News

Buffalo Wild Wings, Inc. announces 2nd quarter 2005 Results

July 25, 2005

MINNEAPOLIS--(BUSINESS WIRE)--July 26, 2005--Buffalo Wild Wings, Inc. (Nasdaq: BWLD) announced today financial results for the second quarter ended June 26, 2005. Highlights for the second quarter versus the same period a year ago were: -- Total revenue increased 21.9% to $48.2 million -- Company-owned restaurant sales grew 20.6% to $42.6 million -- Same-store sales increased 2.7% at company-owned restaurants and 1.8% at franchised restaurants -- Earnings per diluted share increased 47% to $0.22 Sally Smith, President and Chief Executive Officer commented, "We're pleased with second quarter results, especially our ability to drive same-store sales gains in the face of tough comparisons. In terms of profitability, we posted a 47% increase in diluted earnings per share for the quarter, boosted by lower fresh chicken wing prices." Total revenue, which includes company-owned restaurant sales and franchise royalties and fees, increased 21.9% to $48.2 million in the second quarter compared to $39.6 million in the second quarter of 2004. Company-owned restaurant sales for the quarter grew 20.6% to $42.6 million aided by a company-owned same-store sales increase of 2.7% and 18 more company-owned locations in operation at the end of the second quarter 2005 relative to the same period in 2004. Franchise royalties and fees increased 32.7% to $5.7 million versus $4.3 million in the prior year, due to a franchised same-store sales increase of 1.8% and 49 more franchised restaurants at the end of the period versus a year ago. Average weekly sales for company-owned restaurants were $30,531 for the second quarter of 2005 compared to $30,248 for the same quarter last year, a 0.9% increase. Franchised restaurants averaged $39,824 for the period versus $38,072 in the second quarter a year ago, a 4.6% increase. For the second quarter, earnings per diluted share were $0.22, versus earnings per diluted share of $0.15 in the second quarter of 2004. Third Quarter and Full Year 2005 Outlook For the third quarter ending September 25, 2005, the company anticipates total revenue of approximately $51 million to $52 million, based on estimated same-store sales increases of 1% to 3% for both company-owned restaurants and franchised locations, as well as the addition of 5 new company-owned and 11 new franchised restaurants. Earnings per diluted share for the third quarter are expected to range from $0.20 to $0.22. This is based on the previously mentioned revenue assumptions, average chicken wing prices for the third quarter of $1.12 per pound, stock-based compensation expense of $510,000 and diluted weighted average shares outstanding of 8.7 million. For the full year 2005, the company expects total revenue of approximately $210 million to $215 million, and the addition of about 20 new company-owned restaurants and 45 to 50 new franchised units. Ms. Smith concluded, "We believe that our new menu rollout in August, combined with our fall media campaign and our focus on guest service, will sustain positive same-store sales. In terms of development, we continue to project 20% to 25% unit growth, and look forward to third quarter openings in markets where we already have a brand presence. Finally, we maintain our target of 1,000 Buffalo Wild Wings restaurants over the long term and are confident that we can deliver solid financial performance for our shareholders as we execute towards that goal." Included in this release is information regarding restaurant unit counts, same-store sales, average weekly sales volumes and average quarterly wing prices per pound. Our management team believes such information is an important measure of our performance and is useful in assessing consumer acceptance of the Buffalo Wild Wings Grill & Bar concept. Franchise information also provides an understanding of our revenues as franchise royalties and fees are based on the opening of franchised units and their sales. However, these sales measures are not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be comparable to sales measures as defined or used by other companies. Buffalo Wild Wings will be hosting a conference call today, July 26, 2005 at 5:00 p.m. ET to discuss these results. There will be a simultaneous webcast conducted at our website http://www.buffalowildwings.com. About the Company Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, Minnesota, is an established and growing owner, operator and franchisor of Buffalo Wild Wings Grill & Bar restaurants featuring a variety of boldly flavored, made-to-order menu items including Buffalo, New York-style chicken wings spun in one of 12 signature sauces. The widespread appeal of Buffalo Wild Wings establishes it as an inviting, neighborhood destination with over 335 restaurants in 34 states. Forward-looking Statements Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance and expected store openings for the third quarter and full year of 2005, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of our management. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of locations opening during the third quarter and full year of 2005, the sales at these and our other company-owned and franchised locations, our ability to successfully operate in new markets, the cost of wings, the success of our marketing initiatives, our ability to control other restaurant operating costs and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update any forward-looking statements. BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollar amounts in thousands except share and per share data) (unaudited)

