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Press release from Business Wire

Chipotle Mexican Grill, Inc. Announces First Quarter 2011 Results

Wednesday, April 20, 2011

Chipotle Mexican Grill, Inc. Announces First Quarter 2011 Results16:00 EDT Wednesday, April 20, 2011 DENVER (Business Wire) -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its first quarter ended March 31, 2011. Highlights for the first quarter of 2011 as compared to the first quarter of 2010 include: Revenue increased 24.3% to $509.4 million Comparable restaurant sales increased 12.4% Restaurant level operating margin was 25.2%, a decrease of 90 basis points Net income was $46.4 million, an increase of 22.6% Diluted earnings per share was $1.46, an increase of 22.7% “We are pleased to have begun 2011 with a strong quarter, and that we continue to drive great results while remaining true to our vision to change the way people think about and eat fast food. By focusing on finding the best ingredients we can get, preparing food using classic cooking techniques, and developing a people culture that is as unique as our food culture, we are building a very different kind of restaurant company and producing great results for our shareholders," said Steve Ells, founder, chairman and co-CEO of Chipotle. First quarter 2011 results Revenue for the quarter was $509.4 million, up 24.3% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 12.4% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter. During the quarter Chipotle opened 12 new restaurants, including one relocation, bringing the total restaurant count to 1,095. Restaurant level operating margin was 25.2% in the quarter, a decrease of 90 basis points over the prior year period. The decrease was primarily driven by increased food costs and increased promotional spend, partially offset by the positive impact of comparable restaurant sales growth. G&A costs were 6.3% of revenue, down 10 basis points from the prior year period. The decrease as a percent of revenue was driven by the impact of comparable restaurant sales growth, partially offset by an increase in stock-based compensation. Net income for the first quarter of 2011 was $46.4 million, or $1.46 per diluted share, compared to $37.8 million, or $1.19 per diluted share, in the first quarter of 2010. "The strength of our people culture continues to be one of the greatest drivers of our business. With 200 Restaurateurs, and more who have come through the ranks of Restaurateur and gone on to regional leadership positions, more than half of our restaurants are now directly overseen by someone from our Restaurateur program. These extraordinary managers are raising the bar in terms of our restaurant operations, building greater efficiencies, and providing us with the future leaders we will need to help ensure our continued success," said Monty Moran, co-CEO of Chipotle. Outlook For the full year 2011, management expects the following: 135-145 new restaurant openings Mid 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 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 2011 financial results today at 4:30 p.m. Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-364-3109 or 1-719-785-9449 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 3916362. The replay will be available until April 27, 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-CEO, 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 from using ingredients that are not only fresh, but that where possible are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. A similarly focused people culture, with an emphasis on identifying and empowering top performing employees, enables us to develop future leaders from within. Chipotle opened with a single restaurant in 1993 and currently operates nearly 1,100 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.Condensed Consolidated Statement of Income(in thousands, except per share data)(unaudited)           Three months ended March 31, 2011       2010             Revenue $509,384 100.0% $409,686 100.0%   Restaurant operating costs: Food, beverage and packaging 162,908 32.0 123,908 30.2 Labor 125,288 24.6 104,017 25.4 Occupancy 35,315 6.9 31,088 7.6 Other operating costs 57,385 11.3 43,678 10.7 General and administrative expenses 32,216 6.3 26,194 6.4 Depreciation and amortization 18,494 3.6 16,734 4.1 Pre-opening costs 1,296 0.3 1,502 0.4 Loss on disposal of assets 1,661 0.3 1,269 0.3 Total operating expenses 434,563 85.3 348,390 85.0 Income from operations 74,821 