Buffalo Wild Wings 2013 Annual Report Download - page 24

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option valuation
model with the following assumptions:
Stock Options
December 29,
2013 December 30,
2012
December 25,
2011
Expected dividend yield 0.0% 0.0% 0.0%
Expected stock price volatility 48.5% 53.6% 54.1%
Risk-free interest rate 0.8% 1.1% 2.2%
Expected life of options 5 5 5
Employee Stock Purchase Plan
December 29,
2013 December 30,
2012
December 25,
2011
Expected dividend yield 0.0% 0.0% 0.0%
Expected stock price volatility 46.4-47.2% 48.1-48.7% 49.2-50.1%
Risk-free interest rate 0.08% 0.15% 0.04-0.07%
Expected life of options 0.5 0.5 0.5
The expected term of the options represents the estimated period of time until exercise and is based on historical
experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future
employee behavior. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is
based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. We have not
paid dividends in the past.
(x) New Accounting Pronouncements
We reviewed all significant newly-issued accounting pronouncements and concluded that they either are not applicable
to our operations or that no material effect is expected on our consolidated financial statements as a result of future adoption.
(2) Fair Value Measurements
The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for
measuring fair value, and outlines the required disclosures regarding fair value measurements. Fair value is the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair
value hierarchy based upon observable and non-observable inputs as follows:
• Level 1 – Observable inputs such as quoted prices in active markets;
• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its
own assumptions.
The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of
December 29, 2013:
Cash Equivalents $ 33,587
—
—
33,587
Marketable Securities 7,584
—
—
7,584
Restricted Assets 5,823 — — 5,823
Total
Assets
Level 1 Level 2 Level 3
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The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of
December 30, 2012:
Cash Equivalents $ 5,280
—
—
5,280
Marketable Securities 6,297 512
—
6,809
Restricted Assets 1,138 4,675 — 5,813
Total
Assets
Level 1 Level 2 Level 3
We classified a portion of our marketable securities as available-for-sale and trading securities which were reported at
fair market value, using the “market approach” valuation technique. The “market approach” valuation method uses prices and
other relevant information observable in market transactions involving identical or comparable assets to determine fair
market value. Our cash equivalents are comprised of money market funds which are valued using the Level 1 approach. Our
trading securities are valued using the Level 1 approach. Our available-for-sale marketable securities are valued using a Level
2 approach, using observable direct and indirect inputs for municipal bonds. Our restricted assets include money market
mutual funds and variable rate demand obligations and are valued using either the Level 1 or Level 2 approach.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the fiscal years ended December
29, 2013, December 30, 2012, and December 25, 2011.
Our financial assets and liabilities requiring a fair-value measurement on a non-recurring basis were not significant as of
December 29, 2013 or December 30, 2012.
Assets and liabilities that are measured at fair value on a recurring basis
At December 29, 2013, we did not have any significant nonfinancial assets or liabilities that required a fair-value
measurement on a recurring basis.
Assets and liabilities that are measured at fair value on a non-recurring basis
We generally estimate long-lived asset fair values, including property, plant and equipment and leasehold improvements,
using the income approach. The inputs used to determine fair value 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 available at the balance sheet date.
During 2013, we recorded an impairment charge of $1,118 for the assets of two underperforming restaurants.
Financial assets and liabilities not measured at fair value
Certain of our financial assets and liabilities are recorded at their carrying amounts which approximate fair value, based
on their short-term nature or variable interest rate. These financial assets and liabilities include cash, accounts receivable,
accounts payable, and other current assets and liabilities.
(3) Marketable Securities
Marketable securities consisted of the following:
December 29,
2013 December 30,
2012
Held-to-maturity
Municipal securities $ — 2,770
Available-for-sale
Municipal securities — 512
Trading
Mutual funds 7,584 6,297
Total $ 7,584 9,579