Three months ended Six months ended ------------------- ------------------- June 27, June 26, June 27, June 26, 2004 2005 2004 2005 --------- --------- --------- --------- Revenue: Restaurant sales $35,291 42,570 71,217 87,643 Franchise royalties and fees 4,261 5,653 8,518 11,373 --------- --------- --------- --------- Total revenue 39,552 48,223 79,735 99,016 --------- --------- --------- --------- Costs and expenses: Restaurant operating costs: Cost of sales: 12,342 13,291 24,769 28,522 Labor: 10,095 12,976 20,054 26,193 Operating: 5,358 6,666 10,780 13,523 Occupancy: 2,582 3,395 4,875 6,551 Depreciation: 2,156 2,832 4,189 5,507 General and administrative: (1) 4,569 5,634 8,623 11,260 Preopening 451 600 794 913 Restaurant closures and impairment: 28 4 39 22 --------- --------- --------- --------- Total costs and expenses: 37,581 45,398 74,123 92,491 --------- --------- --------- --------- Income from operations: 1,971 2,825 5,612 6,525 --------- --------- --------- --------- Other income: Interest income: 155 337 288 609 --------- --------- --------- --------- 155 337 288 609 --------- --------- --------- --------- Earnings before income taxes 2,126 3,162 5,900 7,134 Income tax expense 829 1,226 2,301 2,747 --------- --------- --------- --------- Net earnings 1,297 1,936 3,599 4,387 ========= ========= ========= ========= Earnings per common share-- basic $0.16 0.23 0.45 0.52 Earnings per common share-- diluted 0.15 0.22 0.42 0.51 Weighted average shares outstanding--basic 8,096,981 8,448,459 8,044,525 8,407,764 Weighted average shares outstanding--diluted 8,575,186 8,674,507 8,565,395 8,671,148(1) Contains stock-based compensation of $127, $330, $127, and $854The following table expresses results of operations as a percentage of total revenue for the periods presented, except for restaurant operating costs which are expressed as a percentage of restaurant sales:Three months ended Six months ended ----------------- ----------------- June 27, June 26, June 27, June 26, 2004 2005 2004 2005 -------- -------- -------- -------- Revenue: Restaurant sales 89.2% 88.3% 89.3% 88.5% Franchising royalties and fees 10.8 11.7 10.7 11.5 -------- -------- -------- -------- Total revenue: 100.0 100.0 100.0 100.0 -------- -------- -------- -------- Costs and expenses: Restaurant operating costs: Cost of sales 35.0 31.2 34.8 32.5 Labor 28.6 30.5 28.2 29.9 Operating 15.2 15.7 15.1 15.4 Occupancy 7.3 8.0 6.8 7.5 Depreciation 5.5 5.9 5.3 5.6 General and administrative 11.6 11.7 10.8 11.4 Preopening 1.1 1.2 1.0 0.9 Restaurant closures and asset impairment 0.1 0.0 0.0 0.0 -------- -------- -------- -------- Total costs and expenses: 95.0 94.1 93.0 93.4 -------- -------- -------- -------- Income from operations: 5.0 5.9 7.0 6.6 -------- -------- -------- -------- Other income: Interest income 0.4 0.7 0.4 0.6 -------- -------- -------- -------- Earnings before income taxes: 5.4 6.6 7.4 7.2 Income tax expense: 2.1 2.5 2.9 2.8 -------- -------- -------- -------- Net earnings: 3.3 4.0 4.5 4.4 ======== ======== ======== ========

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands, except share data) (unaudited) December 26, June 26, 2004 2005 ------------ ------------ Assets Current assets: Cash and cash equivalents $12,557 4,501 Marketable securities 36,454 46,482 Accounts receivable--franchisees, net of allowance of $25 689 726 Accounts receivable--other 2,077 2,792 Inventory 1,207 1,122 Income taxes receivable 1,727 745 Prepaid expenses 1,470 758 Deferred income taxes 840 1,059 ------------ ------------ Total current assets: 57,021 58,185 Property and equipment: net 59,649 62,581 Restricted cash: 782 3,017 Other assets: 774 792 Goodwill: 759 759 ------------ ------------ Total assets $118,985 125,334 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Unearned franchise fees: $2,433 2,138 Accounts payable: 5,383 5,023 Accrued compensation and benefits: 6,339 5,715 Accrued expenses: 3,663 3,315 Current portion of deferred lease credits: 509 488 ------------ ------------ Total current liabilities 18,327 16,679 Long-term liabilities: Marketing fund payables: 782 3,017 Deferred income taxes: 6,298 5,625 Deferred lease credits, net of current portion: 7,871 8,674 ------------ ------------ Total liabilities: 33,278 33,995 ------------ ------------ Commitments and contingencies Common stockholders' equity: Undesignated stock, 5,600,000 shares authorized -- -- Common stock, no par value. Authorized 15,600,000 shares; issued and outstanding 8,425,771 and 8,600,010, respectively 71,491 74,348 Deferred compensation (1,817) (3,429) Retained earnings 16,033 20,420 ------------ ------------ Total common stockholders' equity 85,707 91,339 ------------ ------------ Total liabilities and stockholders' equity: $118,985 125,334 ============ ============

