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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 30, 2012
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 $1.5 billion based on the closing sale price of the
Company’s Common Stock as reported on the NASDAQ Stock Market on June 22, 2012.
The number of shares outstanding of the registrant’s common stock as of February 11, 2013: 18,635,931 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2013 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 $1.5 billion based on the closing sale price of the Company's Common Stock as reported on the NASDAQ Stock Market on June 22, 2012. 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 Item...

  • Page 3
    ... the Buffalo Wild Wings® brand; Deliver a unique guest experience; Offer boldly-flavored menu items with broad appeal; Create an inviting, neighborhood atmosphere; Focus on operational excellence; Open restaurants in new and existing domestic and international markets; and Increase same-store sales...

  • Page 4
    ... to support and develop multiunit 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...

  • Page 5
    ...Our marketing programs are designed to build awareness of our brand with sports fans, encouraging them to visit and ultimately develop a personal connection to Buffalo Wild Wings. These programs consistently drive trial, same-store sales and average check, and they support strong restaurant openings...

  • Page 6
    ... casual dining quality food with minimal wait times. Training. We provide thorough training for our management and hourly Team Members to prepare them for their role in delivering a positively engaging Buffalo Wild Wings experience for each and every guest. Our managers are trained using a hands-on...

  • Page 7
    ...introduction of new menu items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases and fluctuations. Current month chicken wing prices are determined based on the average of...

  • Page 8
    ... management through web-based decision support and analysis tools. Franchisees are required to report sales on a daily basis through an on-line reporting network and submit their restaurant-level financial statements on a quarterly and annual basis. This year we completed the rollout of a new point...

  • Page 9
    ...that our working conditions and compensation packages are competitive and consider our relations with our Team Members to be good. Executive Officers The following sets forth certain information about our executive officers: Sally J. Smith, 55, has served as our Chief Executive Officer and President...

  • Page 10
    ...introduction of new menu items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases and fluctuations. Current month chicken wing prices are determined based on the average of...

  • Page 11
    ...Additional information related to chicken wing prices is included in Item 7 under "Results of Operations." If we are unable to successfully open new restaurants, our revenue growth rate and profits may be reduced. To successfully expand our business, we must open new Buffalo Wild Wings® restaurants...

  • Page 12
    ...those markets. In addition, new restaurants added in existing markets may not achieve sales and operating performance at the same level as established restaurants in the market. Failure of our internal controls over financial reporting could harm our business and financial results. Our management is...

  • Page 13
    ... respect to price, service, location, concept and the type and quality of food. We also face intense competition for real estate sites, qualified management personnel, and hourly restaurant staff. Our success depends substantially on the value of our brand and our reputation for offering guests an...

  • 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
    ... sales taxes. A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, mandated training for employees, increased tax reporting and tax payment requirements...

  • Page 16
    ... Buffalo, New York-style chicken wings, our boneless wings, other food and beverage items, and appeal of sports bars and casual dining restaurants. We also depend on trends toward consumers eating away from home. Shifts in these consumer preferences could negatively affect our future profitability...

  • 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
    ...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 concerns. To date, none of these types of litigation, most of which are typically covered by insurance, has...

  • Page 20
    ... needs and, therefore, do not currently have plans to pay any cash dividends. Our future dividend policy will be determined by our Board of Directors and will depend on various factors, including our results of operations, financial condition, anticipated cash needs and plans for expansion. 20

  • Page 21
    ...percentage change in the cumulative total shareholder return on our Common Stock for the five-year period ended December 30, 2012 with the cumulative total return on the Nasdaq Composite and the S&P 600 Restaurants Index. The comparison assumes $100 was invested in Buffalo Wild Wings Common Stock on...

  • Page 22
    ... Financial Statements and related notes thereto set forth in Item 8 of this Form 10-K. Fiscal Years Ended (1) Dec. 30, 2012 Consolidated Statements of Earnings Data: Revenue: Restaurant sales Franchise royalties and fees Total revenue Costs and expenses: Restaurant operating costs: Cost of sales...

