Buffalo Wild Wings 2005 Annual Report Download - page 62

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 2004 AND DECEMBER 25, 2005
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER−SHARE AMOUNTS)
Deferred tax assets and liabilities are classified as current and
noncurrent on the basis of the classification of the related asset or liability
for financial reporting. Deferred income taxes are provided for temporary
differences between the basis of assets and liabilities for financial reporting
purposes and income tax purposes. Temporary differences comprising the net
deferred tax assets and liabilities on the balance sheets are as follows:
Fiscal Years Ended
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
December 26, December 25,
2004 2005
−−−−−−−−−−−−−−−−− −−−−−−−−−−−−−−
Deferred tax assets:
Unearned franchise fees $ 900 834
Accrued vacation 248 149
Accrued compensation 231 335
Deferred lease credits 705 896
Other 205 214
−−−−−−−−−−−−−−−−− −−−−−−−−−−−−−−
$ 2,289 2,428
================= ==============
Deferred tax liability:
Depreciation $ 7,320 6,185
Prepaid expense 374 228
Other 53 −−
−−−−−−−−−−−−−−−−− −−−−−−−−−−−−−−
Total $ 7,747 6,413
================= ==============
The Company believes that, as a result of its historical income and
reversal of deferred tax liabilities, it is more likely than not that the
Company will realize its deferred tax assets.
(6) MANDATORILY REDEEMABLE PREFERRED STOCK
In 1999 and 2000, the Company issued 3,082,344 shares of Series A
preferred stock (Series A) at $2.75764. Series A was entitled to a cumulative
dividend of 12% before dividends could be paid on any other class of capital
stock. Series A was redeemable at the discretion of its holders in December 2004
for $15,100. The Company increased the carrying value of the Series A over the
four−year period for the difference between the issuance price and the
redemption value. For fiscal 2003, the carrying value of the Series A increased
by $1,452, with a corresponding decrease to retained earnings.
Each Series A share was convertible without the accrued dividend into 0.6
shares of common stock at any time or could be automatically converted into
common stock upon the issuance of common stock in an underwritten public
offering where the gross proceeds received by the Company equal or exceed $15
million and the public offering price equals or exceeds $11.65 per share. In
November 2003, the Company completed its public offering of common stock and the
Series A shares were automatically converted into 1,849,415 shares of common
stock. At the time of conversion, the Series A carrying value, including
cumulative dividends in arrears, amounted to $13,240 and was reclassed to common
stock.
(7) STOCKHOLDERS' EQUITY
(A) STOCK OPTIONS
The Company has 1.1 million shares of common stock reserved for issuance
under a stock−based compensation plan for employees, officers, and directors.
The option price for shares issued under this plan is to be not less than the
fair market value on the date of grant. Incentive stock options become
exercisable in four equal installments from the date of the grant and have a
contractual life of ten years. Nonqualified stock options issued pursuant to the
plan have varying vesting periods
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