cmg-20190630x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________

FORM 10-Q

______________________________

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-32731

______________________________

CHIPOTLE MEXICAN GRILL INC

(Exact name of registrant as specified in its charter)

______________________________


Delaware	84-1219301
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

610 Newport Center Drive, Suite 1300 Newport Beach, CA	92660
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 595-4000

______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	CMG	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of July 19, 2019, there were 27,722,812 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

PART I

ITEM 1. FINANCIAL STATEMENTS

Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)



	June 30,		December 31,
	2019		2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	299,913	$	249,953
Accounts receivable, net of allowance for doubtful accounts of $81 and $0 as of June 30, 2019 and December 31, 2018, respectively		49,362		62,312
Inventory		21,144		21,555
Prepaid expenses and other current assets		44,116		54,129
Investments		417,867		426,845
Total current assets		832,402		814,794
Leasehold improvements, property and equipment, net		1,387,896		1,379,254
Restricted cash		28,543		30,199
Operating lease assets		2,370,710		-
Other assets		17,817		19,332
Goodwill		21,939		21,939
Total assets	$	4,659,307	$	2,265,518
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	99,007	$	113,071
Accrued payroll and benefits		98,800		113,467
Accrued liabilities		126,879		147,849
Unearned revenue		61,794		70,474
Current operating lease liabilities		161,253		-
Income tax payable		535		5,129
Total current liabilities		548,268		449,990
Commitments and contingencies (Note 11)
Deferred rent		-		330,985
Long-term operating lease liabilities		2,534,769		-
Deferred income tax liabilities		4,407		11,566
Other liabilities		33,814		31,638
Total liabilities		3,121,258		824,179
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2019 and December 31, 2018, respectively		-		-
Common stock, $0.01 par value, 230,000 shares authorized, 36,193 and 35,973 shares issued as of June 30, 2019 and December 31, 2018, respectively		362		360
Additional paid-in capital		1,414,420		1,374,154
Treasury stock, at cost, 8,469 and 8,276 common shares at June 30, 2019 and December 31, 2018, respectively		(2,621,922)		(2,500,556)
Accumulated other comprehensive loss		(5,261)		(6,236)
Retained earnings		2,750,450		2,573,617
Total shareholders' equity		1,538,049		1,441,339
Total liabilities and shareholders' equity	$	4,659,307	$	2,265,518

See accompanying notes to condensed consolidated financial statements.

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Income

(unaudited)

(in thousands, except per share data)



	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Revenue	$	1,434,231	$	1,266,520	$	2,742,448	$	2,414,917
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		483,284		413,096		904,651		785,011
Labor		368,053		341,842		716,895		660,705
Occupancy		89,923		86,772		178,693		172,028
Other operating costs		193,309		175,171		368,052		323,240
General and administrative expenses		121,395		85,153		224,066		162,216
Depreciation and amortization		51,642		49,193		105,423		96,108
Pre-opening costs		2,118		2,014		3,058		4,663
Impairment, closure costs, and asset disposals		4,487		45,322		11,429		50,181
Total operating expenses		1,314,211		1,198,563		2,512,267		2,254,152
Income from operations		120,020		67,957		230,181		160,765
Interest and other income, net		3,947		2,323		7,076		3,717
Income before income taxes		123,967		70,280		237,257		164,482
Provision for income taxes		(32,939)		(23,396)		(58,097)		(58,152)
Net income	$	91,028	$	46,884	$	179,160	$	106,330
Earnings per share:
Basic	$	3.28	$	1.69	$	6.47	$	3.82
Diluted	$	3.22	$	1.68	$	6.35	$	3.81
Weighted-average common shares outstanding:
Basic		27,720		27,819		27,708		27,865
Diluted		28,300		27,935		28,209		27,942

Condensed Consolidated Statement of Comprehensive Income

(unaudited)

(in thousands)



	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net income	$	91,028	$	46,884	$	179,160	$	106,330
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments		555		(1,580)		833		(1,448)
Unrealized gain (loss) on available-for-sale securities, net of tax		42		82		142		(19)
Other comprehensive income (loss), net of income taxes		597		(1,498)		975		(1,467)
Comprehensive income	$	91,625	$	45,386	$	180,135	$	104,863

See accompanying notes to condensed consolidated financial statements.

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Shareholders’ Equity

(unaudited)

(in thousands)


	Common Stock					Treasury Stock					Accumulated Other Comprehensive Income (Loss)
	Shares	Amount		Additional ‎Paid-In ‎Capital		Shares	Amount		Retained ‎Earnings		Available-for-Sale Securities			Foreign Currency Translation	Total
Balance, December 31, 2017	35,852	$	359	$	1,305,090	7,826	$	(2,334,409)	$	2,397,064	$	(306)	$	(3,353)	$	1,364,445
Stock-based compensation	-		-		12,376	-		-		-		-		-		12,376
Stock plan transactions and other	31		-		(228)	-		-		-		-		-		(228)
Acquisition of treasury stock	-		-		-	231		(72,025)		-		-		-		(72,025)
Net income	-		-		-	-		-		59,446		-		-		59,446
Other comprehensive income (loss), net of income tax	-		-		-	-		-		-		(101)		132		31
Balance, March 31, 2018	35,883	$	359	$	1,317,238	8,057	$	(2,406,434)	$	2,456,510	$	(407)	$	(3,221)	$	1,364,045
Stock-based compensation	-		-		11,660	-		-		-		-		-		11,660
Stock plan transactions and other	62		-		(409)	-		-		-		-		-		(409)
Acquisition of treasury stock	-		-		-	76		(28,675)		-		-		-		(28,675)
Net income	-		-		-	-		-		46,884		-		-		46,884
Other comprehensive income (loss), net of income tax	-		-		-	-		-		-		82		(1,580)		(1,498)
Balance, June 30, 2018	35,945	$	359	$	1,328,489	8,133	$	(2,435,109)	$	2,503,394	$	(325)	$	(4,801)	$	1,392,007

Balance, December 31, 2018	35,973	$	360	$	1,374,154	8,276	$	(2,500,556)	$	2,573,617	$	(147)	$	(6,089)	$	1,441,339
Adoption of ASU No. 2016-02, Leases (Topic 842)	-		-		-	-		-		(2,327)		-		-		(2,327)
Stock-based compensation	-		-		19,342	-		-		-		-		-		19,342
Stock plan transactions and other	135		1		(212)	-		-		-		-		-		(211)
Acquisition of treasury stock	-		-		-	110		(62,854)		-		-		-		(62,854)
Net income	-		-		-	-		-		88,132		-		-		88,132
Other comprehensive income, net of income tax	-		-		-	-		-		-		100		278		378
Balance, March 31, 2019	36,108	$	361	$	1,393,284	8,386	$	(2,563,410)	$	2,659,422	$	(47)	$	(5,811)	$	1,483,799
Stock-based compensation	-		-		21,322	-		-		-		-		-		21,322
Stock plan transactions and other	85		1		(186)	-		-		-		-		-		(185)
Acquisition of treasury stock	-		-		-	83		(58,512)		-		-		-		(58,512)
Net income	-		-		-	-		-		91,028		-		-		91,028
Other comprehensive income, net of income tax	-		-		-	-		-		-		42		555		597
Balance, June 30, 2019	36,193	$	362	$	1,414,420	8,469	$	(2,621,922)	$	2,750,450	$	(5)	$	(5,256)	$	1,538,049

See accompanying notes to condensed consolidated financial statements.

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(unaudited)

(in thousands)



	Six months ended
	June 30,
	2019	2018
Operating activities
Net income	$



	PART I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
	PART II
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	23