Buffalo Wild Wings 2005 Annual Report Download - page 44

RECENT ACCOUNTING PRONOUNCEMENTS
In October 2005, the FASB issued Staff Position No. FAS 13−1, "Accounting
for Rental Costs Incurred During a Construction Period" ("FSP 13−1"). FSP 13−1
is effective for the first reporting period beginning after December 15, 2005.
FSP 13−1 states that rental costs associated with operating leases must be
recognized as rental expense allocated on a straight−line basis over the lease
term, which includes the construction period. We will adopt this new
pronouncement in our first quarter of fiscal 2006. The adoption of FSP 13−1 is
expected to increase our preopening costs by $30,000 per company−owned
restaurant opening in 2006.
In November 2005, the FASB issued Staff Position No. FAS 115−1, "The
Meaning of Other−Than−Temporary Impairment and Its Application to Certain
Investments" ("FSP 115−1"). FSP 115−1 provides accounting guidance for
identifying and recognizing other−than−temporary impairments of debt and equity
securities, as well as cost method investments in addition to disclosure
requirements. FSP 115−1 is effective for reporting periods beginning after
December 15, 2005, and earlier application is permitted. We will adopt this new
pronouncement in our first quarter of fiscal 2006. The adoption of FSP 115−1 is
not expected to have a material impact on our consolidated financial statements.
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (Revised 2004) (SFAS No.
123R), Shared−Based Payment. SFAS 123R will require us to, among other things,
measure all employee stock−based compensation awards using a fair value method
and record the expense in our consolidated financial statements. The provisions
of SFAS 123R, as amended by SEC Staff Accounting Bulletin No. 107, "Share−Based
Payment," are effective no later than the beginning of the next fiscal year that
begins after June 15, 2005. We will adopt the new requirements using the
modified prospective transition method in our first fiscal quarter of 2006,
which ends March 26, 2006. Under that method, we will recognize compensation
costs for new grants of stock−based awards, awards modified after the effective
date, and the remaining portion of the fair value of the unvested awards at the
adoption date. In addition to the recognition of expense in the financial
statements, under SFAS 123R, any excess tax benefits received upon exercise of
options will be presented as a financing activity inflow in the statement of
cash flows rather than as an adjustment of operating activity as currently
presented. As SFAS 123R applies to the calculation of stock−based compensation
for restricted stock units, beginning in the first quarter of 2006, the value of
our restricted stock units will be based on the fair value of the shares on the
grant date instead of the fair value of the shares when vesting as the expense
is now calculated. Based on our current analysis and information, management has
determined that after adoption of SFAS 123R, our total stock−based compensation
will be approximately $3.0 million in 2006.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, by quarter, the unaudited quarterly
results of operations for the two most recent years, as well as the same data
expressed as a percentage of our total revenue for the periods presented.
Restaurant operating costs are expressed as a percentage of restaurant sales.
The information for each quarter is unaudited and we have prepared it on the
same basis as the audited financial statements appearing elsewhere in this
document. In the opinion of management, all necessary adjustments, consisting
only of normal recurring adjustments, have been included to present fairly the
unaudited quarterly results. All amounts, except per share amounts, are
expressed in thousands.
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 fresh chicken wing prices, the timing and number of new
restaurant openings and their related expenses, asset impairment charges, store
closing charges, general economic conditions 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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