0001636222-18-000013.txt : 20180222 0001636222-18-000013.hdr.sgml : 20180222 20180222160501 ACCESSION NUMBER: 0001636222-18-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20180222 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20180222 DATE AS OF CHANGE: 20180222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Wingstop Inc. CENTRAL INDEX KEY: 0001636222 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37425 FILM NUMBER: 18632522 BUSINESS ADDRESS: STREET 1: 5501 LBJ FREEWAY STREET 2: 5TH FLOOR CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 972-331-8484 MAIL ADDRESS: STREET 1: 5501 LBJ FREEWAY STREET 2: 5TH FLOOR CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: Wingstop, Inc. DATE OF NAME CHANGE: 20150323 FORMER COMPANY: FORMER CONFORMED NAME: Wing Stop Holdings Corp DATE OF NAME CHANGE: 20150311 8-K 1 a8-kq42017.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 22, 2018
 

WINGSTOP INC.
(Exact name of registrant as specified in its charter)
 

Delaware
001-37425
47-3494862
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(IRS Employer Identification No.)
 
 
 
5501 LBJ Freeway, 5th Floor,
Dallas, Texas
 
75240

(Address of principal executive offices)
 
(Zip Code)
(972) 686-6500
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 





Item 2.02. Results of Operations and Financial Condition
The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” Consequently, it is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or Securities Act of 1933, if such subsequent filing specifically references this Form 8-K.
On February 22, 2018, Wingstop Inc. issued a press release reporting the Company’s financial results for its fiscal fourth quarter ended December 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein in its entirety. The press release uses the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, adjusted net income and adjusted earnings per diluted share. A discussion of these financial measures, including a discussion of the usefulness and purpose of each measure, is included below.
EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S.GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.
We define “EBITDA” as net income before interest expense, net, income tax expense, and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for transaction costs, gains and losses on the disposal of assets, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations period over period and would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not part of normal day-to-day operations of our business.
Management uses EBITDA and Adjusted EBITDA:
•
as a measurement of operating performance because they assist us in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
•
for planning purposes, including the preparation of our internal annual operating budget and financial projections;
•
to evaluate the performance and effectiveness of our operational strategies;
•
to evaluate our capacity to fund capital expenditures and expand our business; and
•
to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance shares.
By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Items excluded from these non-GAAP measures are significant components in understanding and assessing financial performance. In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants such as fixed charge coverage, lease adjusted leverage and debt incurrence. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance. Some of the limitations are:
•
such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•
such measures do not reflect changes in, or cash requirements for, our working capital needs;
•
such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•
such measures do not reflect our tax expense or the cash requirements to pay our taxes;




•
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
•
other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only supplementally. As noted in the press release attached hereto as Exhibit 99.1, Adjusted EBITDA includes adjustments for transaction costs, gains and losses on disposal of assets and stock-based compensation, among other items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period-to-period, do not directly relate to the ongoing operations of our restaurants and complicate comparisons of our internal operating results and operating results of other restaurant companies over time. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the press release help management measure our core operating performance over time by removing items that are not related to day-to-day operations.
Adjusted Net Income and Adjusted Earnings per Diluted Share. Adjusted net income represents net income adjusted for transaction costs related to the refinancing of our credit agreement and our public offerings and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term. However, it is reasonable to assume that transaction costs for financing transactions may occur in future periods. Adjusted earnings per diluted share is defined as adjusted net income divided by weighted average diluted share count. Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP. These measures have not been prepared in accordance with Article 11 of Regulation S-X. Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enables management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.
Item 7.01. Regulation FD
In May 2014, the Financial Accounting Standards Board issued new guidance for revenue recognition related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance is effective for the Company beginning in fiscal year 2018. The Company will adopt this new guidance in fiscal year 2018 using the full retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016 and 2017, in the year of adoption. Additional information regarding the Company's adoption of the new revenue recognition guidance and the impact to historical financial results is attached hereto as Exhibit 99.2.
The information contained in this Item, including Exhibit 99.2 attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general incorporation language in any such filing.
Item 8.01. Other Events
On February 22, 2018, the Company’s Board of Directors declared a $0.07 per common share quarterly cash dividend. The dividend is payable on March 23, 2018 to stockholders of record as of the close of business on March 9, 2018. The declaration of any future dividends is subject to the Board’s discretion.
The full text of the press release is attached to this Form 8-K as Exhibit 99.1 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits

(d)    Exhibits

99.1

99.2




Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
Wingstop Inc.
 
 
 
 
(Registrant)
 
 
 
 
 
Date:
February 22, 2018
 
By:
/s/ Michael J. Skipworth
 
 
 
 
Chief Financial Officer
(Principal Financial and Accounting Officer)



 EX-99.1 2 wingq42017earningsrelease.htm EXHIBIT 99.1 Exhibit


winglogo2017a01.jpg
FOR IMMEDIATE RELEASE


Wingstop Inc. Reports Fiscal Fourth Quarter 2017 Financial Results

Dallas, February 22, 2018 - (GLOBE NEWSWIRE) - Wingstop Inc. (NASDAQ: WING) today announced fiscal fourth quarter and fiscal year 2017 financial results for the period ended December 30, 2017.

