UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC 20549
  
 
 FORM
10-Q
  
 
 QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF
 THE
SECURITIES EXCHANGE ACT OF 1934
  For
the quarterly period ended March 29, 2009
  Commission
File No. 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) (Zip Code)
  (952)
593-9943
 (Registrant’s
Telephone Number, Including Area Code)
  
  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  x    NO   ̈
  Indicate
by check mark 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   ̈
  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 “accelerated filer”, “large accelerated filer”, and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 Large Accelerated
Filer   ̈    Accelerated
Filer  x    Non-Accelerated
Filer   ̈    Smaller
Reporting Company   ̈
  Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2 of the Exchange Act).
 YES   ̈        NO  x
  The
number of shares outstanding of the registrant’s common stock as of May 1,
2009:  17,983,006 shares.
  
  
 
 TABLE
OF CONTENTS
  PagePART
      I – FINANCIAL INFORMATIONItem 1.
                Financial
      Statements
                3Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                11Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                17Item
      4.
                Controls
      and Procedures
                17PART
      II – OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                18Item
      6.
                Exhibits
                18Signatures
                19Exhibit
      Index
                20
   2
 PART
I. FINANCIAL INFORMATION
  ITEM
1. FINANCIAL STATEMENTS
  BUFFALO
WILD WINGS, INC. AND SUBSIDIARIES
  CONSOLIDATED
BALANCE SHEETS
  (Dollar
amounts in thousands)
  (unaudited)
  March
      29,
                                                        2009
                                                      
                                                      
                                                      December
      28,
                                                        2008AssetsCurrent
      assets:Cash
      and cash equivalents
                                                      
                                                      $
                                                      6,745
                                                      
                                                      
                                                      $
                                                      8,347Marketable
      securities
                                                      
                                                      
                                                      37,279
                                                      
                                                      
                                                      
                                                      36,157Accounts
      receivable – franchisees, net of allowance of $25
                                                      
                                                      
                                                      1,001
                                                      
                                                      
                                                      
                                                      895Accounts
      receivable – other
                                                      
                                                      
                                                      8,008
                                                      
                                                      
                                                      
                                                      5,759Inventory
                                                      
                                                      
                                                      3,515
                                                      
                                                      
                                                      
                                                      3,104Prepaid
      expenses
                                                      
                                                      
                                                      2,596
                                                      
                                                      
                                                      
                                                      3,294Refundable
      income taxes
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      1,611Deferred
      income taxes
                                                      
                                                      
                                                      2,158
                                                      
                                                      
                                                      
                                                      1,731Total
      current assets
                                                      
                                                      
                                                      61,302
                                                      
                                                      
                                                      
                                                      60,898Property
      and equipment, net
                                                      
                                                      
                                                      163,071
                                                      
                                                      
                                                      
                                                      154,432Restricted
      cash
                                                      
                                                      
                                                      6,395
                                                      
                                                      
                                                      
                                                      7,670Other
      assets
                                                      
                                                      
                                                      9,771
                                                      
                                                      
                                                      
                                                      9,846Goodwill
                                                      
                                                      
                                                      10,972
                                                      
                                                      
                                                      
                                                      10,972Total
      assets
                                                      
                                                      $
                                                      251,511
                                                      
                                                      
                                                      $
                                                      243,818Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Unearned
      franchise fees
                                                      
                                                      $
                                                      2,685
                                                      
                                                      
                                                      $
                                                      2,514Income
      tax payable
                                                      
                                                      
                                                      1,166
                                                      
                                                      
                                                      
                                                      —Accounts
      payable
                                                      
                                                      
                                                      14,715
                                                      
                                                      
                                                      
                                                      16,691Accrued
      compensation and benefits
                                                      
                                                      
                                                      12,714
                                                      
                                                      
                                                      
                                                      14,155Accrued
      expenses
                                                      
                                                      
                                                      6,807
                                                      
                                                      
                                                      
                                                      7,116Current
      portion of deferred lease credits
                                                      
                                                      
                                                      141
                                                      
                                                      
                                                      
                                                      56Total
      current liabilities
                                                      
                                                      
                                                      38,228
                                                      
                                                      
                                                      
                                                      40,532Long-term
      liabilities:Other
      liabilities
                                                      
                                                      
                                                      1,276
                                                      
                                                      
                                                      
                                                      1,270Marketing
      fund payables
                                                      
                                                      
                                                      6,395
                                                      
                                                      
                                                      
                                                      7,670Deferred
      income taxes
                                                      
                                                      
                                                      10,496
                                                      
                                                      
                                                      
                                                      8,916Deferred
      lease credits, net of current portion
                                                      
                                                      
                                                      14,388
                                                      
                                                      
                                                      
                                                      13,837Total
      liabilities
                                                      
                                                      
                                                      70,783
                                                      
                                                      
                                                      
                                                      72,225Commitments
      and contingencies (note 10)Stockholders’
      equity:Undesignated
      stock, 1,000,000 shares authorized; none issued
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      —Common
      stock, no par value. Authorized 44,000,000 shares; issued and outstanding
      17,977,626 and 17,887,271 respectively
                                                      
                                                      
                                                      86,967
                                                      
                                                      
                                                      
                                                      86,318Retained
      earnings
                                                      
                                                      
                                                      93,761
                                                      
                                                      
                                                      
                                                      85,275Total
      stockholders’ equity
                                                      
                                                      
                                                      180,728
                                                      
                                                      
                                                      
                                                      171,593Total
      liabilities and stockholders’ equity
                                                      
                                                      $
                                                      251,511
                                                      
                                                      
                                                      $
                                                      243,818
  See
accompanying notes to consolidated financial statements
 3
 BUFFALO
WILD WINGS, INC. AND SUBSIDIARIES
  CONSOLIDATED
STATEMENTS OF EARNINGS
  (Amounts
in thousands except per share data)
  (unaudited)
  Three months
      endedMarch
      29,
                                                        2009
                                                      
                                                      
                                                      March
      30,
                                                        2008Revenue:Restaurant
      sales
                                                      
                                                      $
                                                      119,424
                                                      
                                                      
                                                      $
                                                      86,896Franchise
      royalties and fees
                                                      
                                                      
                                                      12,131
                                                      
                                                      
                                                      
                                                      10,366Total
      revenue
                                                      
                                                      
                                                      131,555
                                                      
                                                      
                                                      
                                                      97,262Costs
      and expenses:Restaurant
      operating costs:Cost
      of sales
                                                      
                                                      
                                                      36,208
                                                      
                                                      
                                                      
                                                      26,415Labor
                                                      
                                                      
                                                      35,549
                                                      
                                                      
                                                      
                                                      25,858Operating
                                                      
                                                      
                                                      17,987
                                                      
                                                      
                                                      
                                                      13,275Occupancy
                                                      
                                                      
                                                      7,594
                                                      
                                                      
                                                      
                                                      5,697Depreciation
                                                      
                                                      
                                                      7,495
                                                      
                                                      
                                                      
                                                      5,239General
      and administrative (1)
                                                      
