EX-99.1 2 dex991.htm PRESS RELEASE Press Release

 

Exhibit 99.1

LOGO

DRAFT

Investor Relations:

Kate Giha

614-508-1303

Media:

Chris Arnold

303-222-5912

 

 

Chipotle Mexican Grill, Inc. Announces Third Quarter 2010 Results

Denver, Colorado (Business Wire) October 21, 2010 Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2010.

Highlights for the third quarter of 2010 as compared to the third quarter of 2009 include:

 

   

Revenue increased 23.0% to $476.9 million

 

   

Comparable restaurant sales increased 11.4%

 

   

Restaurant level operating margin was 27.7%, an increase of 220 basis points

 

   

Net income was $48.2 million, an increase of 39.9%

 

   

Diluted earnings per share was $1.52, an increase of 40.7%

Highlights for the nine months ended September 30, 2010 as compared to the prior year include:

 

   

Revenue increased 19.7% to $1.35 billion

 

   

Comparable restaurant sales increased 8.3%

 

   

Restaurant level operating margin was 26.9%, an increase of 180 basis points

 

   

Net income was $132.5 million, an increase of 39.1%

 

   

Diluted earnings per share was $4.18, an increase of 41.2%

“We’re delighted that our continuing efforts to serve the very best food made from high quality ingredients raised with respect for the animals, the environment, and the farmers are resonating with our customers, allowing us to deliver double digit comps during the quarter. Our focus on strengthening our food culture, our people culture and our business model is resulting in even stronger customer loyalty and allowing us to deliver industry leading financial results,” said Founder, Chairman, and Co-CEO Steve Ells.

Third quarter 2010 results

Revenue for the quarter was $476.9 million, up 23.0% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.4% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter.

During the quarter Chipotle opened 22 new restaurants, bringing the total restaurant count to 1,023.

Restaurant level operating margin was 27.7% in the quarter, an increase of 220 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth.


 

G&A costs were 7.0% of revenue, up 70 basis points from the prior year period. The increase as a percent of revenue was driven by the impact of holding the biennial All Managers’ Conference in the third quarter and higher stock based compensation expense, partially offset by the positive impact of comparable restaurant sales growth.

Net income for the third quarter of 2010 was $48.2 million, or $1.52 per diluted share, compared to $34.5 million, or $1.08 per diluted share, in the third quarter of 2009.

Results for the nine months ended September 30, 2010

Revenue for the first nine months of 2010 was $1.35 billion, up 19.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 8.3% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic during the first nine months of 2010.

Year to date, Chipotle has opened 67 restaurants, including one restaurant in London and one in Toronto, Canada.

Restaurant level operating margin was 26.9% for the first nine months of 2010, an increase of 180 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth, along with a decline in food costs.

G&A costs for the first nine months of 2010 were 6.6% of revenue, up 10 basis points from the prior year period. The increase as a percent of revenue was driven by higher stock based compensation expense and the biennial All Managers’ Conference, partially offset by the positive impact of comparable restaurant sales growth.

Net income for the first nine months of 2010 was $132.5 million, or $4.18 per diluted share, compared to $95.2 million, or $2.96 per diluted share, in the first nine months of 2009.

“Our strong people culture continues to drive our success in attracting loyal customers and delivering exceptional results. Our restaurant teams are ambitious, passionate, and dedicated to delivering the best dining experience possible, while developing talented future leaders from crew. Our Restaurateurs and restaurant managers who aspire to become Restaurateurs are committed to hiring and developing top performers to achieve high standards in our restaurants every day,” commented Monty Moran, Co-CEO.

Outlook

For 2010, management expects the following:

 

   

120-130 new restaurant openings

 

   

High single digit comparable restaurant sales growth

 

   

An effective tax rate of approximately 38.3%

For 2011, management expects the following:

 

   

135-145 new restaurant openings

 

   

Low single digit comparable restaurant sales growth

 

   

An effective tax rate of approximately 38.4%

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 third quarter 2010 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-337-8198 or 1-719-325-2178 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 2947394. The replay will be available until October 28, 2010. 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-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 more than 1,000 restaurants. For more information, visit chipotle.com.

Forward-Looking Statements

Certain 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 2010 and 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: the uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; 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 performance of new restaurants and their impact on existing restaurant sales; changes in consumer preferences, general economic conditions or consumer discretionary spending; 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; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; risks relating to our expansion into new markets; risks related to our development and implementation of a new marketing strategy; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; risks relating to litigation; 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; the effect of competition in the restaurant industry; 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 Web site at chipotle.com.


 

Chipotle Mexican Grill, Inc.

