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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 28, 2014 or
? Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
to .
Commission File Number: 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)
Registrant’s telephone number (952) 593-9943
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, no par value NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES NO ?
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES ? NO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
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 a checkmark 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ?
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.

Table of contents

  • Page 1
    ...(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 28, 2014 or ? Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to . Commission File Number: 000-24743 BUFFALO WILD WINGS, INC. (Exact name of registrant as...

  • Page 2
    ...shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). YES ? NO The aggregate market value of the voting stock held by non-affiliates was $3.1 billion based on the closing sale price of the Company's Common Stock as reported on the NASDAQ Stock Market on June 29, 2014. The number...

  • Page 3
    ... About Market Risk Item 8. Consolidated Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate...

  • Page 4
    ... a good one. Buffalo Wild Wings® restaurants have widespread appeal and have won dozens of "Best Wings" and "Best Sports Bar" awards across the country. Our made-to-order menu items are enhanced by the bold flavor profile of our 16 signature sauces and 5 signature seasonings, ranging from Sweet BBQ...

  • Page 5
    ...-able menu items with broad appeal; Create an inviting neighborhood atmosphere; Focus on operational excellence; Open restaurants in new and existing domestic and international markets; and Increase same-store sales, average unit volumes, and profitability. Buffalo Wild Wings Growth Strategy We...

  • Page 6
    ...guests with new menu items that increase guest frequency and attract new guests. In addition, our food experience team created a "Sauce Lab" concept in 2014 that features one to two brand new sauces that are introduced during our engagement zone promotions for a limited time only. Buffalo Wild Wings...

  • Page 7
    ... games. In addition, our local restaurant marketing efforts are designed to enhance community connections. Examples of this are our Home Team Advantage and Eat Wings, Raise Funds programs that connect our restaurants to local sports teams and community groups. Advertising. Our media strategy builds...

  • Page 8
    ...: Team, Guest, Quality Operations and Sales and Profits. This includes experience in both hourly and management functions. After successful completion of the manager training program, the new managers work with their General Managers to build a tailored program to meet their training and development...

  • Page 9
    ...an important component of cost of sales at our Buffalo Wild Wings restaurants. We work to counteract the effect of the volatility of chicken wing prices, which can affect our cost of sales and cash flow, with the introduction of new menu items, effective marketing promotions, focused efforts on food...

  • Page 10
    .... The online ordering system is available for all company-owned locations and will be fully implemented in all franchised locations by the end of 2015. Competition The restaurant industry is intensely competitive. We compete on the basis of the taste, quality and price of food offered, guest service...

  • Page 11
    ... Act and similar laws related to increases in minimum wages, overtime pay, paid leaves of absence, and mandated health benefits, may also impact the performance of company-owned and franchised operations. In addition, employee claims based on, among other things, discrimination, harassment, wrongful...

  • Page 12
    ... as our Executive Vice President, Chief Strategy Officer and New Business Development since January 2014. She served as our Executive Vice President, Global Brand and Business Development since October 2011. She served as Executive Vice President, Global Marketing and Brand Development from January...

  • Page 13
    ... our operating income. Chicken wings are a primary food product used by our Buffalo Wild Wings restaurants. 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...

  • Page 14
    ..., or other conditions beyond our control could adversely affect the availability, quality and cost of items we buy and the operations of our restaurants. Our inability to effectively manage supply chain risk could increase our costs and limit the availability of products critical to our restaurant...

  • Page 15
    ...decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors...

  • Page 16
    ... respect to price, service, location, concept and the type and quality of food. We also face intense competition for real estate sites, qualified management personnel, and hourly restaurant staff. Our success depends substantially on the value of our brands and our reputation for offering guests an...

  • Page 17
    ...and sufficiently raise menu prices could result in a decline in profitability. We utilize menu price increases to help offset cost increases, including increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction, utilities, and other key operating costs. If...

  • Page 18
    ... annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of guests and employees, hours of operation, advertising, wholesale purchasing, inventory control...

  • Page 19
    ... sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline. In addition, the current premiums that we pay for our insurance (including workers' compensation, general liability, property, health...

  • Page 20
    ... operate our business. We rely on information systems across our operations, including, for example, point-of-sale processing in our restaurants, management of our supply chain, collection of cash and credit and debit card payments, payment of obligations, and various other processes and procedures...