                                                      
                                                      11,420
                                                      
                                                      
                                                      
                                                      9,341Preopening
                                                      
                                                      
                                                      2,409
                                                      
                                                      
                                                      
                                                      1,185Loss
      on asset disposals and impairment
                                                      
                                                      
                                                      175
                                                      
                                                      
                                                      
                                                      753Total
      costs and expenses
                                                      
                                                      
                                                      118,837
                                                      
                                                      
                                                      
                                                      87,763Income
      from operations
                                                      
                                                      
                                                      12,718
                                                      
                                                      
                                                      
                                                      9,499Investment
      income
                                                      
                                                      
                                                      76
                                                      
                                                      
                                                      
                                                      432Earnings
      before income taxes
                                                      
                                                      
                                                      12,794
                                                      
                                                      
                                                      
                                                      9,931Income
      tax expense
                                                      
                                                      
                                                      4,308
                                                      
                                                      
                                                      
                                                      3,406Net
      earnings
                                                      
                                                      $
                                                      8,486
                                                      
                                                      
                                                      $
                                                      6,525Earnings
      per common share – basic
                                                      
                                                      $
                                                      0.47
                                                      
                                                      
                                                      $
                                                      0.37Earnings
      per common share – diluted
                                                      
                                                      
                                                      0.47
                                                      
                                                      
                                                      
                                                      0.36Weighted
      average shares outstanding – basic
                                                      
                                                      
                                                      17,980
                                                      
                                                      
                                                      
                                                      17,766Weighted
      average shares outstanding – diluted
                                                      
                                                      
                                                      18,041
                                                      
                                                      
                                                      
                                                      17,877
  
 (1)
Includes stock-based compensation of $801 and $1,020, respectively
 
 
 
 See
accompanying notes to consolidated financial statements
 4
 BUFFALO
WILD WINGS, INC. AND SUBSIDIARIES
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
  (Dollar
amounts in thousands)
  (unaudited)
  Three months
      endedMarch
      29,
                                                      2009
                                                    
                                                    
                                                    March
      30,
                                                      2008Cash
      flows from operating activities:Net
      earnings
                                                    
                                                    $
                                                    8,486
                                                    
                                                    
                                                    $
                                                    6,525Adjustments
      to reconcile net earnings to cash provided by operations:Depreciation
                                                    
                                                    
                                                    7,342
                                                    
                                                    
                                                    
                                                    5,239Amortization
                                                    
                                                    
                                                    153
                                                    
                                                    
                                                    
                                                    (36
                                                    )Loss
      on asset disposals and impairment
                                                    
                                                    
                                                    175
                                                    
                                                    
                                                    
                                                    753Deferred
      lease credits
                                                    
                                                    
                                                    620
                                                    
                                                    
                                                    
                                                    834Deferred
      income taxes
                                                    
                                                    
                                                    1,153
                                                    
                                                    
                                                    
                                                    1,267Stock-based
      compensation
                                                    
                                                    
                                                    801
                                                    
                                                    
                                                    
                                                    1,020Excess
      tax benefit from stock issuance
                                                    
                                                    
                                                    (2
                                                    )
                                                    
                                                    
                                                    (278
                                                    )Change
      in operating assets and liabilities:Trading
      securities
                                                    
                                                    
                                                    (691
                                                    )
                                                    
                                                    
                                                    1Accounts
      receivable
                                                    
                                                    
                                                    (2,339
                                                    )
                                                    
                                                    
                                                    (345
                                                    )Inventory
                                                    
                                                    
                                                    (411
                                                    )
                                                    
                                                    
                                                    (260
                                                    )Prepaid
      expenses
                                                    
                                                    
                                                    698
                                                    
                                                    
                                                    
                                                    751Other
      assets
                                                    
                                                    
                                                    (78
                                                    )
                                                    
                                                    
                                                    23Unearned
      franchise fees
                                                    
                                                    
                                                    171
                                                    
                                                    
                                                    
                                                    132Accounts
      payable
                                                    
                                                    
                                                    784
                                                    
                                                    
                                                    
                                                    (219
                                                    )Income
      taxes
                                                    
                                                    
                                                    2,779
                                                    
                                                    
                                                    
                                                    1,826Accrued
      expenses
                                                    
                                                    
                                                    (384
                                                    )
                                                    
                                                    
                                                    (1,212
                                                    )Net
      cash provided by operating activities
                                                    
                                                    
                                                    19,257
                                                    
                                                    
                                                    
                                                    16,021Cash
      flows from investing activities:Acquisition
      of property and equipment
                                                    
                                                    
                                                    (18,916
                                                    )
                                                    
                                                    
                                                    (10,395
                                                    )Purchase
      of marketable securities
                                                    
                                                    
                                                    (13,070
                                                    )
                                                    
                                                    
                                                    (27,704
                                                    )Proceeds
      of marketable securities
                                                    
                                                    
                                                    12,639
                                                    
                                                    
                                                    
                                                    36,322Net
      cash used in investing activities
                                                    
                                                    
                                                    (19,347
                                                    )
                                                    
                                                    
                                                    (1,777
                                                    )Cash
      flows from financing activities:Issuance
      of common stock
                                                    
                                                    
                                                    3
                                                    
                                                    
                                                    
                                                    101Excess
      tax benefit from stock issuance
                                                    
                                                    
                                                    2
                                                    
                                                    
                                                    
                                                    278Tax
      payments for restricted stock
                                                    
                                                    
                                                    (1,517
                                                    )
                                                    
                                                    
                                                    (989
                                                    )Net
      cash used in financing activities
                                                    
                                                    
                                                    (1,512
                                                    )
                                                    
                                                    
                                                    (610
                                                    )Net
      increase (decrease) in cash and cash equivalents
                                                    
                                                    
                                                    (1,602
                                                    )
                                                    
                                                    
                                                    13,634Cash
      and cash equivalents at beginning of period
                                                    
                                                    
                                                    8,347
                                                    
                                                    
                                                    
                                                    1,521Cash
      and cash equivalents at end of period
                                                    
                                                    $
                                                    6,745
                                                    
                                                    
                                                    $
                                                    15,155
  
 See
accompanying notes to consolidated financial statements
 5
 BUFFALO
WILD WINGS, INC. AND SUBSIDIARIES
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  FOR
THE THREE MONTHS ENDED MARCH 29, 2009 AND MARCH 30, 2008
 (Dollar
amounts in thousands except share and per share data)
  (1)
              Basis
      of Financial Statement Presentation
  The
consolidated financial statements as of March 29, 2009 and December 28, 2008,
and for the three-month periods ended March 29, 2009 and March 30, 2008, have
been prepared by Buffalo Wild Wings, Inc. pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”). The financial information
for the three-month periods ended March 29, 2009 and March 30, 2008 is
unaudited, but, in the opinion of management, reflects all adjustments and
accruals necessary for a fair presentation of the financial position, results of
operations, and cash flows for the interim periods.
  References
in the remainder of this document to “Buffalo Wild Wings,” “we,” “us” and “our”
refer to the business of Buffalo Wild Wings, Inc. and our
subsidiaries.
 
