Buffalo Wild Wings 2011 Annual Report Download

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3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 25, 2011
or
2
22
2 Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to .
Commission File Number: 000-24743
BUFFALO WILD WINGS, INC.
(Exact name of registrant as specified in its charter)
Minnesota
No. 31-1455915
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
5500 Wayzata Boulevard, Suite 1600, Minneapolis, MN 55416
(Address of Principal Executive Offices)
Registrant’s telephone number (952) 593-9943
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, no par value
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES 2 NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES 2 NO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YES NO 2
Indicate by a checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES NO 2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. 2
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer 2 Non-Accelerated Filer 2 Smaller Reporting Company 2
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange
Act). YES 2 NO
The aggregate market value of the voting stock held by non-affiliates was $1.1 billion based on the closing sale price of the
Company’s Common Stock as reported on the NASDAQ Stock Market on June 24, 2011.
The number of shares outstanding of the registrant’s common stock as of February 10, 2012: 18,377,920 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2012 Annual Meeting of Shareholders are incorporated by reference into Part III of this
report.

Table of contents

  • Page 1
    ... in Exchange Act Rule 12b-2 of the Exchange YES 2 NO  The aggregate market value of the voting stock held by non-affiliates was $1.1 billion based on the closing sale price of the Company's Common Stock as reported on the NASDAQ Stock Market on June 24, 2011. The number of shares outstanding of...

  • Page 2
    ... Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation...

  • Page 3
    ... a good one. Buffalo Wild Wings® restaurants have widespread appeal and have won dozens of "Best Wings" and "Best Sports Bar" awards across the country. Our made-to-order menu items are enhanced by the bold flavor profile of our 16 signature sauces and 4 signature seasonings, ranging from Sweet BBQ...

  • Page 4
    ... and develop multi-unit and multi-brand operations. The Buffalo Wild Wings® Menu Our restaurants feature a variety of menu items including our Buffalo, New York-style chicken wings spun in one of our signature sauces from sweet to screamin' hot: Sweet BBQ, Teriyaki, Mild, Parmesan Garlic, Medium...

  • Page 5
    ... typically open on a daily basis from 11 a.m. to 2 a.m., although closing times vary depending on the day of the week and applicable regulations governing the sale of alcoholic beverages. Our franchise agreements require franchisees to operate their restaurants for a minimum of 12 hours a day. Site...

  • Page 6
    ... engaging Buffalo Wild Wings experience for each and every Guest. Our managers are trained using a hands-on education process during a seven-week period at one of our Certified Training Restaurants. During this training period, our manager trainees work in and learn about key aspects of the business...

  • Page 7
    ... obtain the lowest possible prices for our ingredients, products and supplies, our purchasing team negotiates prices based on the system-wide usage of both company-owned and franchised restaurants. We believe that competitively priced, high quality alternative manufacturers, suppliers, growers and...

  • Page 8
    ... restaurant-level financial statements on a quarterly and annual basis. Based on custom-developed software as well as industry-specific applications, this technology allows us to monitor business performance and optimizes food and labor costs. This year we completed the pilot test of a new point...

  • Page 9
    ... as wage and hour requirements; workers' compensation insurance; unemployment and other taxes; working and safety conditions, and citizenship and immigration status. Significant additional government-imposed regulations under the Fair Labor Standards Act and similar laws related to minimum wages...

  • Page 10
    ..., has served as our Executive Vice President, Chief Financial Officer and Treasurer since July 1996. She served as our Controller from January 1995 to July 1996. Ms. Twinem also served as a director on our Board from June 2002 to September 2003. Prior to joining Buffalo Wild Wings, she served as the...

  • Page 11
    ... food product used by our company-owned and franchised restaurants is chicken wings. We work to counteract the effect of the volatility of chicken wing prices, which can significantly change our cost of sales and cash flow, with the introduction of new menu items, effective marketing promotions...