  • Page 21
    ... restaurant site in the event of default under the lease or franchise agreement. The following table sets forth the states and provinces in which our restaurants are located and the number of restaurants in each state or province as of December 28, 2014: Number of Restaurants Open Buffalo Wild Wings...

  • Page 22
    ... Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Canada: Alberta Ontario Mexico: Total - 31 - - 23 1 9 - 23 44 9 - 18 10 - 31 1 2 12 - 487 7 57 17 11 1 - 4 5 - 47 - 1 21 2 11 - 2 - - 5 584...

  • Page 23
    ... 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...

  • Page 24
    ...name and/or street name brokerage accounts. Dividends We have never declared or paid cash dividends on our Common Stock. It is our policy to preserve cash for development and other working capital needs and, therefore, do not currently have plans to pay any cash dividends. Our future dividend policy...

  • Page 25
    ...percentage change in the cumulative total shareholder return on our Common Stock for the five-year period ended December 28, 2014 with the cumulative total return on the Nasdaq Composite and the S&P 600 Restaurants Index. The comparison assumes $100 was invested in Buffalo Wild Wings Common Stock on...

  • Page 26
    ... Financial Statements and related notes thereto set forth in Item 8 of this Form 10-K. Fiscal Years Ended (1) Dec 28, 2014 Consolidated Statements of Earnings Data: Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales...

  • Page 27
    ..., including 584 Buffalo Wild Wings restaurants, and 7 Rusty Taco restaurants. We are building for long-term future earnings growth by investing in Buffalo Wild Wings in the United States and Canada, international franchising, and Emerging Brands (PizzaRev, Rusty Taco, and other future brands). These...

  • Page 28
    ... related to assets used by our company-owned restaurants and amortization of reacquired franchise rights. Preopening costs are those costs associated with opening new company-owned restaurants and will vary annually based on the number of new locations opening and under construction. Loss...

  • Page 29
    ... estimated reserve based on current market conditions. During 2014, 2013, and 2012, we recorded expenses of $315,000, $38,000, and $413,000, respectively, for restaurants that closed. Goodwill We review goodwill for impairment annually, or whenever circumstances change in a way which could indicate...

  • Page 30
    ... expense for restricted stock units is recognized for the expected number of shares vesting at the end of each annual period. Restricted stock units granted in 2014, 2013, and 2012 are subject to three-year cliff vesting and a cumulative three-year earnings target. The number of units that vest is...

  • Page 31
    ... operating costs, which are expressed as a percentage of restaurant sales. Fiscal Years Ended December 28, December 29, December 30, 2014 2013 2012 Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating...

  • Page 32
    ... (based on restaurants operating at least fifteen months): Fiscal Years Ended Dec 28, Dec 29, 2014 2013 6.5% 3.9% 5.6% 3.3% Company-owned same-store sales Franchised same-store sales Dec 30, 2012 6.6% 6.5% The annual average prices paid per pound for chicken wings for company-owned Buffalo Wild...

  • Page 33
    ... with 55 new company-owned restaurants that opened or were acquired in 2013 and the company-owned restaurants opened before 2013 that did not meet the criteria for same-store sales for all or part of the year, and $33.2 million related to a 3.9% increase in same-store sales. The 53rd week of 2012...

  • Page 34
    ...52 new restaurants that opened in 2013 and 3 franchised locations that were acquired in 2013. Depreciation and amortization expense as a percentage of total revenue increased to 6.7% in 2013 from 6.5% in 2012 due primarily to higher depreciation on company-owned buildings and amortization related to...

  • Page 35
    ... in refundable income taxes was due to the timing of payments. The increase in accounts receivable was primarily due to an increase in credit card receivable due to the timing of the holidays near our fiscal year end. Net cash used in investing activities for 2014, 2013, and 2012, was $179.0 million...

  • Page 36
    ...food service personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage have increased our labor costs in the last three years. In addition, costs associated with our operating leases, such as taxes, maintenance, repairs and insurance...

  • Page 37
    ... of factors, including increases or decreases in same-store sales, changes in commodity prices, the timing and number of new restaurant openings and related preopening expenses, asset impairment charges, store closing charges, general economic conditions, and stock-based compensation. As a result...