 The
financial information as of December 28, 2008 is derived from our audited
consolidated financial statements and notes thereto for the fiscal year ended
December 28, 2008, which is included in Item 8 in the Fiscal 2008 Annual Report
on Form 10-K, and should be read in conjunction with such financial
statements.
  The
results of operations for the three-month period ended March 29, 2009 are not
necessarily indicative of the results of operations that may be achieved for the
entire year ending December 27, 2009.
  (2)
              Summary
      of Significant Accounting Policies
  (a)
                Inventories
  Inventories
are stated at the lower of cost or market. Cost is determined by the first-in,
first-out (FIFO) method. Cash flows related to inventory sales are classified in
net cash provided by operating activities in our consolidated statements of cash
flows.
  We
purchase our products from a number of suppliers and believe there are
alternative suppliers. We have minimum purchase commitments from some of our
vendors, but the terms of the contracts and nature of the products are such that
our purchase requirements do not create a market risk. The primary food product
used by our restaurants and our franchised restaurants is fresh chicken wings.
Fresh chicken wings are purchased by us at market prices. Material increases in
fresh chicken wing costs may adversely affect our operating results. For the
three-month periods ended March 29, 2009 and March 30, 2008, fresh chicken wings
were 23.6% and 22.5%, respectively, of restaurant cost of sales.
  (b)
                Fair
      Values of Financial
Instruments
 
 Fair
value is defined as the price at which an asset could be exchanged in a current
transaction between knowledgeable, willing parties or the amount that would be
paid to transfer a liability to a new obligor, not the amount that would be paid
to settle the liability with the creditor. Where available, fair value is based
on observable market prices or parameters or derived from such prices or
parameters. Where observable prices or inputs are not available, valuation
models are applied. These valuation techniques involve some level of management
estimation and judgment, the degree of which is dependent on the price
transparency for the instruments or market and the instruments’
complexity.
  Assets
recorded at fair value in our consolidated balance sheets are categorized based
upon the level of judgment associated with the inputs used to measure their fair
value. Hierarchical levels, defined by SFAS No. 157, “Fair Value Measurements,”
and directly related to the amount of subjectivity associated with the inputs to
fair valuation of these assets and liabilities, are as follows:
  Level 1 –
Inputs were unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date.
 
 6
 Level 2 –
Inputs (other than quoted prices included in Level 1) were either directly or
indirectly observable for the asset or liability through correlation with market
data at the measurement date and for the duration of the instrument’s
anticipated life.
 
 Level 3 –
Inputs reflected management’s best estimate of what market participants would
use in pricing the asset or liability at the measurement date. Consideration was
given to the risk inherent in the valuation technique and the risk inherent in
the inputs to the model.
  Determining
which hierarchical level an asset falls within requires significant
judgment. We will evaluate our hierarchy disclosures each quarter. The
following table summarizes the financial instruments measured at fair value in
our consolidated balance sheet as of March 29, 2009:
 
 Fair
      Value MeasurementsLevel
      1
                              
                              
                              Level
      2
                              
                              
                              Level
      3
                              
                              
                              TotalAssetsShort-term investments
      (1)
                              
                              $
                              2,259
                              
                              
                              $
                              22,135
                              
                              
                              $
                              —
                              
                              
                              $
                              24,394
 
 (1)
                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 used prices and other relevant information observable in market
      transactions involving identical or comparable assets. Our trading
      securities are valued using the Level 1 approach. Our available-for-sale
      marketable securities are valued using a Level 2
  approach.
 
 SFAS No.
157 requires separate disclosure of assets measured at fair value on a recurring
basis, as documented above, from those measured at fair value on a nonrecurring
basis. As of March 29, 2009, no assets or liabilities were measured at fair
value on a nonrecurring basis.
 
 (c)
                New
      Accounting
Pronouncements
  In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
141R, “Business Combinations.” SFAS No. 141R provides companies with principles
and requirements on how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree as well as the recognition and
measurement of goodwill acquired in a business combination. SFAS No. 141R also
requires certain disclosures to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS No. 141R is effective for business combinations
occurring in fiscal years beginning after December 15, 2008. We will apply SFAS
No. 141R to all future business combinations.
 
 (3)
              Marketable
      Securities
 
 Marketable
securities were comprised of the following:
  As
      ofMarch
      29,
                                2009
                              
                              
                              December
      28,
                                2008Held-to-maturity:Municipal
      securities
                              
                              $
                              12,885
                              
                              
                              $
                              17,254Available-for-sale:Municipal
      securities
                              
                              
                              22,135
                              
                              
                              
                              17,336Trading:Mutual
      funds
                              
                              
                              2,259
                              
                              
                              
                              1,567Total
                              
                              $
                              37,279
                              
                              
                              $
                              36,157
 
 All
held-to-maturity debt securities are due within one year and had aggregate fair
values of $12,916 and $16,595 as of March 29, 2009 and December 28, 2008,
respectively. Trading securities represents investments held for future needs of
a non-qualified deferred compensation plan.
  7
 (4)
              Property and
      Equipment
  Property
and equipment consisted of the following:
  As
      ofMarch
      29,
                                      2009
                                    
                                    
                                    December
      28,
                                      2008Construction
      in-process
                                    
                                    $
                                    9,138
                                    
                                    
                                    $
                                    10,703Buildings
                                    
                                    
                                    10,088
                                    
                                    
                                    
                                    6,639Furniture,
      fixtures, and equipment
                                    
                                    
                                    101,250
                                    
                                    
                                    
                                    95,460Leasehold
      improvements
                                    
                                    
                                    130,122
                                    
                                    
                                    
                                    122,796250,598
                                    
                                    
                                    
                                    235,598Less
      accumulated depreciation
                                    
                                    
                                    (87,527
                                    )
                                    
                                    
                                    (81,166
                                    )$
                                    163,071
                                    
                                    
                                    $
                                    154,432
  (5)
              Derivative
      Instruments
  We use
commodities derivatives to manage our exposure to commodity price fluctuations.
We enter into options and future contracts to reduce our risk of natural gas
price fluctuations. These derivatives do not qualify for hedge accounting and
changes in fair value are included in current net income. These changes are
classified as a component of restaurant operating expenses. Net losses of $247
and $15 were recognized in the first quarters of 2009 and 2008, respectively. As
of March 29, 2009, the maximum length of time over which we are hedging our
exposure to the variability in future cash flows related to the purchase of
natural gas is ten months.
  (6)
              Stockholders’
      Equity
  (a)
                Stock
      Options
  We have
3.9 million shares of common stock reserved for issuance under the Equity
Incentive Plan (the plan) for employees, officers, and directors. The option
price for shares issued under this plan is to be not less than the fair market
value on the date of grant with respect to incentive stock options, or 85% of
fair market value for nonqualified stock options. Incentive stock options become
exercisable in four equal installments from the date of the grant and have a
contractual life of seven to ten years. Nonqualified stock options issued
pursuant to the plan have varying vesting periods from immediately to one year
and have a contractual life of seven to ten years. In 2008, our shareholders
approved amendments to the plan which extended the plan to 2018. We issue new
shares of common stock upon exercise of stock options. Option activity is
summarized for the quarter ended March 29, 2009 as follows:
  Number
                          of
      shares
                        
