Buffalo Wild Wings 2010 Annual Report Download - page 29

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Occupancy expenses increased by $4.1 million, or 12.8%, to $36.5 million in 2010 from $32.4 million in 2009 due
primarily to more restaurants being operated in 2010. Occupancy expenses as a percentage of restaurant sales remained
consistent at 6.6% in 2010 and 2009.
Depreciation and amortization increased by $6.6 million, or 20.2%, to $39.2 million in 2010 from $32.6 million in
2009. The increase was primarily due to the additional depreciation on 35 new restaurants in 2010 and 36 new restaurants
opened in 2009 and operated for a full year in 2010.
General and administrative expenses increased by $4.6 million, or 9.3%, to $54.0 million in 2010 from $49.4 million in
2009. General and administrative expenses as a percentage of total revenue decreased to 8.8% in 2010 from 9.2% in 2009.
Exclusive of stock-based compensation, our general and administrative expenses decreased to 7.5% of total revenue in 2010
from 8.0% in 2009. This decrease was primarily due to lower cash incentive expense and better leverage of our wage-related
expenses, partially offset by higher professional fees and travel costs.
Preopening costs increased by $696,000, or 9.0%, to $8.4 million in 2010 from $7.7 million in 2009. In 2010, we
incurred costs of $8.0 million for 35 new company-owned restaurants and costs of $390,000 for restaurants that will open in
2011. In 2009, we incurred costs of $7.4 million for 36 new company-owned restaurants and costs of $242,000 for
restaurants that opened in 2010. Average preopening cost per restaurant in 2010 and 2009 was $235,000 and $220,000,
respectively.
Loss on asset disposals and impairment increased by $123,000 to $2.1 million in 2010 from $1.9 million in 2009. The
expense in 2010 represented the closure costs for eight closed or relocated restaurants of $310,000, and $1.7 million for the
write-off of miscellaneous equipment. During 2009, we impaired the assets of one underperforming restaurant for $237,000,
incurred $31,000 for the closure of one restaurant, and incurred costs of $1.6 million for the write-off of miscellaneous
equipment.
Investment income decreased by $393,000 to $684,000 in 2010 from $1.1 million in 2009. The majority of our
investments were in short-term municipal securities. The decrease in investment income was primarily due to lower earnings
on investments held for a deferred compensation plan and lower rates of return on investments. Cash and marketable
securities balances at the end of the year were $72.1 million in 2010 compared to $53.2 million in 2009.
Provision for income taxes increased $3.9 million to $18.6 million in 2010 from $14.8 million in 2009. The effective
tax rate as a percentage of income before taxes increased to 32.7% in 2010 from 32.5% in 2009. The rate increase was
primarily due to an increase in state income taxes. For 2011, we believe our effective tax rate will be about 33%.
Fiscal Year 2009 Compared to Fiscal Year 2008
Restaurant sales increased by $109.0 million, or 28.7%, to $488.7 million in 2009 from $379.7 million in 2008. The
increase in restaurant sales was due to a $97.9 million increase associated with the opening of 36 new company-owned
restaurants in 2009, nine restaurants acquired from our franchisee in Nevada in 2008, and the 52 company-owned restaurants
opened before 2009 that did not meet the criteria for same-store sales for all, or part, of the year and $11.1 million related to a
3.1% increase in same-store sales.
Franchise royalties and fees increased by $7.5 million, or 17.5%, to $50.2 million in 2009 from $42.7 million in 2008.
The increase was due primarily to additional royalties collected from the 59 new franchised restaurants that opened in 2009
and a full year of operations for the 46 franchised restaurants that opened in 2008. Same-store sales for franchised restaurants
increased 3.4%.
Cost of sales increased by $34.4 million, or 30.4%, to $147.7 million in 2009 from $113.3 million in 2008 due
primarily to more restaurants being operated in 2009. Cost of sales as a percentage of restaurant sales increased to 30.2% in
2009 from 29.8% in 2008. The increase in cost of sales as a percentage of restaurant sales was primarily due to the increase in
chicken wing prices partially offset by the leverage of food and alcohol costs as a result of menu price increases. Chicken
wing costs rose to $1.70 per pound in 2009 from $1.22 per pound in 2008.
Labor expenses increased by $31.9 million, or 27.9%, to $146.6 million in 2009 from $114.6 million in 2008 due
primarily to more restaurants being operated in 2009. Labor expenses as a percentage of restaurant sales decreased to 30.0%
in 2009 compared to 30.2% in 2008. Labor costs in our restaurants were lower than prior year due to restaurants having lower
hourly labor costs which were partially offset by higher medical costs.
Operating expenses increased by $16.2 million, or 26.8%, to $76.4 million in 2009 from $60.2 million in 2008 due
primarily to more restaurants being operated in 2009. Operating expenses as a percentage of restaurant sales decreased to