Highlights for the Fiscal Fourth Quarter 2017 compared to the Fiscal Fourth Quarter 2016 (on a 13-week basis):

▪
System-wide restaurant count increased 13.5% to 1,133 global locations
▪
System-wide sales increased 15.6%
▪
Domestic same store sales increased 5.2%
▪
Total revenue increased 21.9% to $28.3 million
▪
Net income increased to $10.5 million, or $0.36 per diluted share*, compared to $4.1 million, or $0.14 per diluted share
▪
Adjusted EBITDA**, a non-GAAP measure, increased 18.9% to $11.3 million
▪
Adjusted net income**, a non-GAAP measure, increased 20.7% to $5.0 million

Highlights for the Fiscal Year 2017 compared to the Fiscal Year 2016 (on a 52-week basis):

▪
Added 135 net new restaurants in fiscal year 2017
▪
System-wide sales increased 14.0% to $1.1 billion
▪
Domestic same store sales increased 2.6%
▪
Total revenue increased 17.5% to $105.6 million
▪
Net income increased to $27.3 million, or $0.93* per diluted share, compared to $15.2 million, or $0.52 per diluted share
▪
Adjusted EBITDA**, a non-GAAP measure, increased 18.3% to $41.5 million
▪
Adjusted net income**, a non-GAAP measure, increased 30.7% to $21.8 million
▪
Adjusted earnings per diluted share**, a non-GAAP measure, increased 27.6% to $0.74 from the prior fiscal year

Note fiscal year 2016 contained an extra week in the fourth quarter, which resulted in incremental revenues of $1.6 million, incremental net income of $0.2 million and incremental EBITDA** of $0.5 million. Unless otherwise noted, all amounts presented for the prior year period are on a 14-week or 53-week basis.

* In the fiscal first quarter of 2017, the Company adopted Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which required the Company to record excess tax benefits from equity-based compensation as a reduction to income tax expense in the income statement, whereas they were previously recognized in equity. See the “Adoption of New Accounting Guidance” section below for additional information.

** Adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share are non-GAAP measures. Reconciliations of adjusted EBITDA and adjusted net income to the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”





President and Chief Executive Officer Charlie Morrison stated, “Despite facing one of the most difficult - if not the most difficult - year in our 23-year history, Wingstop was able to achieve strong results for our shareholders. In 2017, the Company celebrated key milestones with the opening of our 100th international location, 14 consecutive years of same-store sales growth, and the launching of a quarterly dividend, further driving the point that our business model is strong and our team members and business partners are among the best in the business.”

Morrison continued, “We are optimistic about 2018 and will continue to focus on the following long-term growth strategies: national advertising, technological innovation, delivery, and international development. By doing so, we are positioning ourselves to become a top 10 global restaurant brand.”

Key Operating Metrics for the Fiscal Fourth Quarter 2017 Compared to the Fiscal Fourth Quarter 2016

 
Fiscal Quarter Ended
 
December 30, 2017
 
December 31, 2016
Number of system-wide restaurants open at end of period
1,133

 
998

Number of domestic franchise restaurants open at end of period
1,004

 
901

Number of international franchise restaurants open at end of period
106

 
76

System-wide sales (in thousands)
$
284,980

 
$
265,175

System-wide domestic same store sales growth
5.2
%
 
1.0
%
Net income (in thousands)
$
10,497

 
$
4,312

Adjusted EBITDA (in thousands)
$
11,330

 
$
10,031


Fiscal Fourth Quarter 2017 Financial Results

Total revenue for the fiscal fourth quarter 2017 increased 14.3% to $28.3 million from $24.8 million in the fiscal fourth quarter last year.

▪
Royalty revenue and franchise fees increased $2.7 million to $18.3 million from $15.6 million in the fiscal fourth quarter last year. This increase was due to a 13.6% increase in the number of franchised restaurants and domestic same store sales growth of 5.2%, partially offset by revenue of approximately $0.9 million related to the 53rd week in 2016. Additionally, other revenue increased $1.5 million, primarily due to approximately $1.0 million in vendor contributions received in the current period for the franchisee convention, which occurred in the fourth quarter of fiscal year 2017. Royalty revenue and franchise fees for the fiscal fourth quarter increased 24.3% on a 13-week basis.
▪
Company-owned restaurant sales increased $0.9 million to $10.0 million from $9.1 million in the fiscal fourth quarter last year. The increase was the result of the acquisition of two restaurants from a franchisee in July 2017 resulting in sales of $1.0 million, company-owned domestic same store sales growth of 4.6%, driven by increased transactions, and the opening of one company-owned restaurant during December 2016, which was open for a full quarter in 2017. These increases were offset by approximately $0.6 million related to the 53rd week in 2016. Company-owned restaurant sales increased 17.8% on a 13-week basis.

Cost of sales increased to $7.5 million from $7.0 million in the prior year’s fiscal fourth quarter. As a percentage of company-owned restaurant sales, cost of sales decreased 160 basis points to 74.5% from 76.1%. The decrease was driven primarily by our ability to leverage costs due to the company-owned domestic same store sales increase of 4.6% and the acquisition of two previously franchised locations, offset by an increase in costs for bone-in chicken wings as compared to the prior year period.