                        
                        Weighted
                          average
                          exercise price
                        
                        
                        Average
      Remaining Contractual Life (years)
                        
                        
                        Aggregate
      Intrinsic ValueOutstanding,
      December 28, 2008
                        
                        
                        146,548
                        
                        
                        $
                        13.71
                        
                        
                        
                        4.5
                        
                        
                        $
                        1,627Granted
                        
                        
                        56,302
                        
                        
                        
                        30.90Exercised
                        
                        
                        (356
                        )
                        
                        
                        13.81Cancelled
                        
                        
                        (340
                        )
                        
                        
                        8.54Outstanding,
      March 29, 2009
                        
                        
                        202,154
                        
                        
                        $
                        18.51
                        
                        
                        
                        4.9
                        
                        
                        $
                        3,809Exercisable,
      March 29, 2009
                        
                        
                        103,498
                        
                        
                        
                        9.13
                        
                        
                        
                        3.6
                        
                        
                        
                        2,921
  The
aggregate intrinsic value in the table above is before applicable income taxes,
based on our closing stock price of $37.35 as of the last business day of the
quarter ended March 29, 2009, which would have been received by the optionees
had all options been exercised on that date. As of March 29, 2009, total
unrecognized stock-based compensation expense related to nonvested stock options
was approximately $1,211, which is expected to be recognized over a weighted
average period of approximately 2.0 years. During the quarters ended March 29,
2009 and March 30, 2008, the total intrinsic value of stock options exercised
was $6 and $777, respectively. During the quarters ended March 29, 2009 and
March 30, 2008, the total fair value of options vested was $8 and $9,
respectively.
 
 The plan
has 1,031,199 shares available for grant as of March 29, 2009.
  8
 (b)
                Restricted
      Stock Units
  We have a
stock performance plan under which restricted stock units are granted annually
at the discretion of the Board of Directors. For restricted stock units granted
prior to 2008, units vest annually upon achieving performance targets. The
performance targets for these restricted stock units are annual income targets
set by our Board of Directors at the beginning of the year. We record
compensation expense for these restricted stock units if vesting is probable,
based on the achievement of the performance targets. These restricted stock
units may vest one-third annually over a ten-year period as determined by
meeting performance targets. However, the second one-third of the restricted
stock units is not subject to vesting until the first one-third has vested and
the final one-third is not subject to vesting until the first two-thirds of the
award have vested.
 
 In 2008,
we granted restricted stock units subject to cumulative one-year, two-year, and
three-year net earnings targets. The number of units that vest each year is
based on performance against those cumulative targets. These restricted stock
units are subject to forfeiture if they have not vested at the end of the
three-year period. Stock-based compensation is recognized for the expected
number of units vesting at the end of each annual period. Restricted stock units
expected to vest at the end of the first year are fully expensed in the first
year. Restricted stock units expected to vest at the end of the second year are
expensed during the first and second years. Restricted stock units expected to
vest at the end of the third year are expensed over all three
years.
 
 In the
first quarter of 2009, we granted restricted stock units subject to three-year
cliff vesting and a cumulative three-year earnings target. The number of units
which vest at the end of the three-year period is based on performance against
the target. These restricted stock units are subject to forfeiture if they have
not vested at the end of the three-year period. Stock-based compensation is
recognized for the expected number of units vesting at the end of the period and
is expensed over the three-year period.
 
 For each
grant, restricted stock units meeting the performance criteria will vest as 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 common stock upon the
disbursement of restricted stock units. Restricted stock units are contingently
issuable shares, and the activity for fiscal 2009 is as follows:
 
 Number
                          of
      shares
                        
                        
                        Weighted
                          average
                          grant
      date
                          fair
      valueOutstanding,
      December 28, 2008
                        
                        
                        284,845
                        
                        
                        $
                        20.19Granted
                        
                        
                        169,399
                        
                        
                        
                        30.90Vested
                        
                        
                        —
                        
                        
                        
                        —Cancelled
                        
                        
                        (2,386
                        )
                        
                        
                        21.28Outstanding,
      March 29, 2009
                        
                        
                        451,858
                        
                        
                        $
                        24.20
 
 As of
March 29, 2009, the total stock-based compensation expense related to nonvested
awards not yet recognized was $5,473, which is expected to be recognized over a
weighted average period of 1.5 years. During the quarter ended March 30, 2008,
the total fair value of shares vested was $420. No shares vested during the
quarter ended March 29, 2009. The weighted average grant date fair value of
restricted stock units granted during the first quarter of 2008 was
$23.14.
  (c)
                Employee
      Stock Purchase Plan
  We have
reserved 600,000 shares of common stock for issuance under the Employee Stock
Purchase Plan (ESPP). The ESPP is available to substantially all employees
subject to employment eligibility requirements. Participants may purchase our
common stock at 85% of the beginning or ending closing price, whichever is
lower, for each six-month period ending in May and November. During the first
quarters of 2009 and 2008, we issued no shares of common stock under the plan.
As of March 29, 2009, we have 389,075 shares available for future issuance under
the ESPP.
 
 9
 (7)
              Earnings Per
      Share
  The
following is a reconciliation of basic and fully diluted earnings per share for
the three-month periods ended March 29, 2009 and March 30, 2008:
  Three
      months ended March 29, 2009Earnings
                                                (numerator)
                                              
                                              
                                              Shares
                                                (denominator)
                                              
                                              
                                              Per-share
                                                amountNet
      earnings
                                              
                                              $
                                              8,486Earnings
      per common share
                                              
                                              
                                              
                                              
                                              
                                              
                                              17,979,858
                                              
                                              
                                              $
                                              0.47Effect
      of dilutive securities – stock options
                                              
                                              
                                              —
                                              
                                              
                                              
                                              60,693Earnings
      per common share – assuming dilution
                                              
                                              $
                                              8,486
                                              
                                              
                                              
                                              18,040,551
                                              
                                              
                                              $
                                              0.47
   Three
      months ended March 30, 2008Earnings
                                                (numerator)
                                              
                                              
                                              Shares
                                                (denominator)
                                              
                                              
                                              Per-share
                                                amountNet
      earnings
                                              
                                              $
                                              6,525Earnings
      per common share
                                              
                                              
                                              
                                              
                                              
                                              
                                              17,766,331
                                              
                                              
                                              $
                                              0.37Effect
      of dilutive securities – stock options
                                              
                                              
                                              —
                                              
                                              
                                              
                                              110,987Earnings
      per common share – assuming dilution
                                              
                                              $
                                              6,525
                                              
                                              
                                              