14.7 61,296 15.0   Interest and other income 475 0.1 275 0.1 Interest and other expense (188) 0.0 (79) 0.0 Income before income taxes 75,108 14.7 61,492 15.0 Provision for income taxes (28,726) (5.6) (23,645) (5.8) Net income $46,382 9.1% $37,847 9.2%   Earnings per share: Basic $1.49 $1.20 Diluted $1.46 $1.19 Weighted average common shares  outstanding: Basic 31,082 31,483 Diluted 31,717 31,814   Chipotle Mexican Grill, Inc.Condensed Consolidated Balance Sheet(in thousands, except per share data)         March 31,2011       December31, 2010 (unaudited) Assets Current assets: Cash and cash equivalents $282,939 $224,838 Accounts receivable, net of allowance for doubtful accounts  of $68 and $102 as of March 31, 2011 and December 31, 2010,  respectively 7,623 5,658 Inventory 8,738 7,098 Current deferred tax asset 4,697 4,317 Prepaid expenses and other current assets 20,318 16,016 Income tax receivable 7,845 23,528 Investments 45,000       124,766 Total current assets 377,160 406,221 Leasehold improvements, property and equipment 683,392 676,881 Long-term investments 59,456 -- Other assets 16,108 16,564 Goodwill 21,939 21,939 Total assets $1,158,055 $1,121,605   Liabilities and shareholders' equity Current liabilities: Accounts payable $35,929 $33,705 Accrued payroll and benefits 31,148 50,336 Accrued liabilities 32,143 38,892 Current portion of deemed landlord financing 124 121 Total current liabilities 99,344 123,054 Deferred rent 127,387 123,667 Deemed landlord financing 3,629 3,661 Deferred income tax liability 53,608 50,525 Other liabilities 11,341 9,825 Total liabilities 295,309 310,732   Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no  shares issued as of March 31, 2011 and December 31, 2010 — — Common stock, $0.01 par value, 230,000 shares authorized, 34,060  and 33,959 shares issued as of March 31, 2011 and December 31,  2010, respectively 341 340 Additional paid-in capital 612,726 594,331 Treasury stock, at cost, 2,943 and 2,885 shares at March 31, 2011  and December 31, 2010, respectively (254,441) (240,918) Accumulated other comprehensive income 1,224 606 Retained earnings 502,896 456,514 Total shareholders' equity 862,746 810,873 Total liabilities and shareholders' equity $1,158,055 $1,121,605   Chipotle Mexican Grill, Inc.Condensed Consolidated Statement of Cash Flows(in thousands)         Three months endedMarch 31,2011       2010 (unaudited) Operating activities Net income $46,382 $37,847 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,494 16,734 Deferred income tax (benefit)/provision 2,703 (3,271) Loss on disposal of assets 1,661 1,269 Bad debt allowance 3 (136) Stock-based compensation 8,923 4,687 Excess tax benefit on stock-based compensation (8,700) (2,301) Other 115 (159) Changes in operating assets and liabilities: Accounts receivable (1,968) 1,385 Inventory (1,639) (700) Prepaid expenses and other current assets (4,297) (1,317) Other assets 456 (513) Accounts payable 2,501 1,700 Accrued liabilities (25,941) (19,658) Income tax receivable 24,383 19,162 Deferred rent 3,713 3,624 Other long-term liabilities 1,516 1,514 Net cash provided by operating activities 68,305 59,867 Investing activities Purchases of leasehold improvements, property  and equipment, net (26,438) (19,703) Purchases of investments (59,452) (55,000) Maturities of investments 79,766 -- Net cash used in investing activities (6,124) (74,703) Financing activities Acquisition of treasury stock (13,523) (17,798) Proceeds from option exercises 372 3,791 Excess tax benefit on stock-based compensation 8,700 2,301 Payments on deemed landlord financing (29)       (22) Net cash used in financing activities (4,480) (11,728) Effect of exchange rate changes on cash and cash  equivalents 400 - Net change in cash and cash equivalents 58,101 (26,564) Cash and cash equivalents at beginning of period 224,838 219,566 Cash and cash equivalents at end of period $282,939 $193,002   Supplemental disclosures of cash flowinformation Decrease in purchases of leasehold improvements,  property and equipment accrued in accounts  payable ($286) ($791)       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.31,20112010201020102010 Number of restaurants opened 12 62 22 25 20 Restaurant relocations (1) (1) -- -- -- Number of restaurants at end ofperiod 1,095 1,084 1,023 1,001 976 Average restaurant sales $1,885 $1,840 $1,806 $1,763 $1,736 Comparable restaurant salesincreases 12.4% 12.6% 11.4% 8.7% 4.3% Chipotle Mexican Grill, Inc.Investor Relations:614-508-1303Media:Chris Arnold, 303-222-5912