  • Page 38
    ... costs and expenses Income from operations Investment income (loss) Earnings before income taxes Income tax expense Net earnings including noncontrolling interests Net loss attributable to noncontrolling interests Net earnings attributable to Buffalo Wild Wings 284,425 19,939 304,364 Jun 30, 2013...

  • Page 39
    ... Total costs and expenses Income from operations Investment income (loss) Earnings before income taxes Income tax expense Net earnings including noncontrolling interests Net loss attributable to noncontrolling interests Net earnings attributable to Buffalo Wild Wings 93.4% 6.6 100.0 Jun 30, 2013 93...

  • Page 40
    ... 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...

  • Page 41
    ... Quarterly Operations." BUFFALO WILD WINGS, INC. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 41 Consolidated Balance Sheets as of December 28, 2014 and December 29, 2013 42 Consolidated Statements of Earnings for the Fiscal Years Ended December...

  • Page 42
    ... three year period ended December 28, 2014, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Buffalo Wild Wings, Inc.'s internal control over financial reporting...

  • Page 43
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 28, 2014 and December 29, 2013 (Dollar amounts in thousands) December 28, 2014 Assets Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net of allowance of $25 Inventory Prepaid expenses...

  • Page 44
    ... STATEMENTS OF EARNINGS Fiscal years ended December 28, 2014, December 29, 2013, and December 30, 2012 (Amounts in thousands except per share data) Fiscal years ended December 28, December 29, December 30, 2014 2013 2012 Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs...

  • Page 45
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF TOTAL EQUITY Fiscal years ended December 28, 2014, December 29, 2013, and December 30, 2012 (Dollar amounts in thousands) Buffalo Wild Wings Stockholders' Equity Accumulated Other Comprehensive (Loss) Income (295) Common Stock ...

  • Page 46
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal years ended December 28, 2014, December 29, 2013, and December 30, 2012 (Dollar amounts in thousands) Fiscal years ended December 29, December 30, 2013 2012 71,554 57,275 December 28, 2014 Cash flows from ...

  • Page 47
    ... Buffalo Wild Wings and Rusty Taco restaurant franchises. In exchange for the initial and continuing franchise fees received, we give franchisees the right to use the brand names. We operate as a single segment for reporting purposes. At December 28, 2014, December 29, 2013, and December 30, 2012...

  • Page 48
    ...that purchase requirements do not create a market risk. The primary food product used by company-owned and franchised restaurants is chicken wings. The price we pay for chicken wings is determined based on the average of the previous month's spot rates. For fiscal 2014, 2013, and 2012, chicken wings...

  • Page 49
    ... Wild Wings and Rusty Taco trademarks, system, training, preopening assistance, and restaurant operating assistance in exchange for area development fees, franchise fees, and royalties of 5% of a restaurant's sales. Franchise fee revenue from individual franchise sales is recognized upon the opening...

  • Page 50
    ... are calculated based upon monthly purchases. We generally receive payment from vendors approximately 30 days from the end of a month for that month's purchases. During fiscal 2014, 2013, and 2012, vendor allowances were recorded as a reduction in inventoriable costs, and cost of sales was reduced...

  • Page 51
    ...$649, respectively. The related total tax benefit recognized in 2013 was $3,913. Total stock-based compensation expense recognized in the consolidated statement of earnings for fiscal year 2012 was $8,119 before income taxes and consisted of restricted stock units, stock options, and ESPP expense of...

  • Page 52
    ...Expected life of options 0.0% 35.7% 1.7% 5 December 30, 2012 0.0% 53.6% 1.1% 5 Expected dividend yield Expected stock price volatility Risk-free interest rate Expected life of options Employee Stock Purchase Plan December 28, December 29, December 30, 2014 2013 2012 0.0% 0.0% 0.0% 45.5 - 45.9% 46...

  • Page 53
    ... sales and profitability. These inputs are categorized as Level 3 inputs. The inputs used represent management's assumptions about what information market participants would use in pricing the assets and are based upon the best information available at the balance sheet date. During 2014 and 2013...

  • Page 54
    ...maturity debt securities mature within one year and had an aggregate fair value of $2,770 at December 30, 2012. Trading securities represent investments held for future needs of our non-qualified deferred compensation plan. (4) Property and Equipment Property and equipment consisted of the following...

