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Press release from Business Wire

Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2010 Results

Thursday, February 10, 2011

Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2010 Results16:01 EST Thursday, February 10, 2011 DENVER (Business Wire) -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2010. Highlights for the fourth quarter of 2010 as compared to the fourth quarter of 2009 include: Revenue increased 24.5% to $482.5 million Comparable restaurant sales increased 12.6% Restaurant level operating margin was 25.9%, an increase of 140 basis points Net income was $46.4 million, an increase of 47.0% Diluted earnings per share was $1.47, an increase of 48.5% Highlights for the twelve months ended December 31, 2010 as compared to the prior year include: Revenue increased 20.9% to $1.84 billion Comparable restaurant sales increased 9.4% Restaurant level operating margin was 26.7%, an increase of 180 basis points Net income was $ 179.0 million, an increase of 41.1% Diluted earnings per share was $5.64, an increase of 42.8% “Our accomplishments in 2010 were many--opening our first restaurant in London, hitting the 1,000 restaurant milestone, and serving naturally raised barbacoa in all of our restaurants--just to name a few. All of our accomplishments were made possible by remaining focused on our vision to change the way the world thinks about and eats fast food,” said Founder, Chairman, and Co-CEO Steve Ells. Results for the fourth quarter 2010 Revenue for the quarter was $482.5 million, up 24.5% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 12.6% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter. During the quarter Chipotle opened 62 new restaurants, bringing the total restaurant count to 1,084. Restaurant level operating margin was 25.9% in the quarter, an increase of 140 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth which was partially offset by increased food costs. G&A costs were 6.0% of revenue, down 50 basis points from the prior year period. The decrease as a percent of revenue was driven by the impact of comparable restaurant sales growth. Net income for the fourth quarter of 2010 was $46.4 million, or $1.47 per diluted share, compared to $31.6 million, or $0.99 per diluted share, in the fourth quarter of 2009. Results for the full year ended December 31, 2010 Revenue for the full year of 2010 was $1.84 billion, up 20.9% from the prior year. The growth in revenue was the result of new restaurants not in the comparable base and a 9.4% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic during the year. For the full year, Chipotle opened 129 restaurants, including one restaurant in London and one in Toronto, Canada. Restaurant level operating margin was 26.7% for the full year of 2010, an increase of 180 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth. G&A costs for the full year of 2010 were 6.5% of revenue, which was flat from the prior period. The benefit of comparable restaurant sales growth was offset by increased stock based compensation expense, the biennial All Managers' Conference, and hiring more employees as we grew. Net income for the full year of 2010 was $179.0 million, or $5.64 per diluted share, compared to $126.8 million, or $3.95 per diluted share for 2009. “Top performers, along with a culture of empowerment and striving to reach high standards come together naturally to produce great results. Our top performers demonstrate that they can run better restaurants, cook and serve better food, provide better service, increase throughput in their peak times and operate an efficient business. And our managers do all this while hiring and developing our future leaders. So of course we're pleased with the great results our high performing teams generate, but it's even more pleasing to know that it's our special people culture that's enabling these results,” commented Monty Moran, Co-CEO. Outlook For 2011, management expects the following: 135-145 new restaurant openings Low single digit comparable restaurant sales growth An effective tax rate of approximately 38.3% 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 13th 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 fourth quarter and full year 2010 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-877-723-9523 or 1-719-325-4830 for international callers. A