearly all excess cash was invested in high quality municipal securities.
For the nine months ended September 23, 2012, net cash provided by operating activities was $106.8 million. Net cash provided by operating activities consisted primarily of net earnings adjusted for non-cash expenses, and an increase in accrued expenses, partially offset by an increase in accounts receivable. The increase in accrued expenses was primarily due to the timing of our bi-weekly payroll. The increase in accounts receivable was due to higher credit card sales at the end of the quarter.
For the nine months ended September 25, 2011, net cash provided by operating activities was $104.8 million. Net cash provided by operating activities consisted primarily of net earnings adjusted for non-cash expenses, and an increase in accounts payable and accrued expenses, partially offset by an increase in accounts receivable. The increase in accounts payable was primarily due to an increase in amounts due related to restaurants under construction at the end of the quarter, as well as an increase in the number of restaurants. The increase in accrued expenses was primarily due to higher cash incentive costs and the timing of our bi-weekly payroll. The increase in accounts receivable was due to higher credit card sales at the end of the quarter.
For the nine months ended September 23, 2012 and September 25, 2011, net cash used in investing activities was $90.7 million and $69.0 million, respectively. Investing activities included acquisitions of property and equipment related to the additional company-owned restaurants and restaurants under construction in both periods. During the first nine months of 2012 and 2011, we opened or purchased 29 and 35 restaurants, respectively. For the full year of 2012, we expect capital expenditures to be approximately $175.0 million for an estimated 53 new or relocated company-owned restaurants, technology improvements on our restaurant and corporate systems, capital expenditures at existing restaurants, and franchise acquisitions. In the first nine months of 2012, we purchased $123.9 million of marketable securities and received proceeds of $112.2 million as these investments matured or were sold. In the first nine months of 2011, we purchased $78.7 million of marketable securities and received proceeds of $94.4 million as these investments matured or were sold.
For the nine months ended September 23, 2012 and September 25, 2011, net cash used in financing activities was $5.3 million and $911,000, respectively. Net cash used in financing activities for 2012 resulted primarily from tax payments for restricted stock units of $8.4 million, offset by proceeds from the exercise of stock options of $1.1 million and the excess tax benefit from stock issuance of $2.0 million. Net cash used in financing activities for 2011 resulted primarily from tax payments for restricted stock units of $2.5 million, offset by proceeds from the exercise of stock options of $870,000 and the excess tax benefit from stock issuance of $700,000. No additional funding from the issuance of common stock (other than from the exercise of options and purchase of stock under the employee stock purchase plan) is anticipated for the remainder of 2012.
Our liquidity is impacted by minimum cash payment commitments resulting from operating lease obligations for our restaurants and our corporate offices. Lease terms are generally 10 to 15 years with renewal options and generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds. We own the buildings in which 78 of our restaurants operate and therefore have a limited ability to enter into sale-leaseback transactions as a potential source of cash.
The following table presents a summary of our contractual operating lease obligations and commitments as of September 23, 2012:
Payments Due By Period (in thousands) Total Lessthan One year 1-3 years 3-5 years After 5 years Operating lease obligations Lease commitments for restaurants under development Total
$
401,477
43,903
85,508
78,042
194,024
100,587
4,419
13,780
13,845
68,543
$
502,064
48,322
99,288
91,877
262,567
We believe the cash flows from our operating activities and our balance of cash and marketable securities will be sufficient to fund our operations and building commitments and meet our obligations for the foreseeable future. Our future cash outflows related to income tax uncertainties amounted to $820,000 as of September 23, 2012. These amounts are excluded from the contractual obligations table due to the high degree of uncertainty regarding the timing of these liabilities.
Off-Balance Sheet Arrangements
As of September 23, 2012, we had no off-balance sheet arrangements or transactions.
Risk Factors/Forward-Looking Statements
The foregoing discussion and other statements in this report contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on current expectations or beliefs concerning future events. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “possible,” “plan,” “project,” “will,” “forecast” or similar words or expressions. Our forward-looking statements generally relate to our growth strategy, financial results, sales efforts, franchise expectations, restaurant openings and related expense, and cash requirements. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. While it is not possible to foresee all of the factors that may cause actual results to differ from our forward-looking statements, such factors include, among others, the following (some of which are discussed in greater detail in the risk factor section of our Annual Report on Form 10-K for the fiscal year ended December 25, 2011). Investors are cautioned that all forward-looking statements involve risks and uncertainties and speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement.