  • Page 12
    ... Our inability to effectively manage supply chain risk could increase our costs and limit the availability of products critical to our restaurant operations. We may experience higher-than-anticipated costs associated with the opening of new restaurants or with the closing, relocating, and remodeling...

  • Page 13
    ... between the purchase price of acquired companies and the related fair values of net assets acquired. We test goodwill for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We compare the carrying value of a reporting unit, including...

  • Page 14
    ..., minimum wages, employee benefits, insurance arrangements, construction, utilities, and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results...

  • Page 15
    ... hourly Team Members. The inability to recruit, develop and retain these individuals may delay the planned openings of new restaurants or result in high employee turnover in existing restaurants, thus increasing the cost to efficiently operate our restaurants. This could inhibit our expansion plans...

  • Page 16
    ... suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of the restaurants, including minimum age of guests and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and dispensing...

  • Page 17
    ... compensation, general liability, property, health, and directors' and officers' liability) may increase at any time, thereby further increasing our costs. The dollar amount of claims that we actually experience under our workers' compensation and general liability insurance, for which we carry high...

  • Page 18
    ... or 15-year terms, generally including options to extend the terms. We typically lease our restaurant facilities under "triple net" leases that require us to pay minimum rent, real estate taxes, maintenance costs and insurance premiums and, in some instances, percentage rent based on sales in excess...

  • Page 19
    ... New Hampshire New Jersey New Mexico New York ...business, including claims arising from personal injuries, contract claims, franchise-related claims, dram shop claims, employment-related claims and claims from guests or employees alleging injury, illness or other food quality, health or operational...

  • Page 20
    ...name and/or street name brokerage accounts. Dividends We have never declared or paid cash dividends on our Common Stock. It is our policy to preserve cash for development and other working capital needs and, therefore, do not currently have plans to pay any cash dividends. Our future dividend policy...

  • Page 21
    ...26/10 12/25/11 Buffalo Wild Wings, Inc. NASDAQ Composite S&P 600 Restaurants Index *$100 invested on 12/31/06 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis. Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. 12...

  • Page 22
    ...Consolidated Statements of Earnings Data: Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset disposals and store...

  • Page 23
    ... restaurant units, restaurant sales, same-store sales, and average weekly sales volumes. Management believes such sales information is an important measure of our performance, and is useful in assessing consumer acceptance of the Buffalo Wild Wings® Grill & Bar concept and the overall health...

  • Page 24
    ... on assets used by our company-owned restaurants and amortization of reacquired franchise rights. Preopening costs are those costs associated with opening new company-owned restaurants and will vary annually based on the number of new locations opening and under construction and the markets we...

  • Page 25
    ... are calculated based upon monthly purchases. We generally receive payment from vendors approximately 30 days after the end of a month for that month's purchases. During fiscal 2011, 2010, and 2009, vendor allowances were recorded as a reduction in inventoriable costs, and cost of sales was reduced...

  • Page 26
    ...Fiscal Years Ended Dec. 25, 2011 Dec. 26, 2010 Dec. 27, 2009 Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset...

  • Page 27
    ...,043 Increases in comparable same-store sales are as follows (based on restaurants operating at least fifteen months): Fiscal Years Ended Dec. 25, 2011 Dec. 26, 2010 Dec. 27, 2009 Company-owned same-store sales Franchised same-store sales 6.1% 3.6 0.6% (0.2) 3.1% 3.4 The annual average prices...

  • Page 28
    ... in investment income was due to a loss 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 $60.5 million in 2011 compared to $72.1 million in 2010. Provision for income taxes increased...

  • Page 29
    ... to higher payroll-related costs including incentive compensation and wages. Net cash provided by operating activities in 2010 consisted primarily of net earnings adjusted for non-cash expenses and an increase in accounts payable partially offset by an increase in refundable income taxes and trading...

  • Page 30
    ... our corporate offices. Lease terms are generally 10 to 15 years with renewal options and generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance and other operating costs. Some restaurant leases provide for contingent rental payments based on sales...