replay will be available one hour after the call and can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for international callers. The password is 1431566. The replay will be available until February 17, 2011. The call will be webcast live from the Company's website at chipotle.com 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 over 1,000 restaurants. For more information, visit chipotle.com. Forward-Looking StatementsCertain statements in this press release, including statements under the heading “Outlook” of our expected number of new restaurant openings, comparable restaurant sales increases and effective tax rate in 2011, 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: 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 uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; the performance of new restaurants and their impact on existing restaurant sales; increases in the cost of food ingredients and other key supplies; the risk of food-borne illnesses and other health concerns about our food; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of immigration enforcement activities; risks relating to our expansion into new markets; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; risks associated with our Food With Integrity strategy, including supply shortages; changes in consumer preferences, general economic conditions or consumer discretionary spending; the effect of competition in the restaurant industry; risks related to the ongoing development of our marketing strategy; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; risks relating to litigation; risks relating to our insurance coverage and self-insurance; our dependence on key personnel; security risks associated with the acceptance of electronic payment cards; the uncertainty of our ability to protect our name, logo and other proprietary information or the reputation of our brand; the potential effects of inclement weather; 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 website at chipotle.com.Chipotle Mexican Grill, Inc.Consolidated Statement of Income(in thousands, except per share data)(unaudited)     Three months ended December 31, 2010   2009   Revenue $ 482,521     100.0 % $ 387,544     100.0 %   Restaurant operating costs: Food, beverage and packaging 149,589 31.0 116,463 30.1 Labor 119,532 24.8 99,697 25.7 Occupancy 33,977 7.0 30,417 7.8 Other operating costs 54,281 11.2 45,955 11.9 General and administrative expenses 28,733 6.0 25,078 6.5 Depreciation and amortization 17,815 3.7 15,940 4.1 Pre-opening costs 2,598 0.5 2,405 0.6 Loss on disposal of assets   2,004   0.4     1,204   0.3   Total operating expenses   408,529   84.7     337,159   87.0   Income from operations 73,992 15.3 50,385 13.0   Interest and other income 402 0.1 302 0.1 Interest and other expense   (91 ) 0.0     (72 ) 0.0   Income before income taxes 74,303 15.4 50,615 13.1 Provision for income taxes   (27,858 ) (5.8 )   (19,019 ) (4.9 ) Net income $ 46,445   9.6 % $ 31,596   8.2 %   Earnings per share: Basic $ 1.50   $ 1.00   Diluted $ 1.47   $ 0.99   Weighted average common shares outstanding: Basic   31,054     31,585   Diluted   31,702     31,904     Chipotle Mexican Grill, Inc.Consolidated Statement of Income(in thousands, except per share data)   Year ended December 31, 2010 (unaudited)   2009   Revenue $ 1,835,922     100.0 % $ 1,518,417     100.0 %   Restaurant operating costs: Food, beverage and packaging 561,107 30.6 466,027 30.7 Labor 453,573 24.7 385,072 25.4 Occupancy 128,933 7.0 114,218 7.5 Other operating costs 202,904 11.1 174,581 11.5 General and administrative expenses 118,590 6.5 99,149 6.5 Depreciation and amortization 68,921 3.8 61,308 4.0 Pre-opening costs 7,767 0.4 8,401 0.6 Loss on disposal of assets   6,296   0.3     5,956   0.4   Total operating expenses   1,548,091   84.3     1,314,712   86.6   Income from operations 287,831 15.7 203,705 13.4   Interest and other income 1,499 0.1 925 0.1 Interest and other expense   (269 ) 0.0     (405 ) 0.0   Income before income taxes 289,061 15.7 204,225 13.4 Provision for income taxes   (110,080 ) (6.0 )   (77,380 ) (5.1 ) Net income $ 178,981   9.7 % $ 126,845   8.4 %   Earnings per share: Basic $ 5.73   $ 3.99   Diluted $ 5.64   $ 3.95   Weighted average common shares outstanding: Basic   31,234     31,766   Diluted   31,735     32,102     Chipotle Mexican Grill, Inc.Consolidated Balance Sheet(in