  • Page 55
    ... expense as of December 28, 2014 was as follows: Fiscal year ending: 2015 2016 2017 2018 2019 Thereafter Total future amortization expense (6) Investments in Affiliates During 2013, we acquired a minority equity investment in Pie Squared Holdings, LLC, a California-based restaurant concept, as well...

  • Page 56
    ... expenses, require payment of percentage rents based upon sales levels. Rent expense, excluding our proportionate share of real estate taxes and building operating expenses, was as follows: Fiscal Years Ended December 28, December 29, December 30, 2014 2013 2012 $ 61,286 53,651 43,780 1,019 715...

  • Page 57
    ... Fiscal Years Ended December 28, December 29, December 30, 2014 2013 2012 $ 47,392 35,537 29,179 4,399 3,145 2,433 (9,418) (8,097) (6,006) (1,021) (604) 487 $ 41,352 29,981 26,093 Expected federal income tax expense State income tax expense, net of federal effect General business credits Other, net...

  • Page 58
    ... tax positions related to prior years Reductions based on settlements with tax authorities Reductions based on expiration of statute of limitations End of year We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal 2014, 2013, and 2012...

  • Page 59
    ...income tax examinations by tax authorities for fiscal years before 2010. We regularly assess and reevaluate tax uncertainties by considering changes in current tax law, recent court decisions, and changes in the business. We do not anticipate total unrecognized tax benefits will significantly change...

  • Page 60
    ...income taxes, based on our closing stock price of $183.08 as of the last business day of the year ended December 28, 2014, which would have been received by the optionees had all options been exercised on that date. As of December 28, 2014, total unrecognized stock-based compensation expense related...

  • Page 61
    ... per common share for fiscal 2014, 2013, and 2012: Fiscal year ended December 28, 2014 Earnings Shares Per-share (numerator) (denominator) amount $ 94,094 94,094 18,907,801 $ 4.98 - 74,519 - 19,211 $ 94,094 19,001,531 $ 4.95 60 Net earnings attributable to Buffalo Wild Wings Earnings per common...

  • Page 62
    ...20,484 282,093 Stock options Restricted stock units (12) Supplemental Disclosures of Cash Flow Information Fiscal Years Ended December 28, December 29, December 30, 2014 2013 2012 Cash paid during the period for: Income taxes Noncash financing and investing transactions: Property and equipment not...

  • Page 63
    ... other related costs. These charges were recognized as a part of the loss on asset disposals and impairment on our accompanying consolidated statements of earnings. The following is a rollforward of the store closing reserve: Fiscal Years Ended December 28, December 29, December 30, 2014 2013 2012...

  • Page 64
    ... seven Rusty Taco restaurants. During 2013, we acquired 3 Buffalo Wild Wings franchised restaurants through one acquisition. The total purchase price in 2014 and 2013 was $30,497 and $4,297, respectively, and was primarily paid in cash funded by cash from operations and the sale of marketable...

  • Page 65
    ...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 Securities and Exchange Commission's rules and forms. Management's Report on Internal Control over Financial Reporting Our management is...

  • Page 66
    ...Over Financial Reporting There were no changes in the our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not...

  • Page 67
    ...inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Buffalo Wild Wings, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 28, 2014, based on criteria...

  • Page 68
    ... "Executive Officers," and the sections entitled "Election of Directors," "Compliance with Section 16(a) of the Exchange Act," and "Corporate Governance" appearing in our Proxy Statement to be delivered to shareholders in connection with the 2015 Annual Meeting of Shareholders. Such information is...

  • Page 69
    ...Report of Independent Registered Public Accounting Firm dated February 20, 2015 Consolidated Balance Sheets as of December 28, 2014 and December 29, 2013 Consolidated Statements of Earnings for the Fiscal Years Ended December 28, 2014, December 29, 2013, and December 30, 2012 Consolidated Statements...

  • Page 70
    SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 20, 2015 BUFFALO WILD WINGS, INC. By SALLY J. SMITH Sally J. Smith Chief Executive Officer and President ...

  • Page 71
    ...Form 10Q for the fiscal quarter ended June 29, 2008) 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) Form of specimen certificate representing Buffalo Wild Wings, Inc.'s common stock (incorporated by reference to...

  • Page 72
    ...-Oxley Act of 2002 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Nevada Gaming Regulation The following financial statements from the Company's 10-K for the fiscal year ended December 28, 2014, formatted in XBRL: (i) Consolidated Balance Sheet...