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Press release from Business Wire

Chipotle Mexican Grill, Inc. Announces First Quarter 2010 Results

Wednesday, April 21, 2010

Chipotle Mexican Grill, Inc. Announces First Quarter 2010 Results16:00 EDT Wednesday, April 21, 2010 DENVER (Business Wire) -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its first quarter ended March 31, 2010. Highlights for the first quarter of 2010 as compared to the first quarter of 2009 include: Revenue increased 15.6% to $409.7 million Comparable restaurant sales increased 4.3% Restaurant level operating margin was 26.1%, an increase of 260 basis points Net income was $37.8 million, an increase of 49.1% Diluted earnings per share was $1.19, an increase of 52.6% “We're extremely proud of our first quarter results, and we're delighted to see more customer visits to Chipotle after a year where the tough economy impacted us. These strong financial results only strengthen our commitment to our vision to change the way people think about and eat fast food by serving great tasting food made from higher quality and more sustainable raw ingredients” said Founder, Chairman and Co-CEO Steve Ells. First quarter 2010 results Revenue for the quarter was $409.7 million, up 15.6% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 4.3% increase in comparable restaurant sales. Comparable restaurant sales growth was driven by increased traffic in the quarter. During the quarter Chipotle opened 20 new restaurants, bringing the total restaurant count to 976. Restaurant level operating margin was 26.1% in the quarter, an increase of 260 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth and continued labor efficiencies. G&A costs were 6.4% of revenue, down 30 basis points from the prior year period. The improvement as a percent of revenue was attributed to the impact of comparable restaurant sales growth which was partially offset by higher stock based compensation expense. Net income for the first quarter of 2010 was $37.8 million, or $1.19 per diluted share, compared to $25.4 million, or $0.78 per diluted share, in the first quarter of 2009. “The commitment of our restaurant managers and crew to provide great customer service and serve great tasting food is paying off with increased customer visits. Our efforts to hire and develop top performing crew will continue to lead to stronger future leaders running our restaurants, and ensure our customers will enjoy the best customer service possible” said Co-CEO Monty Moran. Outlook For 2010, management expects the following: 120-130 new restaurant openings Mid single digit comparable restaurant sales growth An effective tax rate of approximately 38.5% Definitions The following definitions apply to these terms as used throughout this release: Comparable restaurant sales increases represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its 13 th full calendar month of operation. Average restaurant sales refers to the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months. Restaurant level operating margin represents total revenue less restaurant operating costs, expressed as a percent of total revenue. Conference Call Chipotle will host a conference call to discuss first quarter 2010 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-204-4349 or 1-913-312-1401 for international callers. A replay will be available one hour after the call and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 for international callers. The password is 4925049. The replay will be available until April 28, 2010. The call will be webcast live from the Company's website at under the Investor Relations section. An archived webcast will be available approximately one hour after the end of the call. About Chipotle Steve Ells, Founder, Chairman and Co-Chief Executive Officer, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through our vision of Food With Integrity, Chipotle is seeking better food not only from using fresh ingredients, but ingredients that are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. Chipotle opened its first restaurant in 1993 and currently operates more than 975 restaurants. For more information, visit Forward-Looking StatementsCertain statements in this press release, including statements under the heading “Outlook” of our expected comparable restaurant sales increases, the number of restaurants we intend to open, and our expected effective tax rate in 2010 are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate”, “believe”, “could”, “should”, “estimate”, “expect”, “intend”, “may”, “predict”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified employees; the performance of new restaurants and their impact on existing restaurant sales; changes in consumer preferences, general economic conditions or consumer discretionary spending; changes in the availability and costs of food; the risk of food-borne illnesses and other health concerns about our food products; the potential for increased labor costs or difficulty retaining qualified employees; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; risks relating to our expansion into new markets; risks related to our development and implementation of a new marketing strategy; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; our ability to protect our name and logo and other proprietary information; the potential effects of inclement weather; the