thousands, except per share data)     December31, 2010December31, 2009 (unaudited) Assets Current assets: Cash and cash equivalents $ 224,838 $ 219,566 Accounts receivable, net of allowance for doubtful accounts of $102 and $339 as of December 31, 2010 and December 31, 2009, respectively 5,658 4,763 Inventory 7,098 5,614 Current deferred tax asset 4,317 3,134 Prepaid expenses and other current assets 16,016 14,377 Income tax receivable 23,528 -- Investments   124,766       50,000   Total current assets 406,221 297,454 Leasehold improvements, property and equipment, net 676,881 636,411 Other assets 16,564 5,701 Goodwill   21,939     21,939   Total assets $ 1,121,605   $ 961,505     Liabilities and shareholders' equity Current liabilities: Accounts payable $ 33,705 $ 25,230 Accrued payroll and benefits 50,336 41,404 Accrued liabilities 38,892 31,216 Current portion of deemed landlord financing 121 96 Income tax payable   --     4,207   Total current liabilities 123,054 102,153 Deferred rent 123,667 106,395 Deemed landlord financing 3,661 3,782 Deferred income tax liability 50,525 38,863 Other liabilities   9,825     6,851   Total liabilities   310,732     258,044     Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2010 and December 31, 2009 — — Common stock, $0.01 par value, 230,000 shares authorized, 33,959 and 33,473 shares issued as of December 31, 2010 and December 31, 2009, respectively 340 335 Additional paid-in capital 594,331 539,880 Treasury stock, at cost, 2,885 and 1,990 shares at December 31, 2010 and December 31, 2009, respectively (240,918 ) (114,316 ) Accumulated other comprehensive income 606 29 Retained earnings   456,514     277,533   Total shareholders' equity   810,873     703,461   Total liabilities and shareholders' equity $ 1,121,605   $ 961,505     Chipotle Mexican Grill, Inc.Consolidated Statement of Cash Flows(in thousands)   Year ended December 31,2010   2009 (unaudited) Operating activities Net income $ 178,981 $ 126,845 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 68,921 61,308 Deferred income tax provision 10,479 8,282 Change in valuation allowance - 141 Loss on disposal of assets 6,296 5,956 Bad debt allowance (151 ) (245 ) Stock-based compensation 21,381 14,992 Excess tax benefit on stock-based compensation (14,526 ) (10,435 ) Other - 222 Changes in operating assets and liabilities: Accounts receivable (743 ) (875 ) Inventory (1,481 ) (825 ) Prepaid expenses and other current assets (1,632 ) (2,613 ) Other assets (8,956 ) 374 Accounts payable 6,989 1,435 Accrued liabilities 16,607 19,804 Income tax receivable/payable (13,209 ) 14,927 Deferred rent 17,261 19,386 Other long-term liabilities   2,974     1,994   Net cash provided by operating activities   289,191     260,673   Investing activities Purchases of leasehold improvements, property and equipment, net (113,215 ) (117,198 ) Purchase of equity method investments (1,900 ) - Purchases of investments (125,000 ) (50,000 ) Maturities of investments   50,234     99,990   Net cash used in investing activities   (189,881 )   (67,208 ) Financing activities Proceeds from option exercises 17,650 11,793 Excess tax benefit on stock-based compensation 14,526 10,435 Payments on deemed landlord financing (96 ) (82 ) Acquisition of treasury stock   (126,602 )   (84,089 ) Net cash used in financing activities   (94,522 )   (61,943 ) Effect of exchange rate changes on cash and cash equivalents 484 - Net change in cash and cash equivalents 5,272 131,522 Cash and cash equivalents at beginning of period   219,566     88,044   Cash and cash equivalents at end of period $ 224,838   $ 219,566     Supplemental disclosures of cash flow information (Increase) decrease in purchases of leasehold improvements, property and equipment accrued in accounts payable   ($1,480 ) $ 95     Chipotle Mexican Grill, Inc.Supplemental Financial and Other Data(dollars in thousands)(unaudited)   For the three months endedDec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,20102010201020102009 Number of restaurants opened 62 22 25 20 45 Restaurant relocations or closures (1 ) -- -- -- -- Number of restaurants at end of period 1,084 1,023 1,001 976 956 Average restaurant sales $ 1,840 $ 1,806 $ 1,763 $ 1,736 $ 1,728 Comparable restaurant sales increases 12.6 % 11.4 % 8.7 % 4.3 % 2.0 % Chipotle Mexican Grill, Inc.Investor Relations:Kate Giha, 614-508-1303orMedia:Chris Arnold, 303-222-5912