Selling, general & administrative expenses (SG&A) increased 19.9% to $10.5 million compared to $8.7 million in the prior year’s fourth quarter. The increase in SG&A expense is primarily due to expenses incurred associated with our franchisee convention, planned headcount additions and an increase in stock based compensation, as well as an increase




in voluntary contributions made to the Company’s advertising fund of $0.2 million, partially offset by a decrease in incremental expenses of $0.6 million related to the 53rd week in 2016.

Net income increased to $10.5 million, or $0.36 per diluted share, compared to net income of $4.3 million, or $0.15 per diluted share, in the prior year’s fourth quarter. The net benefit from income taxes in the current quarter includes a $5.5 million net tax benefit due to the enactment of the Tax Cuts and Jobs Act (“Tax Act”), consisting primarily of the re-measurement of our deferred tax liabilities using the lower enacted corporate tax rate. Net income for the fourth quarter increased 156.6% on a 13-week basis.

Adjusted net income increased 14.6% to $5.0 million, or $0.17 per diluted share, compared to $4.4 million, or $0.15 per diluted share, in the prior year’s fourth quarter. Adjusted net income for the fourth quarter increased 20.7% on a 13-week basis. A reconciliation between net income and adjusted net income is included in the accompanying financial data.

Key Operating Metrics for the Fiscal Year 2017 Compared to the Fiscal Year 2016

 
Fiscal Year Ended
 
December 30, 2017
 
December 31, 2016
Number of system-wide restaurants open at end of period
1,133

 
998

Number of domestic franchise restaurants open at end of period
1,004

 
901

Number of international franchise restaurants open at end of period
106

 
76

System-wide sales (in thousands)
$
1,087,434

 
$
972,270

System-wide domestic same store sales growth
2.6
%
 
3.2
%
Net income (in thousands)
$
27,304

 
$
15,434

Adjusted EBITDA (in thousands)
$
41,507

 
$
35,576


Fiscal Year 2017 Financial Results

Total revenue for fiscal year 2017 increased 15.5% to $105.6 million from $91.4 million in the prior fiscal year.

▪
Royalty revenue and franchise fees increased $11.4 million to $68.5 million from $57.1 million in the prior fiscal year. This was primarily due to a 13.6% increase in the number of franchised restaurants and domestic same store sales growth of 2.6%, partially offset by revenue of approximately $0.9 million related to the 53rd week in 2016. Other revenue increased $4.8 million primarily due to an increase in vendor rebates, including a one-time payment, based on system-wide volumes purchased in the prior year, received in conjunction with a new vendor agreement that was executed during the first quarter of 2017. The funding from this agreement was primarily used to support our national advertising campaign. Royalty revenue and franchise fees increased 21.9% on a 52-week basis.
▪
Company-owned restaurant sales increased $2.8 million to $37.1 million from $34.3 million in the prior fiscal year. The increase is the result of the acquisition of two company-owned restaurants from a franchisee in the third quarter of 2017 and company-owned domestic same store sales growth of 1.6%, driven by an increase in transactions, partially offset by revenue of approximately $0.6 million related to the 53rd week in 2016. Company-owned restaurant sales increased 10.2% on a 52-week basis.

Cost of sales increased 13.6% to $28.7 million from $25.3 million in the prior fiscal year. As a percentage of company-owned restaurant sales, cost of sales increased 370 basis points to 77.5% from 73.8%. The increase was driven primarily by an 18.0% increase in commodities rates for bone-in chicken wings as compared to the prior fiscal year and an increase in labor as we made investments in roster sizes and staffing to support the continued top line growth in our company-owned restaurants in the third and fourth quarters of the prior year, offset by a decrease in other restaurant operating expenses.





SG&A increased 9.8% to $37.2 million in fiscal year 2017, compared to $33.8 million in the prior fiscal year. The increase in SG&A expense is primarily due to an increase in voluntary contributions of $3.2 million made to the advertising fund, including a one-time payment made in conjunction with a new vendor agreement executed during the first quarter 2017, which provided support for our national advertising campaign. SG&A expense also increased due to planned headcount additions and an increase in stock based compensation and travel expenses. These increases were partially offset by a decrease in nonrecurring expenses of $2.2 million related to the refinancing of our credit agreement and expenses related to the special dividend, which occurred in the prior fiscal year, as well as in incremental costs of approximately $0.6 million related to the 53rd week in 2016.

Net income increased to $27.3 million, or $0.93 per diluted share, compared to net income of $15.4 million, or $0.53 per diluted share in the prior fiscal year. The net provision from income taxes for fiscal year 2017 includes a $5.5 million net tax benefit due to the enactment of the Tax Cuts and Jobs Act (“Tax Act”), consisting primarily of the re-measurement of our deferred tax liabilities using the lower enacted corporate tax rate. Net income increased 79.5% on a 52-week basis.

Adjusted net income increased 29.0% to $21.8 million, or $0.74 per diluted share, compared to $16.9 million, or $0.58 per diluted share, in the prior fiscal year. A reconciliation between net income and adjusted net income is included in the accompanying financial data.

