Buffalo Wild Wings 2009 Annual Report Download - page 51

Operating expenses increased by $12.2 million, or 25.5%, to $60.2 million in 2008 from $48.0 million in 2007 due primarily
to more restaurants being operated in 2008. Operating expenses as a percentage of restaurant sales decreased to 15.9% in 2008 from
16.4% in 2007. The decrease in operating expenses as a percentage of restaurant sales was primarily due to lower repair and
maintenance costs and general liability insurance costs offset by higher natural gas hedging cost for future months.
Occupancy expenses increased by $5.2 million, or 25.9%, to $25.2 million in 2008 from $20.0 million in 2007 due primarily
to more restaurants being operated in 2008. Occupancy expenses as a percentage of restaurant sales decreased to 6.6% in 2008 from
6.8% in 2007, primarily due to better leverage of rent expense with the higher sales levels.
Depreciation and amortization increased by $6.6 million, or 39.1%, to $23.6 million in 2008 from $17.0 million in 2007. The
increase was primarily due to the additional depreciation on 40 new restaurants in 2008 and 23 new restaurants opened in 2007 and
operated for a full year in 2008. Accelerated depreciation related to three restaurants which were relocated due to the Avado Brands,
Inc. site acquisitions also contributed to the increase.
General and administrative expenses increased by $4.4 million, or 12.3%, to $40.2 million in 2008 from $35.7 million in
2007. General and administrative expenses as a percentage of total revenue decreased to 9.5% in 2008 from 10.8 % in 2007. Exclusive
of stock-based compensation, our general and administrative expenses decreased to 8.3% of total revenue in 2008 from 9.7% in 2007.
This decrease was primarily due to lower professional fees, conference costs, and better leverage of our wage-related expenses.
Preopening costs increased by $3.4 million, or 75.4%, to $7.9 million in 2008 from $4.5 million in 2007. In 2008, we opened
31 new company-owned restaurants, incurred costs of approximately $490,000 for restaurants opening in 2009, and incurred $197,000
related to the acquisition of the nine franchised restaurants located in Nevada. In 2007, we opened 23 new company-owned restaurants
and incurred cost of approximately $47,000 for restaurants opening in 2008. Average preopening cost per restaurant in 2008 was
$203,000, excluding the eight Don Pablo’s conversions which averaged $316,000. Preopening costs for 2007 averaged $195,000 per
restaurant.
Loss on asset disposals and impairment increased by $1.1 million to $2.1 million in 2008 from $987,000 in 2007. The
expense in 2008 represented the asset impairment of one relocated restaurant of $395,000 and two underperforming restaurants of
$154,000, the closure costs for three relocated restaurants of $85,000, and $1.4 million for the write-off of miscellaneous equipment.
During 2007 we closed one underperforming restaurant in North Carolina resulting in store closing costs and a write-down of
equipment costs for $183,000. The remaining 2007 expense was for write-off of miscellaneous equipment.
Investment income decreased by $1.9 million to $970,000 in 2008 from $2.9 million in 2007. The majority of our
investments were in short-term municipal securities. The decrease in investment income was primarily due to lower rates of return on
investments and lower overall cash and marketable securities balances. Cash and marketable securities balances at the end of the year
were $44.5 million in 2008 compared to $68.0 million in 2007.
Provision for income taxes increased $3.1 million to $11.9 million in 2008 from $8.9 million in 2007. The effective tax rate
as a percentage of income before taxes increased to 32.8% in 2008 from 31.1% in 2007. The rate increase was primarily due to a
reduction in tax exempt interest income.
Liquidity and Capital Resources
Our primary liquidity and capital requirements have been for new restaurant construction, remodeling and maintaining our
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 December 27, 2009 was $53.2 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 December 27, 2009, nearly all excess cash was invested in high quality municipal securities.
During fiscal 2009, 2008, and 2007, net cash provided by operating activities was $79.3 million, $66.1 million, and $43.6
million, respectively. Net cash provided by operating activities in 2009 consisted primarily of net earnings adjusted for non-cash
expenses and an increase in accrued expenses partially offset by an increase in accounts receivable and trading securities. The increase
in accrued expenses was primarily due to increased payroll related costs including wages, incentive compensation, and deferred
Source: BUFFALO WILD WINGS INC, 10-K, February 26, 2010 Powered by Morningstar® Document Research℠