The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Business Wire

Chipotle Mexican Grill, Inc. Announces Third Quarter 2011 Results

Thursday, October 20, 2011

Chipotle Mexican Grill, Inc. Announces Third Quarter 2011 Results16:01 EDT Thursday, October 20, 2011 DENVER (Business Wire) -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2011. Highlights for the third quarter of 2011 as compared to the third quarter of 2010 include: Revenue increased 24.1% to $591.9 million Comparable restaurant sales increased 11.3% Restaurant level operating margin was 26.7%, a decrease of 100 basis points Food costs were 33.1% of sales, an increase of 250 basis points driven by rising commodity costs Net income was $60.4 million, an increase of 25.3% Diluted earnings per share was $1.90, an increase of 25.0% Highlights for the nine months ended September 30, 2011 as compared to the prior year include: Revenue increased 23.6% to $1.67 billion Comparable restaurant sales increased 11.2% Restaurant level operating margin was 25.9%, a decrease of 100 basis points Food costs were 32.7% of sales, an increase of 230 basis points driven by rising commodity costs Net income was $157.5 million, an increase of 18.8% Diluted earnings per share was $4.96, an increase of 18.7% "Chipotle's strong performance in the quarter and throughout the year is the result of our strong food culture, where we are constantly striving for more sustainable sources for all of our ingredients; and our special people culture, where top performers throughout the company are creating an extraordinary dining experience for each customer,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle. Third quarter 2011 results Revenue for the quarter was $591.9 million, up 24.1% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.3% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter as well as the impact of menu price increases implemented between March and August. During the quarter we opened 32 new restaurants including our new ShopHouse Southeast Asian Kitchen, bringing the total restaurant count to 1,163. Restaurant level operating margin was 26.7% in the quarter, a decrease of 100 basis points from the prior year period. The decrease was primarily driven by food cost inflation partially offset by leverage from higher restaurant sales. G&A costs were 6.3% of revenue, down 70 basis points from the prior year period. The decrease as a percent of revenue was driven by favorable sales leverage, and an all manager conference held during the third quarter of 2010, partially offset by an increase in non-cash stock-based compensation. Net income for the third quarter of 2011 was $60.4 million, or $1.90 per diluted share, compared to $48.2 million, or $1.52 per diluted share, in the third quarter of 2010. Results for the nine months ended September 30, 2011 Revenue for the first nine months of 2011 was $1.67 billion, up 23.6% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.2% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic. During the first nine months of the year, we opened 82 new Chipotle restaurants as well as ShopHouse, bringing the total restaurant count to 1,163. Restaurant level operating margin was 25.9% for the first nine months, a decrease of 100 basis points from the prior year period. The decrease was primarily driven by increased food costs partially offset by the impact of leverage from higher restaurant sales. G&A costs for the first nine months of 2011 were 6.7% of revenue, up 10 basis points from the prior year period primarily due to higher stock based compensation and partially offset by greater sales leverage. Net income for the first nine months of 2011 was $157.5 million, or $4.96 per diluted share, compared to $132.5 million, or $4.18 per diluted share, in the first nine months of 2010. "I'm very pleased with our performance in the third quarter and throughout the year, but I'm even more pleased we're delivering these strong financial results by advancing our special people culture, where top performers are empowered to deliver high standards in their restaurants. Our people culture is the strongest it has ever been, and it's getting stronger every day, which gives me great confidence that we are well on our way toward our vision to change the way people think about and eat fast food,” commented Co-CEO Monty Moran. Outlook For 2011, management expects the following: Openings at or above the high end of our 135-145 opening range Low double digit comparable restaurant sales growth for the full year An effective tax rate of approximately 38.4% For 2012, management expects the following: 155-165 new restaurant openings Low single digit comparable restaurant sales growth An effective tax rate of approximately 39.2% 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 the third quarter 2011 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-500-6974 or for international callers by dialing 1-719-457-2707. 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 4159826. The replay will be available until October 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 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 1,100 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 and 2012, 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 our Web site at chipotle.com.Chipotle Mexican Grill, Inc.Condensed Consolidated Statement of Income(unaudited)(in thousands, except per share data)         Three months ended September 30, 2011     2010   Revenue $591,854     100.0% $476,874     100.0%   Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and packaging 195,793 33.1 145,688 30.6 Labor 138,046 23.3 115,234 24.2 Occupancy 37,117 6.3 32,096 6.7 Other operating costs 63,167 10.7 51,977 10.9 General and administrative expenses 37,254 6.3 33,522 7.0 Depreciation and amortization 18,741 3.2 17,319 3.6 Pre-opening costs 2,448 0.4 1,943 0.4 Loss on disposal of assets 1,278 0.2 1,511 0.3 Total operating expenses 