effect of competition in the restaurant industry; risks related to the tax treatment of our separation from McDonald's; and other risk factors described from time to time in our SEC reports, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, all of which are available on the Investor Relations page of our Web site at Mexican Grill, Inc.Consolidated Statement of Income(in thousands, except per share data)(unaudited)   Three months ended March 31, 2010     2009     Revenue $409,686     100.0 % $ 354,456     100.0 %   Restaurant operating costs: Food, beverage and packaging 123,908 30.2 109,884 31.0 Labor 104,017 25.4 93,567 26.4 Occupancy 31,088 7.6 26,957 7.6 Other operating costs 43,678 10.7 40,663 11.5 General and administrative expenses 26,194 6.4 23,719 6.7 Depreciation and amortization 16,734 4.1 14,720 4.2 Pre-opening costs 1,502 0.4 1,893 0.5 Loss on disposal of assets 1,269   0.3   1,864   0.5   348,390   85.0   313,267   88.4   Income from operations 61,296 15.0 41,189 11.6   Interest and other income 275 0.1 198 0.1 Interest and other expense (79 ) 0.0   (73 ) 0.0   Income before income taxes 61,492 15.0 41,314 11.7 Provision for income taxes (23,645 ) (5.8 ) (15,922 ) (4.5 ) Net income $37,847   9.2   $25,392   7.2 %   Earnings per share: Basic $1.20   $0.79   Diluted $1.19   $0.78   Weighted average common shares outstanding: Basic 31,483   32,003   Diluted 31,814   32,362   Chipotle Mexican Grill, Inc.Consolidated Balance Sheet(in thousands, except per share data)   March 31,2010December 31,2009 (unaudited) Assets Current assets: Cash and cash equivalents $193,002 $219,566 Accounts receivable, net of allowance for doubtful accounts of $199 and $339 as of March 31, 2010 and December 31, 2009, respectively 3,514 4,763 Inventory 6,314 5,614 Current deferred tax asset 3,526 3,134 Prepaid expenses 15,694 14,377 Available-for-sale securities 105,000     50,000   Total current assets 327,050 297,454 Leasehold improvements, property and equipment, net 637,569 636,411 Other assets 6,214 5,701 Goodwill 21,939   21,939   Total assets $992,772   $961,505     Liabilities and shareholders' equity Current liabilities: Accounts payable $26,139 $25,230 Accrued payroll and benefits 24,748 41,404 Accrued liabilities 28,214 31,216 Current portion of deemed landlord financing 103 96 Income tax payable 21,068   4,207   Total current liabilities 100,272 102,153 Deferred rent 110,019 106,395 Deemed landlord financing 3,753 3,782 Deferred income tax liability 35,984 38,863 Other liabilities 8,365   6,851   Total liabilities 258,393   258,044     Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of March 31, 2010 and December 31, 2009 — — Common stock, $0.01 par value, 230,000 shares authorized, 33,619 and 33,473 shares issued as of March 31, 2010 and December 31, 2009, respectively 336 335 Additional paid-in capital 550,907 539,880 Treasury stock, at cost, 2,160 and 1,990 shares at March 31, 2010 and December 31, 2009, respectively (132,114 ) (114,316 ) Accumulated other comprehensive income (loss) (130 ) 29 Retained earnings 315,380   277,533   Total shareholders' equity 734,379   703,461   Total liabilities and shareholders' equity $992,772   $961,505   Chipotle Mexican Grill, Inc.Consolidated Statement of Cash Flows(unaudited)(in thousands)   Three months endedMarch 31,2010   2009   Operating activities Net income $37,847 $25,392 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,734 14,720 Deferred income tax (benefit) provision (3,271 ) 2,945 Loss on disposal of assets 1,269 1,864 Bad debt allowance (136 ) (299 ) Stock-based compensation 4,687 3,372 Other (159 ) (19 ) Changes in operating assets and liabilities: Accounts receivable 1,385 567 Inventory (700 ) (977 ) Prepaid expenses (1,317 ) (1,897 ) Other assets (513 ) (189 ) Accounts payable 1,700 (562 ) Accrued liabilities (19,658 ) 3,131 Income tax receivable/payable 16,861 10,208 Deferred rent 3,624 4,139 Other long-term liabilities 1,514   616   Net cash provided by operating activities 59,867   63,011     Investing activities Purchases of leasehold improvements, property and equipment, net (19,703 ) (27,144 ) Purchase of available-for-sale securities (55,000 ) - Maturity of available-for-sale securities -   99,990   Net cash provided by (used in) investing activities (74,703 ) 72,846     Financing activities Proceeds from option exercises 3,791 1,571 Excess tax benefit on stock-based compensation 2,301 630 Payments on deemed landlord financing (22 ) (20 ) Acquisition of treasury stock (17,798 ) (21,148 ) Net cash used in financing activities (11,728 ) (18,967 )   Net change in cash and cash equivalents (26,564 ) 116,890 Cash and cash equivalents at beginning of period 219,566   88,044   Cash and cash equivalents at end of period $193,002   $204,934     Supplemental disclosures of cash flow information Decrease in purchases of leasehold improvements, property and equipment accrued in accounts payable $(791 ) $(666 ) Chipotle Mexican Grill, Inc.Supplemental Financial and Other Data(dollars in thousands)(unaudited)   For the three months endedMar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,20102009200920092009 Number of restaurants opened 20 45 26 24 26 Restaurant relocations or closures -- -- (1 ) -- (1 ) Number of restaurants at end of period 976 956 911 886 862 Average restaurant sales $1,736 $1,728 $1,736 $1,734 $1,755 Comparable restaurant sales increases 4.3 % 2.0 % 2.7 % 1.7 % 2.2 %