  • Page 31
    ... same-store sales, changes in commodity prices, the timing and number of new restaurant openings and related preopening expenses, asset impairment charges, store closing charges, general economic conditions, stock-based compensation, and seasonal fluctuations. As a result, our results of operations...

  • Page 32
    ...Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset disposals and store closures Total costs and expenses Income from operations Investment...

  • Page 33
    ...Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset disposals and store closures Total costs and expenses Income from operations Investment...

  • Page 34
    ... are such that our purchase requirements do not create a market risk. The primary food product used by company-owned and franchised restaurants is chicken wings. We work to counteract the effect of the volatility of chicken wing prices, which can significantly change our cost of sales and cash flow...

  • Page 35
    ... of Quarterly Operations." BUFFALO WILD WINGS, INC. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 25, 2011 and December 26, 2010 Consolidated Statements of Earnings for the Fiscal Years Ended December 25...

  • Page 36
    ... accompanying financial statement schedule for each of the fiscal years in the three-year period ended December 25, 2011. We also have audited Buffalo Wild Wings, Inc.'s internal control over financial reporting as of December 25, 2011, based on criteria established in Internal Control - Integrated...

  • Page 37
    ... income taxes Restricted assets Total current assets Property and equipment, net Other assets Goodwill Total assets Liabilities and Stockholders' Equity Current liabilities: Unearned franchise fees Accounts payable Accrued compensation and benefits Accrued expenses Current portion of deferred lease...

  • Page 38
    ...Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales Labor Operating Occupancy Depreciation and amortization General and administrative Preopening Loss on asset disposals and store closures Total costs and expenses Income from operations Investment...

  • Page 39
    ... Fiscal years ended December 25, 2011, December 26, 2010, and December 27, 2009 (Dollar amounts in thousands) Common Stock Shares Amount Accumulated Other Comprehensive (Loss) Income Retained Earnings Total Balance at December 28, 2008 Net earnings Shares issued under employee stock purchase plan...

  • Page 40
    ...lease credits Deferred income taxes Stock-based compensation Excess tax benefit from stock issuance Change in operating assets and liabilities, net of effect of acquisition: Trading securities Accounts receivable Inventory Prepaid expenses Other assets Unearned franchise fees Accounts payable Income...

  • Page 41
    ... of Significant Accounting Policies (a) Nature of Business References in these financial statement footnotes to "company", "we", "us", and "our" refer to the business of Buffalo Wild Wings, Inc. and our subsidiaries. We were organized for the purpose of operating Buffalo Wild Wings® restaurants, as...

  • Page 42
    ... that purchase requirements do not create a market risk. The primary food product used by company-owned and franchised restaurants is chicken wings. Chicken wings are purchased by us at market prices. For fiscal 2011, 2010, and 2009, chicken wings were 19%, 24%, and 25%, of restaurant cost of sales...

  • Page 43
    ... provide the use of the Buffalo Wild Wings trademarks, system, training, preopening assistance, and restaurant operating assistance in exchange for area development fees, franchise fees, and royalties of 5% of a restaurant's sales. Franchise fee revenue from individual franchise sales is recognized...

  • Page 44
    ... as revenue at the point of the delivery of meals and services. All sales taxes are presented on a net basis and are excluded from revenue. (o) Franchise Operations We enter into franchise agreements with unrelated third parties to build and operate restaurants using the Buffalo Wild Wings brand...

  • Page 45
    ...compensation expense recognized in the consolidated statement of earnings for fiscal year 2011 was $11,383 before income taxes and consisted of restricted stock units, stock options, and employee stock purchase plan (ESPP) expense of $9,985, $920 and $478, respectively. The related total tax benefit...

  • Page 46
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2011 and December 26, 2010 (Dollar amounts in thousands, except per-share amounts) Total stock-based compensation expense recognized in the consolidated statement of earnings for fiscal year 2010 was ...