Adoption of New Accounting Guidance

The Company adopted ASU 2016-09 in the fiscal first quarter 2017. This standard requires excess tax benefits from share based compensation to be recorded in income tax expense rather than paid in capital. The adoption resulted in a reduction to the provision for income taxes of $0.1 million and $2.5 million in the fiscal quarter and fiscal year ended December 30, 2017, respectively, due to the recognition of excess tax benefits for options exercised. The adoption resulted in an increase of $0.08 to earnings per diluted share for the year ended December 30, 2017, and did not materially impact earnings per diluted share in the fourth quarter. Refer to the Company’s Annual Report on Form 10-K for the year ended December 30, 2017 for additional information regarding the impact of the adoption of ASU 2016-09.

New Accounting Guidance Not Yet Adopted as of December 30, 2017 - Revenue Recognition

In May 2014, the Financial Accounting Standards Board issued new guidance for revenue recognition related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance is effective for the Company in fiscal year 2018. The Company will adopt this new guidance in fiscal year 2018 using the full retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016 and 2017, in the year of adoption. Additional information regarding the Company's adoption of the new revenue recognition guidance and the impact to historical financial results is contained in Exhibit 99.2 to the Company's filing on Form 8-K, filed with the Securities and Exchange Commission on February 22, 2018.

Restaurant Development

As of December 30, 2017, there were 1,133 Wingstop restaurants system-wide. This included 1,027 restaurants in the United States, of which 1,004 were franchised restaurants and 23 were company-owned. Our international presence consisted of 106 franchised restaurants across eight countries. During the fiscal fourth quarter and fiscal year 2017, there were 45 and 135 net system-wide Wingstop restaurants opened, respectively, including 12 and 30 international franchised locations, respectively.

Quarterly Dividend

In recognition of the Company’s strong cash flow generation, confidence in the business, and commitment to returning value to shareholders, our Board of Directors has authorized and declared a quarterly dividend of $0.07 per share of




common stock, totaling approximately $2.1 million. This dividend will be paid on March 23, 2018 to shareholders of record as of March 9, 2018. Additionally, we announced a special cash dividend of $3.17 in conjunction with the closing of a new credit facility on January 30, 2018, which was paid on February 14, 2018 to shareholders of record on February 9, 2018.

Financial Outlook

For fiscal year ending December 29, 2018, the Company is reiterating its long-term targets and providing an update on certain items that will impact how Wingstop reports its financials in 2018.

2018
▪
10%+ system-wide unit growth
▪
Low single digit domestic same store sales growth
▪
Adjusted EBITDA growth of 13% - 15%
▪
As discussed above, we will report results reflecting the new revenue recognition standards beginning in the first quarter of 2018
▪
Effective tax rate of approximately 23%
▪
Stock-based compensation expense of approximately $3 million
▪
Fully diluted Adjusted earnings per share of approximately $0.75, which reflects 29.6 million diluted shares outstanding. This estimate is comparable to fully diluted Adjusted earnings per share of $0.69 for fiscal year 2017, which has been restated to reflect the new revenue recognition standards. Fiscal year 2017 included a benefit of $0.08 to Adjusted earnings per share associated with the new accounting rules for excess tax benefits for stock options exercised. No excess tax benefits from stock option exercises have been contemplated in our 2018 guidance.

 
Fiscal Year Ended
 
December 29, 2018
Diluted earnings per share
$
0.71

Adjustments:
 
Transaction costs (a)
0.05

Tax impact of adjustments (b)
(0.01
)
Adjusted diluted earnings per share
$
0.75

 
 
(a) Represents costs and expenses related to the refinancing of our credit agreement
(b) Tax impact of adjustment calculated at a 23% effective tax rate




The following definitions apply to these terms as used in this release:

Same store sales reflects the change in year-over-year sales for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.

System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees.

Adjusted EBITDA is defined as net income before interest expense, net, income tax expense, and depreciation and amortization (EBITDA) further adjusted for transaction costs, gains and losses on the disposal of assets, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.

Adjusted net income is defined as net income plus transactions costs minus related adjustments to income tax expense.

Adjusted earnings per diluted share is defined as adjusted net income divided by weighted average diluted share count.

Conference Call and Webcast

Chairman and Chief Executive Officer, Charlie Morrison, and Chief Financial Officer, Michael Skipworth, will host a conference call today to discuss the fiscal fourth quarter and fiscal year 2017 financial results at 5:00 PM Eastern Time.

The conference call can be accessed live by dialing 201-689-8562. A replay will be available two hours after the call and can be accessed by dialing 412-317-6671; the passcode is 13675837. The replay will be available through Thursday, March 1, 2018.

The conference call will also be webcast live and later archived on the investor relations section of Wingstop’s corporate website at ir.wingstop.com under the ‘News & Events’ section.