  • Page 23
    ... on company-owned and franchised 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...

  • Page 24
    ... and includes the costs associated with closures of locations and normal asset retirements. General and administrative expenses are related to home office and field support provided to both company-owned restaurant and franchising operations. We operate on a 52 or 53-week fiscal year ending on the...

  • Page 25
    ...days after the end of a month for that month's purchases. During fiscal 2012, 2011, and 2010, vendor allowances were recorded as a reduction in inventoriable costs, and cost of sales was reduced by $8.7 million, $7.0 million, and $6.4 million, respectively. Revenue Recognition - Franchise Operations...

  • Page 26
    ... net earnings levels for future years. Results of Operations Our operating results for 2012, 2011, and 2010, are expressed below as a percentage of total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant sales. Fiscal Years Ended...

  • Page 27
    ...(based on restaurants operating at least fifteen months): Fiscal Years Ended Dec. 30, 2012 Dec. 25, 2011 Dec. 26, 2010 Company-owned same-store sales Franchised same-store sales 6.6% 6.5 6.1% 3.6 0.6% (0.2) The annual average prices paid per pound for chicken wings for company-owned restaurants...

  • Page 28
    ...anticipated on our 2012 tax return related to the favorable impact of the American Taxpayer Relief Tax Act of 2012. We estimate the 53rd week in fiscal 2012 contributed approximately $0.19 of earnings per diluted share. Fiscal Year 2011 Compared to Fiscal Year 2010 Restaurant sales increased by $162...

  • Page 29
    ... 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 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
    ... store closures Total costs and expenses Income from operations Investment income (loss) Earnings before income taxes Income tax expense Net earnings Earnings per common share - basic Earnings per common share - diluted Weighted average shares outstanding - basic Weighted average shares outstanding...

  • 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
    ...introduction of new menu items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We also explore purchasing strategies to reduce the severity of cost increases and fluctuations. Current month chicken wing prices are determined based on the average of...

  • 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 30, 2012 and December 25, 2011 Consolidated Statements of Earnings for the Fiscal Years Ended December 30...

  • Page 36
    ... the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Buffalo Wild Wings, Inc.'s internal control over financial reporting as of December 30, 2012, based on criteria established in Internal Control...

  • Page 37
    BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 30, 2012 and December 25, 2011 (Dollar amounts in thousands) December 30, 2012 December 25, 2011 Assets Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net of allowance of $25 ...

  • Page 38
    ... except per share data) Fiscal years ended December 30, 2012 December 25, 2011 December 26, 2010 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...

  • Page 39
    ...comprehensive loss Shares issued under employee stock purchase plan Shares issued from restricted stock units Units effectively repurchased for required employee withholding taxes Exercise of stock options Excess tax benefit from stock issued Stock-based compensation Balance at December 25, 2011 Net...

  • Page 40
    ...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 taxes Accrued...

  • Page 41
    ... are classified as current assets based upon our intent and ability to use any and all of the securities as necessary to satisfy the operational requirements of our business. Realized gains and losses from the sale of available-for-sale securities were not material for fiscal 2012, 2011, and 2010...

  • 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. Current month chicken wing prices are determined based on the average of the previous month's spot rates. For fiscal 2012, 2011, and 2010, chicken wings...

  • 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
    ..., net of estimated forfeitures. All stock-based compensation is recognized as general and administrative expense. Total stock-based compensation expense recognized in the consolidated statement of earnings for fiscal year 2012 was $8,119 before income taxes and consisted of restricted stock units...

  • Page 46
    ...Notes to Consolidated Financial Statements December 30, 2012 and December 25, 2011 (Dollar amounts in thousands, except per-share amounts) Total stock-based compensation expense recognized in the consolidated statement of earnings for fiscal year 2011 was $11,383 before income taxes and consisted of...

