Buffalo Wild Wings 2012 Annual Report Download - page 28

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Occupancy expenses increased by $10.1 million, or 23.0%, to $54.1 million in 2012 from $44.0 million in 2011 due
primarily to more restaurants being operated in 2012. Occupancy expenses as a percentage of restaurant sales decreased to
5.6% in 2012 from 6.1% in 2011 due primarily to leveraging rent costs with higher sales and a shift toward more company-
owned buildings.
Depreciation and amortization increased by $17.5 million, or 35.2%, to $67.5 million in 2012 from $49.9 million in
2011. The increase was primarily due to the additional depreciation related to the 62 additional company-owned restaurants
compared to 2011 and incremental amortization related to the acquisition of franchised restaurants.
General and administrative expenses increased by $11.5 million, or 15.8%, to $84.1 million in 2012 from $72.7 million
in 2011 primarily due to additional headcount partially offset by lower stock-based compensation expense. General and
administrative expenses as a percentage of total revenue decreased to 8.1% in 2012 from 9.3% in 2011. Exclusive of stock-
based compensation, our general and administrative expenses decreased to 7.3% of total revenue in 2012 from 7.8% in 2011.
This decrease was primarily due to the leveraging of salaried costs due to higher sales volumes and lower cash incentive
expense.
Preopening costs increased by $66,000 to $14.6 million in 2012 from $14.6 million in 2011. In 2012, we incurred costs
of $13.4 million for 51 new company-owned restaurants and costs of $1.2 million for restaurants that will open in 2013. In
2011, we incurred costs of $13.4 million for 50 new company-owned restaurants and costs of $1.1 million for restaurants that
opened in 2012. Average preopening cost per restaurant in 2012 and 2011 was $281,000 and $275,000, respectively.
Loss on asset disposals and store closures increased by $1.4 million to $3.3 million in 2012 from $1.9 million in 2011.
The expense in 2012 represented the closures costs for seven closed or relocated restaurants of $413,000, the write-off of
equipment related to the rollout of new point-of-sale and back-office systems of $1.3 million, and the write-off of
miscellaneous equipment and disposals due to remodels. The expense in 2011 represented the closures costs for eight closed
or relocated restaurants of $205,000, and the write-off of miscellaneous equipment and disposals due to remodels.
Investment income increased by $636,000 to $754,000 in 2012 from $118,000 in 2011. Our investments were in short-
term municipal securities and our deferred compensation investments were primarily in mutual funds. The increase in
investment income was due to gains on investments held for our deferred compensation plan. Cash and marketable securities
balances at the end of the year were $30.9 million in 2012 compared to $60.5 million in 2011.
Provision for income taxes increased $3.6 million to $26.1 million in 2012 from $22.5 million in 2011. The effective
tax rate as a percentage of income before taxes increased to 31.3% in 2012 from 30.8% in 2011. The rate increase was
primarily due to lower employment-related Federal tax credits. We estimate our effective tax rate in 2013 will be about
31.0% before we record an estimated $1.0 million tax reduction for the savings anticipated on our 2012 tax return related to
the favorable impact of the American Taxpayer Relief Tax Act of 2012.
We estimate the 53
rd
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 $162.2 million, or 29.2%, to $717.4 million in 2011 from $555.2 million in 2010. The
increase in restaurant sales was due to a $131.2 million increase associated with 50 new company-owned restaurants that
opened in 2011, 18 franchised locations that were acquired in 2011 and 84 company-owned restaurants opened before 2011
that did not meet the criteria for same-store sales for all or part of the year, and $31.1 million related to a 6.1% increase in
same-store sales.
Franchise royalties and fees increased by $9.0 million, or 15.5%, to $67.1 million in 2011 from $58.1 million in 2010.
The increase was due primarily to additional royalties collected from the 53 new franchised restaurants that opened in 2011
and a full year of operations for the 60 franchised restaurants that opened in 2010. Same-store sales for franchised restaurants
increased 3.6% in 2011.
Cost of sales increased by $42.4 million, or 26.4%, to $203.3 million in 2011 from $160.9 million in 2010 due
primarily to more restaurants being operated in 2011. Cost of sales as a percentage of restaurant sales decreased to 28.3% in
2011 from 29.0% in 2010, primarily due to lower chicken wing prices partially offset by a sales mix shift to appetizers. In
2011, the cost of chicken wings averaged $1.21 per pound which was a 23.4% decrease compared to 2010.
Labor expenses increased by $48.5 million, or 29.0%, to $215.6 million in 2011 from $167.2 million in 2010 due
primarily to more restaurants being operated in 2011. Labor expenses as a percentage of restaurant sales remained steady at