About Wingstop

Founded in 1994 and headquartered in Dallas, Texas, Wingstop Inc. (NASDAQ:WING) operates and franchises more than 1,000 restaurants across the United States, Mexico, Singapore, the Philippines, Indonesia, the United Arab Emirates, Malaysia, Saudi Arabia, and Colombia. The Wing Experts’ menu features classic and boneless wings with 11 bold, distinctive flavors including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ, Louisiana Rub, and Mango Habanero. Wingstop’s wings are always cooked to order, hand-sauced and tossed and served with a variety of house-made sides including fresh-cut, seasoned fries. Having grown its domestic same store sales for 13 consecutive years, the Company has been ranked #3 on the “Top 100 Fastest Growing Restaurant Chains” by Nation’s Restaurant News (2016), #7 on the “Top 40 Fast Casual Chains” by Restaurant Business (2016), and was named “Best Franchise Deal in North America” by QSR magazine (2014). Wingstop was ranked #88 on Fortune’s 100 Best Medium Workplaces list in October 2016. For more information visit www.wingstop.com or www.wingstopfranchise.com. Follow us on facebook.com/Wingstop and Twitter @Wingstop.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we




are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Forward-looking Information

Certain statements contained in this news release, as well as other information provided from time to time by Wingstop Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “guidance,” “anticipate,” “estimate,” “expect,” “forecast,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can have,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements in this news release include our fiscal year 2018 outlook for new restaurant openings, domestic same store sales growth, SG&A expenses, net income, EBTIDA, adjusted EBITDA, adjusted net income, adjusted earnings per diluted share and our diluted share count, as well as our anticipated potential domestic restaurant expansion opportunity, positioning to make progress towards domestic restaurant potential and progress toward our goal of becoming a top 10 global restaurant brand.

Any such forward-looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company’s control) and assumptions. Although we believe any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements. Please refer to the risk factors discussed in our Form 10-K for the year ended December 30, 2017, which can be found at the SEC’s website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.

Any forward-looking statement made by Wingstop Inc. in this press release speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Media Contact
Brian Bell
972-707-3956
bbell@wingstop.com

Investor Contact
Raphael Gross
203-682-8253
raphael.gross@icrinc.com





WINGSTOP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
 
December 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
4,063

 
$
3,750

Accounts receivable, net
4,567

 
3,199

Prepaid expenses and other current assets
4,334

 
1,634

Advertising fund assets, restricted
2,944

 
2,533

Total current assets
15,908

 
11,116

Property and equipment, net
5,826

 
4,999

Goodwill
46,557

 
45,128

Trademarks
32,700

 
32,700

Customer relationships, net
15,567

 
16,914

Other non-current assets
3,278

 
943

Total assets
$
119,836

 
$
111,800

Liabilities and stockholders' deficit
 
 
 
Current liabilities
 
 
 
Accounts payable
$
1,752

 
$
1,458

Other current liabilities
10,683

 
9,241

Current portion of debt
3,500

 
3,500

Advertising fund liabilities, restricted
2,944

 
2,533

Total current liabilities
18,879

 
16,732

Long-term debt, net
129,841

 
147,217

Deferred revenues, net of current
8,427

 
7,868

Deferred income tax liabilities, net
8,799

 
12,304

Other non-current liabilities
2,142

 
2,307

Total liabilities
168,088

 
186,428

Commitments and contingencies
 
 
 
Stockholders' deficit
 
 
 
Common stock, $0.01 par value; 100,000,000 shares authorized; 29,092,669 and 28,747,392 shares issued and outstanding as of December 30, 2017 and December 31, 2016, respectively
291

 
287

Additional paid-in-capital
262

 
1,194

Accumulated deficit
(48,805
)
 
(76,109
)
Total stockholders' deficit
(48,252
)
 
(74,628
)
Total liabilities and stockholders' deficit
$
119,836

 
$
111,800






WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)

 
Fiscal Quarter Ended
 
December 30,
2017
 
December 31,
2016
 
 
 
 
Revenue:
 
 
 
Royalty revenue and franchise fees
$
18,279

 
$
15,608

Company-owned restaurant sales
10,006

 
9,144

Total revenue
28,285

 
24,752

Costs and expenses:
 
 
 
Cost of sales (1)
7,455

 
6,956

Selling, general and administrative
10,457

 
8,720

Depreciation and amortization
969

 
821

Total costs and expenses
18,881

 
16,497

Operating income
9,404

 
8,255

Interest expense, net
1,223

 
1,538

Other expense, net
—

 
—

Income before income tax expense
8,181

 
6,717

Income tax expense
(2,316
)
 
2,405

Net income
$
10,497

 
$
4,312

 
 
 
 
Earnings per share
 
 
 
Basic
$
0.36

 
$
0.15

Diluted
$
0.36

 
$
0.15

 
 
 
 
Weighted average shares outstanding
 
 
 
Basic
29,094

 
28,745

Diluted
29,459

 
29,114

 
 
 
 
Dividends per share
$
0.07

 
$
—

 
 
 
 
(1) exclusive of depreciation and amortization, shown separately






WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(amounts in thousands, except per share data)

 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
Revenue:
 
 
 
Royalty revenue and franchise fees
$
68,483

 
$
57,071

Company-owned restaurant sales
37,069

 
34,288

Total revenue
105,552

 
91,359

Costs and expenses:
 
 
 
Cost of sales (1)
28,745

 
25,308

Selling, general and administrative
37,151

 
33,840

Depreciation and amortization
3,376

 
3,008

Total costs and expenses
69,272

 
62,156

Operating income
36,280

 
29,203

Interest expense, net
5,131

 
4,396

Other expense, net
—

 
254

Income before income tax expense
31,149

 
24,553

Income tax expense
3,845

 
9,119

Net income
$
27,304

 
$
15,434

 
 
 
 
Earnings per share
 
 
 
Basic
$
0.94

 
$
0.54

Diluted
$
0.93

 
$
0.53

 
 