                                              17,877,318
                                              
                                              
                                              $
                                              0.36
 
 Shares
excluded from the fully diluted calculation because the effect on net earnings
per share would have been antidilutive were 526,119 shares and 469,447 shares
for the three-month periods ended March 29, 2009 and March 30, 2008,
respectively.
  (8)
              Supplemental Disclosures of
      Cash Flow Information
  Three months
      endedMarch
      29,
                          2009
                        
                        
                        March
      30,
                          2008Cash
      paid during the period for:Income
      taxes
                        
                        $
                        437
                        
                        
                        $
                        275Noncash
      financing and investing transactions:Property
      and equipment not yet paid for
                        
                        
                        (2,760
                        )
                        
                        
                        1,557
  (9)
              Income Taxes
  We
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (FIN 48), on January 1, 2007. The total
unrecognized tax benefits reflected on our consolidated balance sheet as of
March 29, 2009, and December 28, 2008 were $458 and $442 respectively. The
increase was due to additions based on tax positions related to the current
year. We recognize potential accrued interest and penalties related to
unrecognized tax benefits in income tax expense. Interest and penalties related
to unrecognized tax benefits totaled $89 at March 29, 2009. Included in the
balance at March 29, 2009 and December 28, 2008, are unrecognized tax benefits
of $298 and $287, respectively, which if recognized, would affect the annual
effective tax rate. We do not anticipate any significant change to the total
unrecognized tax benefits prior to March 28, 2010.
 
 The
Internal Revenue Service completed their examination of our 2005 U.S. Income Tax
Return in 2008. No changes to the tax return were reported. With few exceptions,
we are no longer subject to state income tax examinations for years before
2005.
  (10)
              Contingencies
  We are
involved in various legal actions arising in the ordinary course of business. In
the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on our consolidated financial position, results
of operations, or cash flows.
 
 10
 ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included in Item 1 of Part 1 of this Quarterly
Report and the audited consolidated financial statements and related notes and
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the fiscal year ended
December 28, 2008. This discussion and analysis contains certain statements that
are not historical facts, including, among others, those relating to our
anticipated financial performance for 2009, cash requirements, and our expected
store openings. Such statements are forward-looking and speak only as of the
date on which they are made. There are risks and uncertainties including, but
not limited to, those discussed in this Form 10-Q under Item 2 of Part I as well
as in Item 1A of Part I of the fiscal 2008 Form
 10-K.
  Critical
Accounting Policies and Use of Estimates
  Our most
critical accounting policies, which are those that require significant judgment,
include: valuation of long-lived assets and store closing reserves, vendor
allowances, revenue recognition from franchise operations, and self-insurance
liability. An in-depth description of these can be found in our Annual Report on
Form 10-K for the fiscal year ended December 28, 2008. There have been no
changes to those policies during this period.
  Overview
  As of
March 29, 2009, we owned and operated 206 company-owned and franchised an
additional 373 Buffalo Wild Wings® Grill
& Bar restaurants in 40 states. Of the 579 system-wide restaurants, 85 are
located in Ohio. The restaurants have elements of both the quick casual and
casual dining styles, both of which are part of a growing industry. Our
long-term focus is to grow to a national chain of over 1,000 locations,
continuing the strategy of developing both company-owned and franchised
restaurants.
  Our
growth targets for 2009 are 15% unit growth, 25% revenue growth, and 20% to 25%
net earnings growth. Our growth and success depend on several factors and
trends. First, we continue to monitor and react to changes in our cost of goods
sold. The cost of goods sold is difficult to predict, as it ranged from 29.3% to
30.4% of restaurant sales per quarter in 2009 and 2008. We are working to
counteract the volatility of chicken wing prices with the introduction of
popular new menu items, effective marketing promotions, focused efforts on food
costs and waste, and menu price increases. We will continue to monitor the cost
of fresh chicken wings, as it can significantly change our cost of sales and
cash flow from company-owned restaurants. We are also exploring purchasing
strategies to lessen the severity of cost increases and fluctuations. We are
currently purchasing chicken wings at market prices. If a satisfactory long-term
price agreement for chicken wings were to arise, we would consider locking in
prices to reduce our price volatility.
  A second
factor is our success in new markets. There are inherent risks in opening new
restaurants, especially in new markets, for various reasons, including the lack
of experience, logistical support, and brand awareness in a new market. These
factors may result in lower than anticipated sales and cash flow for new
restaurants in new markets. In 2009, we plan to develop the majority of our
company-owned restaurants primarily in markets where we currently have either
company-owned or franchised restaurants. We believe this development focus,
together with our focus on our new restaurant opening procedures, will help
mitigate the overall risk associated with opening restaurants in new
markets.
 
 Third, we
will continue our focus on trends in company-owned and franchised same-store
sales as an indicator of the continued acceptance of our concept by consumers.
We also review the overall trend in average weekly sales as an indicator of our
ability to increase the sales volume and, therefore, cash flow per location. We
remain committed to high quality operations and guest hospitality.
 
 Our
revenue is generated by:
 
 •
              Sales
      at our company-owned restaurants, which were 91% of total revenue in the
      first quarter of 2009. Food and nonalcoholic beverages accounted for 75%
      of restaurant sales. The remaining 25% of restaurant sales was from
      alcoholic beverages. The menu item with the highest sales volume is
      chicken wings at 20% of total restaurant
sales.
  •
              Royalties
      and franchise fees received from our
  franchisees.
  11
 We
generate cash from the operation of company-owned restaurants and from franchise
royalties and fees. We highlight the specific costs associated with the on-going
operation of our company-owned restaurants in the consolidated statement of
earnings under “Restaurant operating costs.” Nearly all of our depreciation
expense relates to assets used by our company-owned restaurants. Preopening
costs are those costs associated with opening new company-owned restaurants and
will vary quarterly based on the number of new locations opened and under
construction. Loss on asset disposals and impairment expense is related to
company-owned restaurants and includes the impairment of assets due to a
relocation and the write-down of miscellaneous assets. Certain other expenses,
such as general and administrative, relate to both company-owned and franchising
operations.
  We
operate on a 52 or 53-week fiscal year ending on the last Sunday in December.
Both of the first quarters of 2009 and 2008 consisted of thirteen
weeks.
  Quarterly
Results of Operations
  Our
operating results for the periods indicated 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. The information for each
three-month period is unaudited, and we have prepared it on the same basis as
the audited financial statements. In the opinion of management, all necessary
adjustments, consisting only of normal recurring adjustments, have been included
to present fairly the unaudited quarterly results.
  Quarterly
and annual operating results may fluctuate significantly as a result of a
variety of factors, including increases or decreases in same-store sales,
changes in commodity prices, the timing and number of new restaurant openings
and related expenses, asset impairment charges, store closing charges, general
economic conditions, stock-based compensation, and seasonal fluctuations. As a
result, our quarterly results of operations are not necessarily indicative of
the results that may be achieved for any future period.
  Three months
      endedMarch
      29,
                                                    2009
                                                  
                                                  
                                                  March
      30,
                                                    2008Revenue:Restaurant
      sales
                                                  