  • Page 47
    ... approach, using observable direct and indirect inputs for municipal bonds. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the fiscal years ended December 30, 2012, December 25, 2011, and December 26, 2010. Our financial assets and liabilities requiring a fair...

  • 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
    ... Reacquired franchise rights, net $ $ 43,020 (5,650) 37,370 23,370 (2,342) 21,028 Amortization expense related to reacquired franchise rights for fiscal 2012, 2011, and 2010 was $3,308, $910, and $614, respectively. The weighted average amortization period is 14 years. Estimated future...

  • Page 50
    ... typically require us to pay our share of common area maintenance, insurance, real estate taxes, and other operating costs. Certain leases also include provisions for contingent rentals based upon sales. Future minimum rental payments due under noncancelable operating leases for existing restaurants...

  • Page 51
    ... taxes (benefits) at the statutory rate of 35% to the actual provision for income taxes: Fiscal Years Ended December 30, 2012 December 25, 2011 December 26, 2010 Expected federal income tax expense State income tax expense, net of federal effect General business credits Other, net Total income tax...

  • Page 52
    ... net operating losses begin expiring in 2030. The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits: Fiscal Years Ended December 30, 2012 December 25, 2011 Beginning of year Additions based on tax positions related to the current year Reductions based...

  • Page 53
    ... income taxes, based on our closing stock price of $71.94 as of the last business day of the year ended December 30, 2012, which would have been received by the optionees had all options been exercised on that date. As of December 30, 2012, total unrecognized stock-based compensation expense related...

  • 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 2012, 2011, and 2010: Fiscal year ended December 30, 2012 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
    ... Flow Information Fiscal Years Ended December 30, 2012 December 25, 2011 December 26, 2010 Cash paid during the period for: Income taxes Noncash financing and investing transactions: Property and equipment not yet paid for Tax withholding for restricted stock units Goodwill adjustment (12) Loss on...

  • Page 57
    ...acquired 18 Buffalo Wild Wings franchised restaurants through three acquisitions. The total purchase price in 2012 and 2011 was $43,580 and $33,744, respectively, and was paid in cash and was funded by cash from operations and the sale of marketable securities. The acquisitions were accounted for as...

  • Page 58
    ... at a rate per annum equal to 0.15%, if our consolidated total leverage ratio is less than or equal to 0.50, or 0.20% if our consolidated total leverage ratio is greater than or equal to 0.51. The Credit Agreement requires us to maintain (a) consolidated coverage ratio as of the end of each fiscal...

  • Page 59
    ... 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 60
    ...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 61
    ... of Buffalo Wild Wings, Inc. and subsidiaries as of December 30, 2012 and December 25, 2011, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for each of the fiscal years in the three-year period ended December 30, 2012, and our report...

  • Page 62
    ... Information required by this item is contained in Part I of this document under the heading "Executive Officers," and the sections entitled "Election of Directors," "Compliance with Section 16(a) of the Exchange Act," and "Corporate Governance" appearing in our Proxy Statement to be delivered...

  • Page 63
    ...can be found at Item 8 of this Form 10-K. Report of Independent Registered Public Accounting Firm dated February 28, 2013 Consolidated Balance Sheets as of December 30, 2012 and December 25, 2011 Consolidated Statements of Earnings for the Fiscal Years Ended December 30, 2012, December 25, 2011, and...

  • Page 64
    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 27, 2013 BUFFALO WILD WINGS, INC. By /s/ SALLY J. SMITH Sally J. Smith Chief Executive Officer and ...

  • Page 65
    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 2012 2011 2010 $ 25 25 25 - 98 - - 98 - 25 25 25 65

  • Page 66
    ... Plan (incorporated by reference to Appendix A to our Definitive Proxy Statement filed on March 22, 2012) (1) Form of Notice of Performance-Based Restricted Stock Unit Award (Officer Level) as of March 1, 2009 (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the fiscal quarter ended...

  • Page 67
    ...2012 with Andrew D. Block (1) List of Subsidiaries Consent of KPMG LLP, Independent Registered 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...