 
 
Weighted average shares outstanding
 
 
 
Basic
29,025

 
28,637

Diluted
29,424

 
28,983

 
 
 
 
Dividends per share
$
0.14

 
$
2.90

 
 
 
 
(1) exclusive of depreciation and amortization, shown separately





WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Cost of Sales Margin Analysis
(amounts in thousands)

 
Fiscal Quarter Ended
 
December 30, 2017
 
As a % of company-owned restaurant sales
 
December 31, 2016
 
As a % of company-owned restaurant sales
Cost of sales:
 
 
 
 
 
 
 
Food, beverage and packaging costs
$
3,808

 
38.1
 %
 
$
3,470

 
37.9
 %
Labor costs
2,343

 
23.4
 %
 
2,139

 
23.4
 %
Other restaurant operating expenses
1,572

 
15.7
 %
 
1,566

 
17.1
 %
Vendor rebates
(268
)
 
(2.7
)%
 
(219
)
 
(2.4
)%
Total cost of sales
$
7,455

 
74.5
 %
 
$
6,956

 
76.1
 %

 
Fiscal Year Ended
 
December 30, 2017
 
As a % of company-owned restaurant sales
 
December 31, 2016
 
As a % of company-owned restaurant sales
Cost of sales:
 
 
 
 
 
 
 
Food, beverage and packaging costs
$
14,810

 
40.0
 %
 
$
12,827

 
37.4
 %
Labor costs
8,878

 
23.9
 %
 
7,680

 
22.4
 %
Other restaurant operating expenses
6,004

 
16.2
 %
 
5,760

 
16.8
 %
Vendor rebates
(947
)
 
(2.6
)%
 
(959
)
 
(2.8
)%
Total cost of sales
$
28,745

 
77.5
 %
 
$
25,308

 
73.8
 %






WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Restaurant Count

 
Fiscal Quarter Ended
 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
 
December 30,
2017
 
December 31,
2016
Domestic Franchised Activity:
 
 
 
 
 
 
 
Beginning of period
971

 
862

 
901

 
767

Openings
36

 
41

 
115

 
137

Closures
(3
)
 
(2
)
 
(10
)
 
(3
)
Acquired by Company
—

 
—

 
(2
)
 
—

Restaurants end of period
1,004

 
901

 
1,004

 
901

 
 
 
 
 
 
 
 
Domestic Company-Owned Activity:
 
 
 
 
 
 
 
Beginning of period
23

 
20

 
21

 
19

Openings
—

 
1

 
—

 
2

Closures
—

 
—

 
—

 
—

Acquired from franchisees
—

 
—

 
2

 
—

Restaurants end of period
23

 
21

 
23

 
21

 
 
 
 
 
 
 
 
Total Domestic Restaurants
1,027

 
922

 
1,027

 
922

 
 
 
 
 
 
 
 
International Franchised Activity:
 
 
 
 
 
 
 
Beginning of period
94

 
67

 
76

 
59

Openings
12

 
9

 
32

 
20

Closures
—

 
—

 
(2
)
 
(3
)
Restaurants end of period
106

 
76

 
106

 
76

 
 
 
 
 
 
 
 
Total System-wide Restaurants
1,133

 
998

 
1,133

 
998





WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(amounts in thousands)

 
Fiscal Quarter Ended
 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
 
December 30,
2017
 
December 31,
2016
Net income
$
10,497

 
$
4,312

 
$
27,304

 
$
15,434

Interest expense, net
1,223

 
1,538

 
5,131

 
4,396

Income tax expense
(2,316
)
 
2,405

 
3,845

 
9,119

Depreciation and amortization
969

 
821

 
3,376

 
3,008

EBITDA
$
10,373

 
$
9,076

 
$
39,656

 
$
31,957

Additional adjustments:
 
 
 
 
 
 
 
Transaction costs (a)
—

 
116

 
—

 
2,388

Stock-based compensation expense (b)
957

 
839

 
1,851

 
1,231

Adjusted EBITDA
$
11,330

 
$
10,031

 
$
41,507

 
$
35,576


(a)
Represents costs and expenses related to the refinancing of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the fiscal year ended December 31, 2016.
(b)
Includes non-cash, stock-based compensation.




WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - Adjusted Net Income and Adjusted EPS
(Unaudited)
(amounts in thousands, except per share data)

 
Fiscal Quarter Ended
 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
 
December 30,
2017
 
December 31,
2016
Numerator:
 
 
 
 
 
 
 
Net income
$
10,497

 
$
4,312

 
$
27,304

 
$
15,434

Adjustments
 
 
 
 
 
 
 
Transaction costs (a)
—

 
116

 
—

 
2,388

Tax effect of adjustments (b)
—

 
(44
)
 
—

 
(896
)
Impact of tax reform (c)
(5,473
)
 
—

 
(5,473
)
 
—

Adjusted net income
$
5,024

 
$
4,384

 
$
21,831

 
$
16,926

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted-average shares outstanding - diluted
29,459

 
29,114

 
29,424

 
28,983

 
 
 
 
 
 
 
 
Adjusted earnings per diluted share
$
0.17

 
$
0.15

 
$
0.74

 
$
0.58


(a)
Represents costs and expenses related to the refinancing of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the fiscal year ended December 31, 2016.
(b)
Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 37.6% for the periods ended December 31, 2016, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.
(c)
Net tax benefit due to the enactment of the Tax Act during the fiscal quarter and fiscal year ended December 30, 2017, consisting primarily of the re-measurement of deferred tax liabilities using the lower enacted corporate tax rate.