                                                  
                                                  90.8
                                                  %
                                                  
                                                  
                                                  89.3
                                                  %Franchising
      royalties and fees
                                                  
                                                  
                                                  9.2
                                                  
                                                  
                                                  
                                                  10.7Total
      revenue
                                                  
                                                  
                                                  100.0
                                                  
                                                  
                                                  
                                                  100.0Costs
      and expenses:Restaurant
      operating costs:Cost
      of sales
                                                  
                                                  
                                                  30.3
                                                  
                                                  
                                                  
                                                  30.4Labor
                                                  
                                                  
                                                  29.8
                                                  
                                                  
                                                  
                                                  29.8Operating
                                                  
                                                  
                                                  15.1
                                                  
                                                  
                                                  
                                                  15.3Occupancy
                                                  
                                                  
                                                  6.4
                                                  
                                                  
                                                  
                                                  6.6Depreciation
                                                  
                                                  
                                                  5.7
                                                  
                                                  
                                                  
                                                  5.4General
      and administrative
                                                  
                                                  
                                                  8.7
                                                  
                                                  
                                                  
                                                  9.6Preopening
                                                  
                                                  
                                                  1.8
                                                  
                                                  
                                                  
                                                  1.2Loss
      on asset disposals and impairment
                                                  
                                                  
                                                  0.1
                                                  
                                                  
                                                  
                                                  0.8Total
      costs and expenses
                                                  
                                                  
                                                  90.3
                                                  
                                                  
                                                  
                                                  90.2Income
      from operations
                                                  
                                                  
                                                  9.7
                                                  
                                                  
                                                  
                                                  9.8Investment
      income
                                                  
                                                  
                                                  0.1
                                                  
                                                  
                                                  
                                                  0.4Earnings
      before income taxes
                                                  
                                                  
                                                  9.7
                                                  
                                                  
                                                  
                                                  10.2Income
      tax expense
                                                  
                                                  
                                                  3.3
                                                  
                                                  
                                                  
                                                  3.5Net
      earnings
                                                  
                                                  
                                                  6.5
                                                  %
                                                  
                                                  
                                                  6.7
                                                  %
 
 The
number of company-owned and franchised restaurants open are as
follows:
 
 As
      ofMarch
      29,
                          2009
                        
                        
                        March
      30,
                          2008Company-owned
      restaurants
                        
                        
                        206
                        
                        
                        
                        165Franchised
      restaurants
                        
                        
                        373
                        
                        
                        
                        340
  12
 The
restaurant sales for company-owned and franchised restaurants are as follows
(amounts in thousands):
  Three months
      endedMarch
      29,
                          2009
                        
                        
                        March
      30,
                          2008Company-owned
      restaurant sales
                        
                        $
                        119,424
                        
                        
                        $
                        86,896Franchised
      restaurant sales
                        
                        
                        242,120
                        
                        
                        
                        206,888
  Increases
in comparable same-store sales are as follows (based on restaurants operating at
least fifteen months):
  Three months
      endedMarch
      29,
                          2009
                        
                        
                        March
      30,
                          2008Company-owned
      same-store sales
                        
                        
                        6.4%
                        
                        
                        
                        4.1%Franchised
      same-store sales
                        
                        
                        6.0%
                        
                        
                        
                        2.1%
  The
quarterly average prices paid per pound for fresh chicken wings are as
follows:
 
