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Press release from Business Wire

Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2011 Results

Wednesday, February 01, 2012

Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2011 Results16:01 EST Wednesday, February 01, 2012 DENVER (Business Wire) -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2011. Highlights for the fourth quarter of 2011 as compared to the fourth quarter of 2010 include: Revenue increased 23.7% to $596.7 million Comparable restaurant sales increased 11.1% Restaurant level operating margin was 26.1%, an increase of 20 basis points Food costs were 32.2% of sales, an increase of 120 basis points driven by higher commodity costs Net income was $57.5 million, an increase of 23.7% Diluted earnings per share was $1.81, an increase of 23.1% Highlights for the twelve months ended December 31, 2011 as compared to the prior year include: Revenue increased 23.6% to $2.27 billion Comparable restaurant sales increased 11.2% Restaurant level operating margin was 26.0%, a decrease of 70 basis points Food costs were 32.5% of sales, an increase of 190 basis points driven by higher commodity costs Net income was $214.9 million, an increase of 20.1% Diluted earnings per share was $6.76, an increase of 19.9% "During 2011, we remained focused on our mission to change the way the world thinks about and eats fast food, while continuing to strengthen our people culture and our unit economic model. Our success is rooted in serving great tasting food and it has been since day one. Our sourcing of food made from the finest ingredients, which is raised with respect for the animals, the environment, and the farmers is at the heart of that effort,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle. Results for the fourth quarter 2011 Revenue for the quarter was $596.7 million, up 23.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.1% 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 67 new restaurants, bringing the total restaurant count to 1,230. Restaurant level operating margin was 26.1% in the quarter, an increase of 20 basis points from the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth which was partially offset by higher food costs. G&A costs were 6.4% of revenue, up 40 basis points from the prior year period. The increase as a percent of revenue was primarily driven by an increase in non-cash stock-based compensation expense. Net income for the fourth quarter of 2011 was $57.5 million, or $1.81 per diluted share, compared to $46.4 million, or $1.47 per diluted share, in the fourth quarter of 2010. Results for the full year ended December 31, 2011 Revenue for the full year of 2011 was $2.27 billion, up 23.6% from the prior year. 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, and to a lesser extent, by menu price increases. For the full year, Chipotle opened 150 new restaurants including one ShopHouse, and one Chipotle in London, bringing the total restaurant count to 1,230. Restaurant level operating margin was 26.0% for the full year of 2011, a decrease of 70 basis points from the prior year. The decrease was primarily driven by higher food costs, partially offset by the impact of leverage from higher restaurant sales. G&A costs for the full year of 2011 were 6.6% of revenue, up 10 basis points from the prior year period primarily due to higher non-cash stock based compensation expense which was partially offset by greater sales leverage. Net income for the full year of 2011 was $214.9 million, or $6.76 per diluted share, compared to $179.0 million, or $5.64 per diluted share, for 2010. Our Board of Directors has approved the expenditure of up to an additional $100 million to repurchase shares of our common stock exclusive of commissions. This repurchase agreement may be modified, suspended, or discontinued at any time. “Our accomplishments this year were truly amazing. Empowered cultures create excellent teams. These excellent teams are exciting, productive and powerful. They attract great employees and develop them to be at their very best, and they become the future leaders within our organization,” commented Co-CEO Monty Moran. Outlook For 2012, management expects the following: 155-165 new restaurant openings Mid-single digit comparable restaurant sales growth Food inflation of mid-single digits from the fourth quarter food cost level An effective tax rate of approximately 39.3% 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 the fourth quarter and full year 2011 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-466-4414 or for international callers by dialing 1-719-325-2135. 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 7146034. The replay will be available until February 8, 2012. 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 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 its first restaurant in 1993 and currently operates over 1,200 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, food inflation, and effective tax rate in 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; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; the impact of increasing general and administrative expenses due to higher non-cash stock-based compensation expense and other increased expenses; 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 December 31, 2011   2010   Revenue $ 596,749     100.0 % $ 482,521     100.0 %   Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and packaging 191,898 32.2 149,589 31.0 Labor 142,080 23.8 119,532 24.8 Occupancy 38,647 6.5 33,977 7.0 Other operating costs 68,435 11.5 54,281 11.2 General and administrative expenses 37,988 6.4 28,733 6.0 Depreciation and amortization 19,198 3.2 17,815 3.7 Pre-opening costs 3,145 0.5 2,598 0.5 Loss on disposal of assets   1,490   0.2     2,004   0.4   Total operating expenses   502,881   84.3     408,529   84.7   Income from operations 93,868 15.7 73,992 15.3   Interest and other income 571 0.1 402 0.1 Interest and other expense   (157 ) 0.0     (91 ) 0.0   Income before income taxes 94,282 15.8 74,303 15.4 Provision for income taxes   (36,809 ) (6.2 )   (27,858 ) (5.8 ) Net income $ 57,473   9.6 % $ 46,445   9.6 %   Earnings per share: Basic $ 1.84   $ 1.50   Diluted $ 1.81   $ 1.47   Weighted average common shares outstanding: Basic   31,281     31,054   Diluted   31,784     31,702     Chipotle Mexican Grill, Inc.Consolidated Statement of Income(in thousands, except per share data)           Year ended December 31, 2011 2010   Revenue $ 2,269,548   100.0 % $ 1,835,922   100.0 %   Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and packaging 738,720 32.5 561,107 30.6 Labor 543,119 23.9 453,573 24.7 Occupancy 147,274 6.5 128,933 7.0 Other operating costs 251,208 11.1 202,904 11.1 General and administrative expenses 149,426 6.6 118,590 6.5 Depreciation and amortization 74,938 3.3 68,921 3.8 Pre-opening costs 8,495 0.4 7,767 0.4 Loss on disposal of assets   5,806   0.3     6,296   0.3   Total operating expenses   1,918,986   84.6     1,548,091   84.3   Income from operations 350,562 15.4 287,831 15.7   Interest and other income 2,088 0.1 1,499 0.1 Interest and other expense   (2,945 ) (0.1 )   (269 ) 0.0   Income before income taxes 349,705 15.4 289,061 15.7 Provision for income taxes   (134,760 ) (5.9 )   (110,080 ) (6.0 ) Net income $ 214,945   9.5 % $ 178,981   9.7 %   Earnings per share: Basic $ 6.89   $ 5.73   Diluted $ 6.76   $ 5.64   Weighted average common shares outstanding: Basic   31,217     31,234   Diluted   31,775     31,735     Chipotle Mexican Grill, Inc.Consolidated Balance Sheet(in thousands, except per share data)   December 31, 2011   2010   Assets Current assets: Cash and cash equivalents $ 401,243 $ 224,838 Accounts receivable, net of allowance for doubtful accounts of $208 and $102 as of December 31, 2011 and 2010, respectively 8,389 5,658 Inventory 8,913 7,098 Current deferred tax asset 6,238 4,317 Prepaid expenses and other current assets 21,404 16,016 Income tax receivable -- 23,528 Investments   55,005     124,766   Total current assets 501,192 406,221 Leasehold improvements, property and equipment, net 751,951 676,881 Long term investments 128,241 - Other assets 21,985 16,564 Goodwill   21,939     21,939   Total assets $ 1,425,308   $ 1,121,605   Liabilities and shareholders' equity Current liabilities: Accounts payable $ 46,382 $ 33,705 Accrued payroll and benefits 60,241 50,336 Accrued liabilities 46,456 38,892 Current portion of deemed landlord financing 133 121 Income tax payable   4,241     --   Total current liabilities 157,453 123,054 Deferred rent 143,284 123,667 Deemed landlord financing 3,529 3,661 Deferred income tax liability 64,381 50,525 Other liabilities   12,435     9,825   Total liabilities   381,082     310,732   Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2011 and 2010 — — Common stock, $0.01 par value, 230,000 shares authorized, 34,357 and 33,959 shares issued as of December 31, 2011 and 2010, respectively 344 340 Additional paid-in capital 676,652 594,331 Treasury stock, at cost, 3,105 and 2,885 common shares at December 31, 2011 and 2010, respectively (304,426 ) (240,918 ) Accumulated other comprehensive income 197 606 Retained earnings   671,459     456,514   Total shareholders' equity   1,044,226     810,873   Total liabilities and shareholders' equity $ 1,425,308   $ 1,121,605     Chipotle Mexican Grill, Inc.Consolidated Statement of Cash Flows(in thousands)   Year ended December 31, 2011   2010   Operating activities Net income $ 214,945 $ 178,981 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 74,938 68,921 Deferred income tax provision 11,319 10,064 Increase in valuation allowance 616 415 Loss on disposal of assets 5,806 6,296 Bad debt allowance 239 (151 ) Stock-based compensation expense 41,382 21,381 Excess tax benefit on stock-based compensation (38,786 ) (14,526 )   Other 2,501 - Changes in operating assets and liabilities: Accounts receivable (2,970 ) (743 ) Inventory (1,816 ) (1,481 ) Prepaid expenses and other current assets (5,399 ) (1,632 ) Other assets (7,350 ) (8,956 ) Accounts payable 9,432 6,989 Accrued liabilities 17,451 16,607 Income tax payable/receivable 66,555 (13,209 ) Deferred rent 19,624 17,261 Other long-term liabilities   2,609     2,974   Net cash provided by operating activities   411,096     289,191     Investing activities Purchases of leasehold improvements, property and equipment (151,147 ) (113,215 ) Acquisition of interests in equity method investment (586 ) (1,900 ) Purchase of investments (183,251 ) (125,000 ) Maturities of investments   124,766     50,234   Net cash used in investing activities   (210,218 )   (189,881 )   Financing activities Acquisition of treasury stock (63,508 ) (126,602 ) Proceeds from option exercises 574 17,650 Excess tax benefit on stock-based compensation 38,786 14,526 Payments on deemed landlord financing   (120 )   (96 ) Net cash used in financing activities   (24,268 )   (94,522 )   Effect of exchange rate changes on cash and cash equivalents   (205 ) 484 Net change in cash and cash equivalents 176,405 5,272 Cash and cash equivalents at beginning of period   224,838     219,566   Cash and cash equivalents at end of period $ 401,243     224,838     Supplemental disclosures of cash flow information Income Taxes Paid $ 56,270   $ 112,150   Increase in purchases of leasehold improvements, property, and equipment accrued in accounts payable   ($3,249 )   ($1,480 )   Chipotle Mexican Grill, Inc.Supplemental Financial and Other Data(dollars in thousands)     For the three months ended Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31, 20112011201120112010 Number of restaurants opened 67 32 39 12 62 Restaurant relocations or closures -- -- (3 ) (1 ) (1 ) Number of restaurants at end of period 1,230 1,163 1,131 1,095 1,084 Average restaurant sales $ 2,013 $ 1,973 $ 1,927 $ 1,885 $ 1,840 Comparable restaurant sales increases 11.1 % 11.3 % 10.0 % 12.4 % 12.6 % Chipotle Mexican Grill, Inc.Investor Relations:Alex Spong, 303-222-2552