493,844 83.4 399,290 83.7 Income from operations 98,010 16.6 77,584 16.3   Interest and other income 567 0.1 395 0.1 Interest and other expense (119) 0.0 (14) 0.0 Income before income taxes 98,458 16.6 77,965 16.3 Provision for income taxes (38,025) (6.4) (29,737) (6.2) Net income $60,433 10.2% $48,228 10.1%   Earnings per share: Basic $1.93 $1.55 Diluted $1.90 $1.52 Weighted average common shares outstanding: Basic 31,331 31,031 Diluted 31,832 31,629   Chipotle Mexican Grill, Inc.Condensed Consolidated Statement of Income(unaudited)(in thousands, except per share data)           Nine months ended September 30, 2011     2010   Revenue $1,672,799     100.0% $1,353,401     100.0%   Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and packaging 546,822 32.7 411,518 30.4 Labor 401,039 24.0 334,041 24.7 Occupancy 108,627 6.5 94,956 7.0 Other operating costs 182,773 10.9 148,623 11.0 General and administrative expenses 111,438 6.7 89,857 6.6 Depreciation and amortization 55,740 3.3 51,106 3.8 Pre-opening costs 5,350 0.3 5,169 0.4 Loss on disposal of assets 4,316 0.3 4,292 0.3 Total operating expenses 1,416,105 84.7 1,139,562 84.2 Income from operations 256,694 15.3 213,839 15.8   Interest and other income 1,517 0.1 1,097 0.1 Interest and other expense (2,788) (0.2) (178) 0.0 Income before income taxes 255,423 15.3 214,758 15.9 Provision for income taxes (97,951) (5.9) (82,222) (6.1) Net income $157,472 9.4% $132,536 9.8%   Earnings per share: Basic $5.05 $4.24 Diluted $4.96 $4.18 Weighted average common shares outstanding: Basic 31,195 31,278 Diluted 31,772 31,731   Chipotle Mexican Grill, Inc.Condensed Consolidated Balance Sheet(in thousands, except per share data)         September30, 2011 December31, 2010   Assets (unaudited) Current assets: Cash and cash equivalents $409,875 $224,838 Accounts receivable, net of allowance for doubtful accounts  of $6 and $102 as of September 30, 2011 and December 31, 2010,  respectively 5,765 5,658 Inventory 8,768 7,098 Current deferred tax asset 5,883 4,317 Prepaid expenses and other current assets 22,679 16,016 Income tax receivable -- 23,528 Investments 34,759 124,766 Total current assets 487,729 406,221 Leasehold improvements, property and equipment, net 719,346 676,881 Long term investments 99,718 - Other assets 14,641 16,564 Goodwill 21,939 21,939 Total assets $1,343,373 $1,121,605 Liabilities and shareholders' equity Current liabilities: Accounts payable $49,011 $33,705 Accrued payroll and benefits 42,965 50,336 Accrued liabilities 33,382 38,892 Current portion of deemed landlord financing 130 121 Income tax payable 2,955 -- Total current liabilities 128,443 123,054 Deferred rent 136,596 123,667 Deemed landlord financing 3,563 3,661 Deferred income tax liability 63,561 50,525 Other liabilities 11,769 9,825 Total liabilities 343,932 310,732 Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no  shares issued as of September 30, 2011 and December 31, 2010 — — Common stock, $0.01 par value, 230,000 shares authorized, 34,350  and 33,959 shares issued as of September 30, 2011 and December  31, 2010, respectively 343 340 Additional paid-in capital 667,150 594,331 Treasury stock, at cost, 3,038 and 2,885 common shares at  September 30, 2011 and December 31, 2010, respectively (282,728) (240,918) Accumulated other comprehensive income 690 606 Retained earnings 613,986 456,514 Total shareholders' equity 999,441 810,873 Total liabilities and shareholders' equity $1,343,373 $1,121,605   Chipotle Mexican Grill, Inc.Condensed Consolidated Statement of Cash Flows(unaudited)(in thousands)     Nine months endedSeptember 30, 2011         2010   Operating activities Net income $157,472 $132,536 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 55,740 51,106 Deferred income tax provision (benefit) 11,470 (3,039) Loss on disposal of assets 4,316 4,292   Bad debt allowance 29 (228) Stock-based compensation 32,621 17,846 Excess tax benefit on stock-based compensation (38,483) (5,887)   Other 2,476 - Changes in operating assets and liabilities: Accounts receivable (136) 545 Inventory (1,670) (1,560) Prepaid expenses and other current assets (6,669) (4,553) Other assets 9 (903) Accounts payable 6,738 4,883 Accrued liabilities (12,893) (4,948) Income tax payable/receivable 64,966 (8,411) Deferred rent 12,940 11,994 Other long-term liabilities 1,943 2,523 Net cash provided by operating activities 290,869 196,196   Investing activities Purchases of leasehold improvements, property and  equipment (92,867) (71,179) Acquisition of interests in equity method investment (586) - Purchase of investments (99,702) (90,000) Maturities of investments 90,007 50,000 Net cash used in investing activities (103,148) (111,179)   Financing activities Acquisition of treasury stock (41,810) (111,480) Proceeds from option exercises 535 11,295 Excess tax benefit on stock-based compensation 38,483 5,887 Payments on deemed landlord financing (89) (68)   Net cash used in financing activities (2,881) (94,366)   Effect of exchange rate changes on cash and cash equivalents 197 779 Net change in cash and cash equivalents 185,037 (8,570) Cash and cash equivalents at beginning of period 224,838 219,566 Cash and cash equivalents at end of period $409,875 210,996   Supplemental disclosures of cash flow information Increase in purchases of leasehold improvements, property, and  equipment accrued in accounts payable $8,569 $5,525   Chipotle Mexican Grill, Inc.Supplemental Financial and Other Data(dollars in thousands)(unaudited)     For the three months ended Sep. 30,     Jun. 30     Mar. 31, Dec. 31,     Sep. 30, 20112011201120102010 Number of restaurants opened 32 39 12 62 22 Restaurant relocations or closures -- (3) (1) (1) -- Number of restaurants at end of period 1,163 1,131 1,095 1,084 1,023 Average restaurant sales $1,973 $1,927 $1,885 $1,840 $1,806 Comparable restaurant sales increases 11.3% 10.0% 12.4% 12.6% 11.4% Chipotle Mexican GrillInvestor Relations:Alex Spong, 303-222-2552