 Three months
      endedMarch
      29,
                        2009
                      
                      
                      March
      30,
                        2008Average
      price per pound
                      
                      $
                      1.63
                      
                      
                      $
                      1.33
  Results
of Operations for the Three Months Ended March 29, 2009 and March 30,
2008
  Restaurant
sales increased by $32.5 million, or 37.4%, to $119.4 million in 2009 from $86.9
million in 2008. The increase in restaurant sales was due to a $27.2 million
increase associated with the opening of 10 new company-owned restaurants in 2009
and 46 company-owned restaurants opened before 2009 that did not meet the
criteria for same-store sales for all or part of the three-month period and $5.3
million related to a 6.4% increase in same-store sales.
  Franchise
royalties and fees increased by $1.8 million, or 17.0%, to $12.1 million in 2009
from $10.4 million in 2008. The increase was primarily due to additional
royalties collected from 11 new franchised restaurants that opened in 2009 and
37 franchised restaurants that opened in the last nine months of 2008.
Same-store sales for franchised restaurants increased 6.0% in 2009.
  Cost of
sales increased by $9.8 million, or 37.1%, to $36.2 million in 2009 from $26.4
million in 2008 due primarily to more restaurants being operated in 2009. Cost
of sales as a percentage of restaurant sales decreased to 30.3% in 2009 from
30.4% in 2008. The decrease in cost of sales as a percentage of restaurant sales
was primarily due to the leverage of food and alcohol costs as a result of price
increases. The steady shift from traditional wings to boneless wings also
lowered our cost of goods percentage. Traditional wings accounted for 20% of our
restaurant sales, down from 22% in 2008. Boneless wings, which in first quarter
were a better margin item than traditional wings, increased to 18% of sales,
from 15% in the prior year. For the first quarter of 2009, wing prices averaged
$1.63 per pound which was a 23.0% increase over the same period in
2008.
  Labor
expenses increased by $9.7 million, or 37.5%, to $35.5 million in 2009 from
$25.9 million in 2008 due primarily to more restaurants being operated in 2009.
Labor expenses as a percentage of restaurant sales remained consistent at 29.8%
in 2009 and 2008. Lower hourly and management labor were offset by higher
incentive and medical costs.
  Operating
expenses increased by $4.7 million, or 35.5%, to $18.0 million in 2009 from
$13.3 million in 2008 due primarily to more restaurants being operated in 2009.
Operating expenses as a percentage of restaurant sales decreased to 15.1% in
2009 from 15.3% in 2008. The decrease in operating expenses as a percentage of
restaurant sales is primarily due to lower cable and televised sport package
costs.
  Occupancy
expenses increased by $1.9 million, or 33.3%, to $7.6 million in 2009 from $5.7
million in 2008 due primarily to more restaurants being operated in 2009.
Occupancy expenses as a percentage of restaurant sales decreased to 6.4% in 2009
from 6.6% in 2008, primarily due to better leverage of rent expense with higher
sales levels.
  Depreciation
increased by $2.3 million, or 43.1%, to $7.5 million in 2009 from $5.2 million
in 2008. The increase was primarily due to the additional depreciation on 10 new
restaurants opened in 2009 and the 30 new restaurants that opened in the last
nine months of 2008.
  13
 General
and administrative expenses increased by $2.1 million, or 22.3%, to $11.4
million in 2009 from $9.3 million in 2008 primarily due to additional headcount
and higher corporate, professional, and travel-related expenditures. General and
administrative expenses as a percentage of total revenue decreased to 8.7% in
2009 from 9.6% in 2008. Exclusive of stock-based compensation, we reduced our
general and administrative expenses as a percentage of revenue to 8.1% from 8.6%
due to better leveraging of our wage-related expenses against higher sales
levels.
  Preopening
costs increased by $1.2 million, to $2.4 million in 2009 from $1.2 million in
2008. In 2009, we incurred costs of $1.9 million for 10 new company-owned
restaurants opened in the first quarter of 2009, and incurred $511,000 for
restaurants that will open in the second or third quarters of 2009. In 2008, we
incurred costs of $688,000 for four new company-owned restaurants opened in the
first quarter of 2008, and incurred $467,000 for restaurants that opened in the
second or third quarters of 2008. In 2009, we expect average preopening costs
per restaurant to be $215,000.
  Loss on
asset disposals and impairment decreased by $578,000 to $175,000 in 2009 from
$753,000 in 2008. In 2009, the charge was due to the write-off of miscellaneous
equipment. In 2008, we impaired the assets of one of our Texas restaurants by
$395,000 due to a relocation. The remaining charge in 2008 was related to the
HDTV upgrades and write-off of miscellaneous equipment.
  Investment
income decreased by $356,000 to $76,000 in 2009 from $432,000 in 2008. The
decrease was primarily due to lower cash and marketable securities balances,
lower interest rates, and losses on investments held for a deferred compensation
plan. Cash and marketable securities balances at the end of the quarter totaled
$44.0 million in 2009 compared to $73.1 million for the first quarter of
2008.
  Provision
for income taxes increased $902,000 to $4.3 million in 2009 from $3.4 million in
2008. The effective tax rate as a percentage of income before taxes decreased to
33.7% in 2009 from 34.3% in 2008. The 2009 income tax rate was lower due to an
increase in employer tax credits and a decrease in state taxes which were
partially offset by a decrease in tax-exempt interest income. For fiscal year
2009, we believe our effective tax rate will be approximately 34%.
  Liquidity
and Capital Resources
  Our
primary liquidity and capital requirements have been for new restaurant
construction, remodeling and maintaining our existing company-owned restaurants,
working capital, and other general business needs. We fund these expenses
primarily with cash from operations. The cash and marketable securities balance
at March 29, 2009 was $44.0 million. We invest our cash balances in debt
securities with the focus on protection of principal, adequate liquidity, and
return on investment based on risk. As of March 29, 2009, nearly all excess cash
was invested in high-quality municipal securities.
  For the
three months ended March 29, 2009, net cash provided by operating activities was
$19.3 million. Net cash provided by operating activities consisted primarily of
net earnings adjusted for non-cash expenses, an increase in income taxes payable
and accounts receivable. The change in income taxes was due to the timing of
income tax payments. The increase in accounts receivable was due to an increase
in our credit card receivables.
  For the
three months ended March 30, 2008, net cash provided by operating activities was
$16.0 million. Net cash provided by operating activities consisted primarily of
net earnings adjusted for non-cash expenses, a decrease in refundable income
taxes, and a decrease in accrued expenses. The change in income taxes was due to
the timing of income tax payments. The decrease in accrued expenses was due to
the payout of year-end incentive compensation.
  For the
three months ended March 29, 2009 and March 30, 2008, net cash used in investing
activities was $19.3 million and $1.8 million, respectively. Investing
activities included purchases of property and equipment related to the opening
of new company-owned restaurants and restaurants under construction in both
periods. During the first quarter of 2009 and 2008, we opened 10 restaurants and
four restaurants, respectively. In 2009, we expect capital expenditures for
approximately 35 new company-owned restaurants to cost approximately $1.5
million per location and expenditures to be approximately $22.5 million for the
maintenance and remodel of existing restaurants. In 2009, we purchased $13.1
million of marketable securities and received proceeds of $12.6 million as these
investments matured or were sold. In 2008, we purchased $27.7 million of
marketable securities and received proceeds of $36.3 million as these
investments matured or were sold.
  For the
three months ended March 29, 2009 and March 30, 2008, net cash used in financing
activities was $1.5 million and $610,000, respectively. Net cash used in
financing activities for 2009 resulted primarily from tax payments for
restricted stock of $1.5 million. No additional funding from the issuance of
common stock (other than from the exercise of options and purchase of stock
under the employee stock purchase plan) is anticipated for the remainder of
2009. Net cash used in financing activities for 2008 resulted primarily from tax
payments for restricted stock of $989,000, offset by proceeds from the exercise
of stock options of $101,000 and the excess tax benefit from stock issuance of
$278,000.
  14
 Our
liquidity is impacted by minimum cash payment commitments resulting from
operating lease obligations for our restaurants and 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 thresholds. We own the buildings in
which 19 of our restaurants operate and, therefore, have very limited ability to
enter into sale-leaseback transactions as a potential source of
cash.
  The
following table presents a summary of our contractual operating lease
obligations and commitments as of March 29, 2009:
  Payments Due
      By Period (in thousands)Total
                                    
                                    
                                    Less than
                                      One
      year
                                    
                                    
                                    1-3 years
                                    
                                    
                                    3-5 years
                                    
                                    
                                    After 5
                                      yearsOperating
      lease obligations
                                    
                                    $
                                    214,806
                                    
                                    
                                    
                                    25,547
                                    
                                    
                                    
                                    48,555
                                    
                                    
                                    
                                    43,829
                                    
                                    
                                    
                                    96,875Lease
      commitments for restaurants under development
                                    
                                    
                                    32,269
                                    
                                    
                                    
                                    1,506
                                    
                                    
                                    
                                    4,411
                                    
                                    
                                    
                                    4,485
                                    
                                    
                                    
                                    21,867Total
                                    
                                    $
                                    247,075
                                    
                                    
                                    
                                    27,053
                                    
                                    
                                    
                                    52,966
                                    
                                    
                                    
                                    48,314
                                    
                                    
                                    
                                    118,742
  We
believe the cash flows from our operating activities and our balance of cash and
marketable securities will be sufficient to fund our operations and building
commitments and meet our obligations for the foreseeable future. Our future cash
outflows related to income tax uncertainties amount to $458,000. These amounts
are excluded from the contractual obligations table due to the high degree of
uncertainty regarding the timing of these liabilities.
 
 Off-Balance
Sheet Arrangements
 
 As of
March 29, 2009, we had no off-balance sheet arrangements or
transactions.
 