 EX-99.2 3 supplementalinformationq42.htm EXHIBIT 99.2 Exhibit
WINGSTOP INC. AND SUBSIDIARIES

Supplemental Information (Unaudited)
Adoption of New Revenue Recognition Guidance

SUPPLEMENTAL INFORMATION

The purpose of this exhibit is to provide additional information related to Wingstop, Inc. and subsidiaries’ (the "Company”) adoption of new revenue recognition guidance and the impact to the Company’s historical financial results. This exhibit should be read in conjunction with Exhibit 99.1.

Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance for revenue recognition related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance provides a single framework in which revenue is required to be recognized to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services.

The new guidance is effective for the Company in fiscal year 2018. The Company will adopt this new guidance in fiscal year 2018 using the full retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2017 and 2016, in the year of adoption. Additionally, a cumulative effect adjustment will be recorded to the opening balance of accumulated deficit as of the first day of fiscal year 2016, the earliest period presented, which we expect to be $5.1 million.

The expected impact of the new guidance is summarized below. In addition to these expected impacts to our financial results, the Company continues to evaluate the impact the adoption of this new guidance will have on financial statement disclosures, in addition to evaluating business processes and internal controls related to revenue recognition to assist in the ongoing application of the new guidance.

Franchise Fees
The adoption of the new guidance will change the timing of recognition of initial franchise fees, development fees, territory fees for our international business, and renewal and transfer fees. Currently, these fees are generally recognized upfront upon either opening of the respective restaurant, when a renewal agreement becomes effective, or upon transfer of a franchise agreement. The new guidance will generally require these fees to be recognized over the term of the related franchise license for the respective restaurant, which will result in an impact to revenue recognized for initial franchise fees and renewal fees. The new guidance will not change the recognition of royalty income.

Advertising
The adoption of the new guidance will change the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which are not currently included in the consolidated statements of operations. The new guidance requires these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations, which will have an impact to our total revenues and expenses. However, we expect such advertising fund contributions and expenditures will be largely offsetting and therefore do not expect a significant impact on our reported net income. Additionally, advertising costs that have been incurred by the Company outside of the advertising funds have historically been included within general and administrative expenses, net, but will be included within advertising expenses in the consolidated statements of operations. Advertising expenses incurred by Company-owned restaurants will continue to be included within cost of sales in the consolidated statements of operations.

Annual Statements of Operations - Fiscal Years 2017 and 2016

The following consolidated statements of operations for the fiscal years ended December 30, 2017 and December 31, 2016 reflect the expected impacts of the adoption of the new guidance for revenue recognition:



WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)


 
Fiscal year ended December 30, 2017
 
 
 
Adjustments for adoption of ASC 606
 
 
 
 As reported
 
 Franchise Fees
 
 Advertising
 
 Restated
Revenue:
 
 
 
 
 
 
 
Royalty revenue and franchise fees
$
68,483

 
$
(2,407
)
 
$
—

 
$
66,076

Advertising fees and related income
—

 
—

 
30,174

 
30,174

Company-owned restaurant sales
37,069

 
—

 
—

 
37,069

Total revenue
105,552

 
(2,407
)
 
30,174

 
133,319

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales (1)
28,745

 
—

 
—

 
28,745

Advertising Expenses
—

 
—

 
32,427

 
32,427

Selling, general and administrative
37,151

 
—

 
(2,253
)
 
34,898

Depreciation and amortization
3,376

 
—

 
—

 
3,376

Total costs and expenses
69,272

 
—

 
30,174

 
99,446

Operating income
36,280

 
(2,407
)
 
—

 
33,873

Interest expense, net
5,131

 
—

 
—

 
5,131

Other (income) expense, net
—

 
—

 
—

 
—

Income before income tax expense
31,149

 
(2,407
)
 
—

 
28,742

Income tax expense (2)
3,845

 
957

 
—

 
4,802

Net income
$
27,304

 
$
(3,364
)
 
$
—

 
$
23,940

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.94

 
$
(0.12
)
 
$
—

 
$
0.82

Diluted
$
0.93

 
$
(0.11
)
 
$
—

 
$
0.82

 
(1) Cost of sales excludes depreciation and amortization, which are presented separately, and includes advertising expenses incurred at company-owned restaurants.
(2) Adjustments for "Franchise fees" include tax expense of $1.8 million related to the enactment of the Tax Cuts and Jobs Act, consisting of the remeasurement of the related deferred tax balances using the lower enacted corporate rate.


WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)


 
Fiscal year ended December 31, 2016
 
 
 
Adjustments for adoption of ASC 606
 
 
 
 As reported
 
 Franchise Fees
 
 Advertising
 
 Restated
Revenue:
 
 
 
 
 
 
 
Royalty revenue and franchise fees
$
57,071

 
$
(2,596
)
 
$
—

 
$
54,475

Advertising fees and related income
—

 
—

 
14,561

 
14,561

Company-owned restaurant sales
34,288

 
—

 
—

 
34,288

Total revenue
91,359

 
(2,596
)
 
14,561

 
103,324

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales (1)
25,308

 
—

 
—

 
25,308

Advertising Expenses
—

 
—

 
13,849

 
13,849

Selling, general and administrative
33,840

 
—

 
712

 
34,552

Depreciation and amortization
3,008

 
—

 
—

 
3,008

Total costs and expenses
62,156

 
—

 
14,561

 
76,717

Operating income
29,203

 
(2,596
)
 
—

 
26,607

Interest expense, net
4,396

 
—

 
—

 
4,396

Other (income) expense, net
254

 
—

 
—

 
254

Income before income tax expense
24,553

 
(2,596
)
 
—

 
21,957

Income tax expense
9,119

 
(931
)
 
—

 
8,188

Net income
$
15,434

 
$
(1,665
)
 
$
—

 
$
13,769

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.54

 
$
(0.06
)
 
$
—

 
$
0.48

Diluted
$
0.53

 
$
(0.06
)
 
$
—

 
$
0.47

 
(1) Cost of sales excludes depreciation and amortization, which are presented separately, and includes advertising expenses incurred at company-owned restaurants



Quarterly Statements of Operations - Fiscal Year 2017
The following consolidated statements of operations for each quarter within the fiscal year ended December 30, 2017 reflect the expected impacts of the adoption of the new guidance for revenue recognition:

WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)


 
Thirteen weeks ended
 
April 1, 2017
 
July 1, 2017
 
September 30, 2017
 
December 30, 2017
 
(Restated)
 
(Restated)
 
(Restated)
 
(Restated)
Revenue:
 
 
 
 
 
 
 
Royalty revenue and franchise fees
$
17,596

 
$
15,267

 
$
15,872

 
$
17,341

Advertising fees and related income
7,268

 
7,466

 
7,579

 
7,861

Company-owned restaurant sales
8,546

 
8,845

 
9,672

 
10,006

Total revenue
33,410

 
31,578

 
33,123

 
35,208

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales (1)
6,600

 
6,867

 
7,823

 
7,455

Advertising Expenses
9,283

 
7,574

 
7,665

 
7,905

Selling, general and administrative
8,247

 
8,180

 
8,058

 
10,413

Depreciation and amortization
755

 
771

 
881

 
969

Total costs and expenses
24,885

 
23,392

 
24,427

 
26,742

Operating income
8,525

 
8,186

 
8,696

 
8,466

Interest expense, net
1,299

 
1,307

 
1,302

 
1,223

Other (income) expense, net
—

 
—

 
—

 
—

Income before income tax expense
7,226

 
6,879

 
7,394

 
7,243

Income tax expense (2)
969

 
1,972

 
2,690

 
(829
)
Net income
$
6,257

 
$
4,907

 
$
4,704

 
$
8,072

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.17

 
$
0.16

 
$
0.28

Diluted
$
0.21

 
$
0.17

 
$
0.16

 
$
0.27

 
(1) Cost of sales excludes depreciation and amortization, which are presented separately, and includes advertising expenses incurred at company-owned restaurants.
(2) Adjustments for "Franchise fees" include tax expense of $1.8 million related to the enactment of the Tax Cuts and Jobs Act, consisting of the remeasurement of the related deferred tax balances using the lower enacted corporate rate.







Non-GAAP Reconciliations - Fiscal Years 2017 and 2016
The following non-GAAP reconciliations reflect the impacts of the adoption of the new guidance for revenue recognition:

WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(amounts in thousands)


 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
Net income
$
23,940

 
$
13,769

Interest expense, net
5,131

 
4,396

Income tax expense
4,802

 
8,188

Depreciation and amortization
3,376

 
3,008

EBITDA
$
37,249

 
$
29,361

Additional adjustments:
 
 
 
Transaction costs (a)
—

 
2,388

Stock-based compensation expense (b)
1,851

 
1,231

Adjusted EBITDA
$
39,100

 
$
32,980

 
(a) 
Represents costs and expenses related to the refinancing of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the fiscal year ended December 31, 2016.
(b) 
Includes non-cash, stock-based compensation.





WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - Adjusted Net Income and Adjusted EPS
(Unaudited)
(amounts in thousands, except per share data)


 
Fiscal Year Ended
 
December 30, 2017
 
December 31, 2016
Numerator:
 
 
 
Net income
$
23,940

 
$
13,769

Adjustments
 
 
 
Transaction costs (a)
—

 
2,388

Tax effect of adjustments (b)
—

 
(896
)
Impact of tax reform (c)
(3,647
)
 
—

Adjusted net income
$
20,293

 
$
15,261

 
 
 
 
Denominator:
 
 
 
Weighted-average shares outstanding - diluted
29,424

 
28,983

 
 
 
 
Adjusted earnings per diluted share
$
0.69

 
$
0.53

 
(a) Represents costs and expenses related to the refinancings of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $215,000 that is included in Other expense, net during the period ended December 31, 2016.
(b) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 37.6% for the period ended December 31, 2016, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.
(c) Net tax benefit due to the enactment of the Tax Act during the fiscal ended December 30, 2017, consisting primarily of the re-measurement of deferred tax liabilities using the lower enacted corporate tax rate.


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