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Price and yield fluctuations related to chicken wings could impact our operating income. |
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If we are unable to successfully open new restaurants, our revenue growth rate and profits may be reduced. |
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We must identify and obtain a sufficient number of suitable new restaurant sites for us to sustain our growth. |
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Shortages or interruptions in the availability and delivery of food and other supplies may increase costs or reduce revenues. |
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We may experience higher-than-anticipated costs associated with the opening of new restaurants or with the closing, relocating, and remodeling of existing restaurants, which may adversely affect our results of operations. |
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Our restaurants may not achieve market acceptance in the new domestic and international geographic regions we enter. |
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New restaurants added to our existing markets may take sales from existing restaurants. |
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Failure of our internal controls over financial reporting could harm our business and financial results. |
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Economic conditions could have a material adverse impact on our landlords or other tenants in retail centers in which we or our franchisees are located, which in turn could negatively affect our financial results. |
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An impairment in the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and consolidated results of operations. |
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We are dependent on franchisees and their success. |
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Franchisees may take actions that could harm our business. |
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We could face liability from our franchisees. |
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We may be unable to compete effectively in the restaurant industry. |
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Our success depends substantially on the value of our brand and our reputation for offering guests an unparalleled guest experience. |
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Our inability to successfully and sufficiently raise menu prices could result in a decline in profitability. |
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A reduction in vendor allowances currently received could affect our costs of goods sold. |
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Our quarterly operating results may fluctuate due to the timing of special events and other factors, including the recognition of impairment losses. |
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We may not be able to attract and retain qualified team members and key executives to operate and manage our restaurants. |
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We may not be able to obtain and maintain licenses and permits necessary to operate our restaurants. |
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Unfavorable publicity could harm our business. |
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The sale of alcoholic beverages at our restaurants subjects us to additional regulations and potential liability. |
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Changes in employment laws or regulations could harm our performance. |
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Changes in consumer preferences or discretionary consumer spending could harm our performance. |
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A regional or global health pandemic could severely affect our business. |
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The acquisition of existing restaurants from our franchisees or other acquisitions may have unanticipated consequences that could harm our business and our financial condition. |
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There is volatility in our stock price. |
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We may be subject to increased labor and insurance costs. |
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Our current insurance may not provide adequate levels of coverage against claims. |
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We are dependent on information technology and any material failure of that technology could impair our ability to efficiently operate our business. |
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If we are unable to maintain our rights to use key technologies of third parties, our business may be harmed. |
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We may not be able to protect our trademarks, service marks or trade secrets. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to international market risk related to our cash and cash equivalents and marketable securities. We invest our excess cash in highly liquid short-term investments with maturities of less than one year. These investments are not held for trading or other speculative purposes. We invest with a strategy focused on principal preservation. Changes in interest rates affect the investment income we earn on our cash and cash equivalents and marketable securities and, therefore, impact our cash flows and results of operations. We also have trading securities, which are held to generate returns that seek to offset changes in liabilities related to the equity market risk of our deferred compensation arrangements.
Financial Instruments
Financial instruments that potentially subject us to concentrations of credit risk consist principally of municipal securities. We do not believe there is a significant risk of non-performance by these municipalities because of our investment policy restrictions as to acceptable investment vehicles.
Inflation
The primary inflationary factors affecting our operations are food, labor, and restaurant operating costs. Substantial increases in these costs in any country that we operate in could impact operating results to the extent that such increases cannot be passed along through higher menu prices. A large number of our restaurant personnel are paid at rates based on the applicable federal and state minimum wages, and increases in the minimum wage rates and tip-credit wage rates could directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.
Commodity Price Risk
Many of the food products purchased by us are affected by weather, production, availability, and other factors outside our control. We believe that almost all of our food and supplies are available from several sources, which helps to control food product risks. We negotiate directly with independent suppliers for our supply of food and paper products. Domestically, we use members of UniPro Food Services, Inc., a national cooperative of independent food distributors, to distribute these products from the suppliers to our restaurants. We have signed a new distribution contract that covers food, paper, and non-food products and will begin transitioning locations to the new provider in December 2012 with full rollout expected to be completed by June 2013. We have minimum purchase requirements with some of our vendors, but the terms of the contracts and nature of the products are such that our purchase requirements do not create a market risk. The primary food product used by company-owned and franchised restaurants is chicken wings. We work to counteract the effect of the volatility of chicken wing prices, which can significantly change our cost of sales and cash flow, with the introduction of new menu items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases and fluctuations. Chicken wings accounted for approximately 28.2% and 18.1% of our cost of sales in the third quarters of 2012 and 2011, respectively, with a quarterly average price per pound of $1.97 and $1.16, respectively.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Occasionally, we are a defendant in litigation arising in the ordinary course of our business, including claims arising from personal injuries, contract claims, franchise-related claims, dram shop claims, employment-related claims and claims from guests or employees alleging injury, illness or other food quality, health or operational concerns. To date, none of these types of litigation, most of which are typically covered by insurance, has had a material effect on us. We have insured and continue to insure against most of these types of claims. A judgment on any claim not covered by or in excess of our insurance coverage could adversely affect our financial condition or results of operations.
ITEM 6. EXHIBITS
See Exhibit Index following the signature page of this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: November 1, 2012 |
BUFFALO WILD WINGS, INC. | |
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By: |
/s/ Sally J. Smith |
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Sally J. Smith, President and Chief Executive Officer (principal executive officer) |
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By: |
/s/ Mary J. Twinem |
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Mary J. Twinem, Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) |
EXHIBIT INDEX
BUFFALO WILD WINGS, INC.
FORM 10-Q FOR QUARTER ENDED SEPTEMBER 23, 2012
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Exhibit |
Description | |
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3.1 |
Restated Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to our Form 10-Q for the fiscal quarter ended June 29, 2008). | |
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3.2 |
Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed May 27, 2009). | |
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31.1 |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
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31.2 |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
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32.1 |
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
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32.2 |
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
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101.INS* |
XBRL Instance Document | |
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101.SCH* |
XBRL Taxonomy Extension Schema Document | |
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101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase Document | |
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101.LAB* |
XBRL Taxonomy Extension Label Linkbase Document | |
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101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document | |
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101.DEF* |
XBRL Taxonomy Extension Definition Linkbase Document |
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* |
In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.” |
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