 Risk
Factors/Forward-Looking Statements
  The
foregoing discussion and other statements in this report contain various
“forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements are based on current expectations or
beliefs concerning future events. Such statements can be identified by the use
of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “could,” “possible,” “plan,” “project,” “will,” “forecast” and similar
words or expressions. Our forward-looking statements generally relate to our
expected restaurant openings for 2009 and the longer term, our efforts to manage
the cost of fresh chicken wings and other costs of sales, our growth strategy in
new and existing markets, our expectations and beliefs with respect to the
impact of certain accounting pronouncements on our financial statements, our
estimated tax rates for 2009, our anticipated capital expenditures, our
expectations regarding pre-opening costs, sources of funding and cash
requirements, our expectations and beliefs regarding various legal actions
arising in the ordinary course of business, and our beliefs relating to
commodity price and investment risks. Although it is not possible to foresee all
of the factors that may cause actual results to differ from our forward-looking
statements, such factors include, among others, the following risk factors (each
of which is discussed in greater detail in our Annual Report on Form 10-K for
the fiscal year ended December 28, 2008):
 
 ·
              Fluctuations
      in chicken wing prices could reduce our operating
  income.
  ·
              If
      we are unable to successfully open new restaurants, our revenue growth
      rate and profits may be reduced.
  ·
              We
      must identify and obtain a sufficient number of suitable new restaurant
      sites for us to sustain our revenue growth
rate.
  ·
              Our
      restaurants may not achieve market acceptance in the new geographic
      regions we enter.
  ·
              New
      restaurants added to our existing markets may take sales from existing
      restaurants.
  ·
              Implementing
      our expansion strategy may strain our
resources.
  ·
              We
      are dependent on franchisees and their
success.
  ·
              Franchisees
      may take actions that could harm our
business.
  15
 ·
              We
      could face liability from our
franchisees.
  ·
              We
      may be unable to compete effectively in the restaurant
      industry.
  ·
              A
      reduction in vendor allowances currently received could affect our costs
      of goods sold.
  ·
              Our
      quarterly operating results may fluctuate due to the timing of special
      events and other factors, including the recognition of impairment
      losses.
  ·
              We
      may not be able to attract and retain qualified personnel to operate and
      manage our restaurants.
  ·
              We
      may not be able to obtain and maintain licenses and permits necessary to
      operate our restaurants.
  ·
              Changes
      in employment laws or regulation could harm our
    performance.
  ·
              Changes
      in consumer preferences, consumer confidence, or discretionary consumer
      spending could harm our
performance.
  ·
              We
      are susceptible to adverse trends in
Ohio.
  ·
              Changes
      in public health concerns may impact our
  performance.
  ·
              A
      decline in visitors to any of the business districts near the locations of
      our restaurants could negatively affect our restaurant
    sales.
  ·
              The
      acquisition of existing restaurants from our franchisees or other
      acquisitions may have unanticipated consequences that could harm our
      business and our financial
condition.
  ·
              Improper
      food handling may affect our business
adversely.
  ·
              Complaints
      or litigation may hurt us.
  ·
              Our
      current insurance may not provide adequate levels of coverage against
      claims.
  ·
              Natural
      disasters and other events could harm our
  performance.
  ·
              We
      may not be able to protect our trademarks, service marks or trade
      secrets.
  Investors
are cautioned that all forward-looking statements involve risk and uncertainties
and speak only as of the date on which they are made.
  16
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  We are
exposed to market risk related to our cash and cash equivalents and marketable
securities. We invest our excess cash in highly liquid short-term investments
with maturities of less than one year. These investments are not held for
trading or other speculative purposes. Changes in interest rates affect the
investment income we earn on our cash and cash equivalents and marketable
securities and, therefore, impact our cash flows and results of operations. We
also hold investments in mutual funds for the future needs of a non-qualified
deferred compensation plan.
  Financial
Instruments
  Financial
instruments that potentially subject us to concentrations of credit risk consist
principally of municipal securities. We do not believe there is a significant
risk of non-performance by these municipalities because of our investment policy
restrictions as to acceptable investment vehicles.
  Inflation
  The
primary inflationary factors affecting our operations are food, labor, and
restaurant operating costs. Substantial increases in these costs could impact
operating results to the extent that such increases cannot be passed along
through higher menu prices. A large number of our restaurant personnel are paid
at rates based on the applicable federal and state minimum wages, and increases
in the minimum wage rates and tip-credit wage rates could directly affect our
labor costs. Many of our leases require us to pay taxes, maintenance, repairs,
insurance, and utilities, all of which are generally subject to inflationary
increases.
  Commodity
Price Risk
  Many of
the food products purchased by us are affected by weather, production,
availability, and other factors outside our control. We believe that almost all
of our food and supplies are available from several sources, which helps to
control food product risks. We negotiate directly with independent suppliers for
our supply of food and paper products. We use members of UniPro Food Services,
Inc., a national cooperative of independent food distributors, to distribute
these products from the suppliers to our restaurants. We have minimum purchase
requirements with some of our vendors, but the terms of the contracts and nature
of the products are such that our purchase requirements do not create a market
risk. The primary food product used by company-owned and franchised restaurants
is fresh 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 popular 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. We currently purchase chicken wings at market prices. If a
satisfactory long-term price agreement for chicken wings were to arise, we would
consider locking in prices to reduce our price volatility. If there is a
significant rise in the price of fresh chicken wings, and we are unable to
successfully adjust menu prices or menu mix or otherwise make operational
adjustments to account for the higher wing prices, our operating results could
be adversely affected. Fresh chicken wings accounted for approximately 23.6% and
22.5% of our cost of sales in the first quarter of 2009 and 2008, respectively,
with a quarterly average price per pound of $1.63 and $1.33,
respectively.
  ITEM
4. CONTROLS AND PROCEDURES
  Management’s
Report on Internal Control Over Financial Reporting
 
 As of the
end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of our principal executive officer and
principal financial officer, of our disclosure controls and procedures as
defined in Rules 13(a)-15(e) under the Securities Exchange Act of 1934 (“the
Exchange Act”). Based on this evaluation, the principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
 
 Changes
in Internal Control Over Financial Reporting
 
 There
were no changes in our internal controls over financial reporting during our
most recently completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
  17
 
 PART
II – OTHER INFORMATION
  ITEM
1. LEGAL PROCEEDINGS
  Occasionally,
we are a defendant in litigation arising in the ordinary course of our 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 concerns. To date, none of these types of litigation, most of
which are typically covered by insurance, has had a material effect on us. We
have insured and continue to insure against most of these types of claims. A
judgment significantly in excess of our insurance coverage or involving punitive
damages, which may not be covered by insurance, could materially adversely
affect our financial condition or results of operations.
 
 ITEM 6. EXHIBITS
  See
Exhibit Index following the signature page of this report.
  
 18
  SIGNATURES
  In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  Date:
      May 6, 2009
                    BUFFALO
      WILD WINGS, INC.By:
                    /s/
      Sally J. SmithSally
      J. Smith, President and Chief Executive Officer
                      (principal
      executive officer)By:
                    /s/
      Mary J. TwinemMary
      J. Twinem, Executive Vice President, Chief
                      Financial
      Officer and Treasurer (principal financial and
                      accounting
      officer)
  
 19
 EXHIBIT
INDEX
  BUFFALO
WILD WINGS, INC.
 FORM
10-Q FOR QUARTER ENDED MARCH 29, 2009
  Exhibit
                        Number
                      
                      Description10.1*
                      
                      2009
      Executive Cash Incentive Program for Chief Executive
    Officer10.2*
                      
                      Form
      of Notice of Performance-Based Restricted Stock Unit Award (Officer Level)
      as of March 1, 200931.1
                      
                      Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act31.2
                      
                      Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act32.1
                      
                      Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act32.2
                      
                      Certification
      of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act
  
  *Management
agreement or compensatory plan or arrangement.
    20