  • Page 47
    ... market funds which are valued using Level 1 and Level 2 approaches. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the fiscal years ended December 25, 2011, December 26, 2010, and December 27, 2009. Our financial assets and liabilities requiring a fair-value...

  • Page 48
    ... relate primarily to future assumptions regarding restaurant sales and profitability. These inputs are categorized as Level 3 inputs. The inputs used represent management's assumptions about what information market participants would use in pricing the assets and are based upon the best information...

  • Page 49
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2011 and December 26, 2010 (Dollar amounts in thousands, except per-share amounts) (4) Property and Equipment Property and equipment consisted of the following: December 25, 2011 December 26, 2010 ...

  • Page 50
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2011 and December 26, 2010 (Dollar amounts in thousands, except per-share amounts) (6) Lease Commitments We lease all of our restaurants and corporate offices under operating leases that have various ...

  • Page 51
    ... taxes (benefits) at the statutory rate of 35% to the actual provision for income taxes: Fiscal Years Ended December 25, 2011 December 26, 2010 December 27, 2009 Expected federal income tax expense State income tax expense, net of federal effect General business credits Other, net Total income tax...

  • Page 52
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2011 and December 26, 2010 (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 ...

  • Page 53
    ... 2018. We issue new shares of common stock upon exercise of stock options. Option activity is summarized for the year ended December 25, 2011 as follows: Average remaining contractual life (years) Number of shares Weighted average exercise price Aggregate Intrinsic Value Outstanding, December 26...

  • Page 54
    ... of the end of our fiscal year. The distribution of vested restricted stock units as common stock typically occurs in March of the following year. The common stock is issued to participants net of the number of shares needed for the required minimum employee withholding taxes. We issue new shares of...

  • Page 55
    ... per common share for fiscal 2011, 2010, and 2009: Fiscal year ended December 25, 2011 Earnings (numerator) Shares (denominator) Per-share amount Net earnings Earnings per common share Effect of dilutive securities - stock options Effect of dilutive securities - restricted stock units Earnings per...

  • Page 56
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 25, 2011 and December 26, 2010 (Dollar amounts in thousands, except per-share amounts) (11) Supplemental Disclosures of Cash Flow Information Fiscal Years Ended December 25, 2011 December 26, 2010 December...

  • Page 57
    ... 2011, we acquired 18 Buffalo Wild Wings franchised restaurants through three acquisitions. The total purchase price of $33,744, was paid in cash and was funded by cash from operations and the sale of marketable securities. The acquisitions were accounted for as a business combination. The assets...

  • Page 58
    ... our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the chief executive officer and chief financial...

  • Page 59
    ...Over Financial Reporting There were no changes in the our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not...

  • Page 60
    ...Board of Directors in the absence of such designation or identification. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is contained in the sections entitled "Executive Compensation" and "Compensation Discussion and Analysis" appearing in our Proxy Statement to be delivered to...

  • Page 61
    ... and can be found at Item 8 of this Form 10-K. Report of Independent Registered Public Accounting Firm dated February 21, 2011 Consolidated Balance Sheets as of December 25, 2011 and December 26, 2010 Consolidated Statements of Earnings for the Fiscal Years Ended December 25, 2011, December 26, 2010...

  • Page 62
    SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 21, 2012 BUFFALO WILD WINGS, INC. By /s/ SALLY J. SMITH Sally J. Smith Chief Executive Officer and ...

  • Page 63
    Buffalo Wild Wings, Inc. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Balance at Beginning of Period Additions Charged to Costs and Expenses Description Deductions From Reserves Balance at End of Period Allowance for doubtful accounts 2011 2010 2009 $ 25 25 25 98 - - 98 - - 25 25 25 63

  • Page 64
    ... Form 10-Q for the fiscal quarter ended June 29, 2008) Amended and Restated Bylaws, as Amended (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed May 27, 2009) Form of specimen certificate representing Buffalo Wild Wings, Inc.'s common stock (incorporated by reference...

  • Page 65
    ...Public Accounting Firm Power of Attorney (included on the signature page) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer... Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on...