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands) (unaudited) Six months ended ----------------- June 27, June 26, 2004 2005 -------- -------- Cash flows from operating activities: Net earnings $3,599 4,387 Adjustments to reconcile net earnings to cash provided by operations: Depreciation 4,189 5,507 Amortization 72 (20) Restaurant closures and impairment 39 22 Deferred lease credits 62 643 Deferred income taxes 213 (892) Stock-based compensation 127 854 Change in operating assets and liabilities: Accounts receivable (681) (752) Inventory 38 85 Prepaid expenses 291 712 Other assets (73) (18) Unearned franchise fees 183 (295) Accounts payable (367) (360) Income taxes 29 982 Accrued expenses (628) (972) -------- -------- Net cash provided by operating activities 7,093 9,883 -------- -------- Cash flows from investing activities: Acquisition of property and equipment (10,768) (8,322) Purchase of marketable securities (57,817) (47,079) Proceeds of marketable securities 24,200 37,071 -------- -------- Net cash used in investing activities (44,385) (18,330) -------- -------- Cash flows from financing activities: Issuance of common stock 976 717 Tax payments for restricted stock -- (326) -------- -------- Net cash provided by financing activities 976 391 -------- -------- Net decrease in cash and cash equivalents (36,316) (8,056) Cash and cash equivalents at beginning of period 49,538 12,557 -------- -------- Cash and cash equivalents at end of period $13,222 4,501 ======== ========

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Supplemental Information Restaurant Count Company-owned Restaurants: Q1 Q2 Q3 Q4 -- -- -- -- 2005 106 110 2004 88 92 97 103 2003 73 74 77 84 2002 56 60 63 70 2001 45 47 48 53 Franchised Restaurants: Q1 Q2 Q3 Q4 -- -- -- -- 2005 212 224 2004 168 175 189 203 2003 131 138 142 161 2002 108 119 123 129 2001 95 97 100 105 Quarterly Same-Store Sales Company-owned Restaurants: Q1 Q2 Q3 Q4 Year -- -- -- -- ---- 2005 6.1% 2.7% 2004 11.1% 10.6% 9.9% 7.6% 9.7% 2003 (1.4%) 2.7% 6.7% 8.5% 4.3% 2002 5.6% 4.6% (0.7%) (1.8%) 1.6% 2001 9.1% 7.0% 6.4% 12.1% 8.8%

Franchised Restaurants: Q1 Q2 Q3 Q4 Year -- -- -- -- ---- 2005 3.2% 1.8% 2004 12.0% 10.4% 5.7% 3.7% 7.6% 2003 (0.4%) 2.3% 8.5% 10.7% 5.6% 2002 4.2% 4.5% 0.0% (1.8%) 1.5% 2001 4.3% 3.7% 5.3% 8.4% 5.5%

BUFFALO WILD WINGS, INC. AND SUBSIDIARIES Supplemental Information Average Weekly Sales Volumes Company-owned Restaurants: Q1 Q2 Q3 Q4 Year -- -- -- -- ---- 2005 $33,195 30,531 2004 32,289 30,248 30,983 33,038 31,663 2003 28,782 27,132 28,281 31,171 28,886 2002 29,564 26,330 25,916 28,466 27,547 2001 27,675 25,644 26,722 29,426 27,382 Franchised Restaurants: Q1 Q2 Q3 Q4 Year -- -- -- -- ---- 2005 $41,309 39,824 2004 39,678 38,072 38,727 40,926 39,402 2003 33,920 33,393 35,289 39,014 35,491 2002 32,956 31,623 31,619 34,023 32,574 2001 30,533 28,820 29,835 33,267 30,652 Average Quarterly Wing Prices Per Pound Q1 Q2 Q3 Q4 Year -- -- -- -- ---- 2005 $1.45 1.14 2004 1.49 1.46 1.35 1.30 1.39 2003 1.01 1.02 1.00 1.21 1.06 2002 1.11 .87 .84 .78 .89 2001 1.14 1.22 1.22 1.16 1.18