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BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 27, 2009 and December 28, 2008
(Dollar amounts in thousands, except per-share amounts)
(7) Derivative Instruments
We use commodities derivatives to manage our exposure to commodity price fluctuations. We enter into options and future
contracts to reduce our risk of natural gas price fluctuations. These derivatives do not qualify for hedge accounting and changes in fair
value are included in current net income. These changes are classified as a component of restaurant operating expenses. All changes in
the fair value of these contracts are recorded in earnings in the period in which they occur. Net losses of $383 and $592 were
recognized in fiscal 2009 and 2008, respectively. The fair value of our derivative instruments as of December 27, 2009 and December
28, 2008 was $11 and $461, respectively, and is a liability in accrued expenses in the accompanying consolidated balance sheets. As
of December 27, 2009, the maximum length of time over which we are hedging our exposure to the variability in future cash flows
related to the purchase of natural gas is three months. As of December 27, 2009 and December 28, 2008 we were party to natural gas
swap contracts with notional values of $525 and $5,797, respectively.
(8) Income Taxes
We file a consolidated return in the United States Federal jurisdiction and in many state jurisdictions. The Internal Revenue
Service completed their examination of our 2005 U.S. Federal Income Tax Return in 2008. No proposed changes were made. With
few exceptions, we are no longer subject to state income tax examinations for years before 2005. We do not anticipate that total
unrecognized tax benefits will significantly change due to the settlement of audits and the expiration of statutes of limitations prior to
December 26, 2010. The provision for income taxes consisted of the following:
Fiscal Years Ended
December 27,
2009
December 28,
2008
December 30,
2007
Current:
Federal $ 7,917 4,082 8,320
State 2,023 1,525 1,438
Deferred:
Federal 4,824 6,125 (869)
State (7) 197 (25)
Total income tax expense $ 14,757 11,929 8,864
A reconciliation of the expected federal income taxes (benefits) at the statutory rate of 35% to the actual provision for income
taxes is as follows:
Fiscal Years Ended
December 27,
2009
December 28,
2008
December 30,
2007
Expected federal income tax expense $ 15,883 12,728 9,981
State income tax expense, net of federal
effect 1,310 1,119 919
Nondeductible expenses 69 116 144
Tax exempt income (85) (430) (824)
General business credits (2,713) (1,752) (1,121)
Other, net 293 148 (235)
Total income tax expense $ 14,757 11,929 8,864
51
Source: BUFFALO WILD WINGS INC, 10-K, February 26, 2010 Powered by Morningstar® Document Research℠