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Table of Contents

 

 

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, 2020

or

¨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: (949524-4000

______________________________

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 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

 

 Large accelerated filer

 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 24, 2020, there were 27,967,625 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

 

 


Table of Contents

TABLE OF CONTENTS

 

PART I

Item 1.

Financial Statements

1

Notes to Condensed Consolidated Financial Statements

5

Note 1 - Basis of Presentation and Update to Accounting Policy

5

Note 2 - Recent Accounting Standards

5

Note 3 - Revenue Recognition

6

Note 4 - Fair Value of Financial Instruments

7

Note 5 - Shareholders' Equity

7

Note 6 - Stock-Based Compensation

7

Note 7 - Income Taxes

8

Note 8 - Leases

8

Note 9 - Earnings Per Share

9

Note 10 - Commitments and Contingencies

10

Note 11 - Debt

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

16

Item 4.

Controls and Procedures

17

PART II

Item 1.

Legal Proceedings

17

Item 1A.

Risk Factors

17

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

Item 6.

Exhibits

18

 

Signatures

19


Table of Contents

PART I

ITEM 1.  FINANCIAL STATEMENTS

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

June 30,

December 31,

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

605,622

$

480,626

Accounts receivable, net

68,006

80,545

Inventory

24,178

26,096

Prepaid expenses and other current assets

53,656

57,076

Income tax receivable

97,840

27,705

Investments

301,041

400,156

Total current assets

1,150,343

1,072,204

Leasehold improvements, property and equipment, net

1,498,048

1,458,690

Restricted cash

27,979

27,855

Operating lease assets

2,634,165

2,505,466

Other assets

37,655

18,450

Goodwill

21,939

21,939

Total assets

$

5,370,129

$

5,104,604

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

160,523

$

115,816

Accrued payroll and benefits

130,306

126,600

Accrued liabilities

146,229

155,843

Unearned revenue

88,924

95,195

Current operating lease liabilities

197,196

173,139

Total current liabilities

723,178

666,593

Commitments and contingencies (Note 10)

 

 

Long-term operating lease liabilities

2,809,178

2,678,374

Deferred income tax liabilities

96,502

37,814

Other liabilities

36,775

38,797

Total liabilities

3,665,633

3,421,578

Shareholders' equity:

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2020 and December 31, 2019, respectively

-

-

Common stock, $0.01 par value, 230,000 shares authorized, 36,667 and 36,323 shares issued as of June 30, 2020 and December 31, 2019, respectively

367

363

Additional paid-in capital

1,506,785

1,465,697

Treasury stock, at cost, 8,703 and 8,568 common shares as of June 30, 2020 and December 31, 2019, respectively

(2,801,467)

(2,699,119)

Accumulated other comprehensive loss

(6,149)

(5,363)

Retained earnings

3,004,960

2,921,448

Total shareholders' equity

1,704,496

1,683,026

Total liabilities and shareholders' equity

$

5,370,129

$

5,104,604

See accompanying notes to condensed consolidated financial statements.

1


Table of Contents

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

Revenue

$

1,364,738

$

1,434,231

$

2,775,510

$

2,742,448

Restaurant operating costs (exclusive of depreciation and amortization shown separately below):

Food, beverage and packaging

454,756

483,284

917,055

904,651

Labor

385,266

368,053

778,831

716,895

Occupancy

95,576

89,923

190,855

178,693

Other operating costs

262,378

193,309

473,140

368,052

General and administrative expenses

102,647

121,395

209,117

224,066

Depreciation and amortization

60,024

51,642

118,398

105,423

Pre-opening costs

3,644

2,118

7,210

3,058

Impairment, closure costs, and asset disposals

5,386

4,487

14,722

11,429

Total operating expenses

1,369,677

1,314,211

2,709,328

2,512,267

Income (loss) from operations

(4,939)

120,020

66,182

230,181

Interest and other income, net

623

3,947

3,366

7,076

Income (loss) before income taxes

(4,316)

123,967

69,548

237,257

Benefit (provision) for income taxes

12,491

(32,939)

15,015

(58,097)

Net income

$

8,175

$

91,028

$

84,563

$

179,160

Earnings per share:

Basic

$

0.29

$

3.28

$

3.04

$

6.47

Diluted

$

0.29

$

3.22

$

2.99

$

6.35

Weighted-average common shares outstanding:

Basic

27,911

27,720

27,851

27,708

Diluted

28,333

28,300

28,328

28,209

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

Net income

$

8,175

$

91,028

$

84,563

$

179,160

Other comprehensive income (loss), net of income taxes:

Foreign currency translation adjustments

1,055

555

(786)

833

Unrealized gain on available-for-sale securities, net of income taxes

-

42

-

142

Other comprehensive income (loss), net of income taxes

1,055

597

(786)

975

Comprehensive income

$

9,230

$

91,625

$

83,777

$

180,135

See accompanying notes to condensed consolidated financial statements.

2


Table of Contents

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

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, 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 (loss), 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 (loss), 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 

Balance, December 31, 2019

36,323 

$

363 

$

1,465,697 

8,568 

$

(2,699,119)

$

2,921,448 

$

-

$

(5,363)

$

1,683,026

Adoption of ASU No. 2016-13, Financial Instrument-Credit Losses (Topic 326)

-

-

-

-

-

(1,051)

-

-

(1,051)

Stock-based compensation

-

-

17,708 

-

-

-

-

-

17,708 

Stock plan transactions and other

194 

2 

(181)

-

-

-

-

-

(179)

Acquisition of treasury stock

-

-

-

134 

(102,031)

-