Consolidated Statement of Income

(in thousands, except per share data)

(unaudited)

 

     Three months ended September 30,  
     2010     2009  

Revenue

   $ 476,874        100.0   $ 387,581        100.0
                                

Restaurant operating costs:

        

Food, beverage and packaging

     145,688        30.6        119,473        30.8   

Labor

     115,234        24.2        96,419        24.9   

Occupancy

     32,096        6.7        28,677        7.4   

Other operating costs

     51,977        10.9        44,118        11.4   

General and administrative expenses

     33,522        7.0        24,555        6.3   

Depreciation and amortization

     17,319        3.6        15,451        4.0   

Pre-opening costs

     1,943        0.4        2,535        0.7   

Loss on disposal of assets

     1,511        0.3        1,544        0.4   
                                

Total operating expenses

     399,290        83.7        332,772        85.9   
                                

Income from operations

     77,584        16.3        54,809        14.1   

Interest and other income

     395        0.1        132        0.0   

Interest and other expense

     (14     0.0        (74     0.0   
                                

Income before income taxes

     77,965        16.3        54,867        14.2   

Provision for income taxes

     (29,737     (6.2     (20,403     (5.3
                                

Net income

   $ 48,228        10.1   $ 34,464        8.9
                                

Earnings per share:

        

Basic

   $ 1.55        $ 1.09     
                    

Diluted

   $ 1.52        $ 1.08     
                    

Weighted average common shares outstanding:

        

Basic

     31,031          31,625     
                    

Diluted

     31,629          31,949     
                    


 

Chipotle Mexican Grill, Inc.

Consolidated Statement of Income

(in thousands, except per share data)

(unaudited)

 

     Nine months ended September 30,  
     2010     2009  

Revenue

   $ 1,353,401        100.0   $ 1,130,873        100.0
                                

Restaurant operating costs:

        

Food, beverage and packaging

     411,518        30.4        349,564        30.9   

Labor

     334,041        24.7        285,375        25.2   

Occupancy

     94,956        7.0        83,801        7.4   

Other operating costs

     148,623        11.0        128,626        11.4   

General and administrative expenses

     89,857        6.6        74,071        6.5   

Depreciation and amortization

     51,106        3.8        45,368        4.0   

Pre-opening costs

     5,169        0.4        5,996        0.5   

Loss on disposal of assets

     4,292        0.3        4,752        0.4   
                                

Total operating expenses

     1,139,562        84.2        977,553        86.4   
                                

Income from operations

     213,839        15.8        153,320        13.6   

Interest and other income

     1,097        0.1        623        0.1   

Interest and other expense

     (178     0.0        (333     0.0   
                                

Income before income taxes

     214,758        15.9        153,610        13.6   

Provision for income taxes

     (82,222     (6.1     (58,361     (5.2
                                

Net income

   $ 132,536        9.8   $ 95,249        8.4
                                

Earnings per share:

        

Basic

   $ 4.24        $ 2.99     
                    

Diluted

   $ 4.18        $ 2.96     
                    

Weighted average common shares outstanding:

        

Basic

     31,278          31,827     
                    

Diluted

     31,731          32,168     
                    


 

Chipotle Mexican Grill, Inc.

Consolidated Balance Sheet

(in thousands, except per share data)

 

     September 30,
2010
    December 31,
2009
 
     (unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 210,996      $ 219,566   

Accounts receivable, net of allowance for doubtful accounts of $99 and $339 as of September 30, 2010 and December 31, 2009, respectively

     4,446        4,763   

Inventory

     7,175        5,614   

Current deferred tax asset

     3,758        3,134   

Prepaid expenses

     18,933        14,377   

Available-for-sale securities

     90,000        50,000   

Income tax receivable

     10,091        —     
                

Total current assets

     345,399        297,454   

Leasehold improvements, property and equipment, net

     658,423        636,411   

Other assets

     6,610        5,701   

Goodwill

     21,939        21,939   
                

Total assets

   $ 1,032,371      $ 961,505   
                

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 35,641      $ 25,230   

Accrued payroll and benefits

     39,085        41,404   

Accrued liabilities

     28,590        31,216   

Current portion of deemed landlord financing

     117        96   

Income tax payable

     —          4,207   
                

Total current liabilities

     103,433        102,153   

Deferred rent

     118,394        106,395   

Deemed landlord financing

     3,693        3,782   

Deferred income tax liability

     36,448        38,863   

Other liabilities

     9,374        6,851   
                

Total liabilities

     271,342        258,044   
                

Shareholders’ equity:

    

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2010 and December 31, 2009

     —          —     

Common stock, $0.01 par value, 230,000 shares authorized, 33,749 and 33,473 shares issued as of September 30, 2010 and December 31, 2009, respectively

     338        335   

Additional paid-in capital

     575,554        539,880   

Treasury stock, at cost, 2,810 and 1,990 shares at September 30, 2010 and December 31, 2009, respectively

     (225,796     (114,316

Accumulated other comprehensive income

     864        29   

Retained earnings

     410,069        277,533   
                

Total shareholders’ equity

     761,029        703,461   
                

Total liabilities and shareholders’ equity

   $ 1,032,371      $ 961,505   
                


 

Chipotle Mexican Grill, Inc.

Consolidated Statement of Cash Flows

(unaudited)

(in thousands)

 

     Nine months ended
September 30,
 
     2010     2009  

Operating activities

    

Net income

   $ 132,536      $ 95,249   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     51,106        45,368   

Deferred income tax (benefit) provision

     (3,039     10,381   

Loss on disposal of assets

     4,292        4,752   

Bad debt allowance

     (228     (245

Stock-based compensation

     17,846        11,479   

Other

     —          172   

Changes in operating assets and liabilities:

    

Accounts receivable

     545        755   

Inventory

     (1,560     (1,069

Prepaid expenses

     (4,553     (1,594

Other assets

     (903     (637

Accounts payable

     4,883        3,230   

Accrued liabilities

     (4,948     1,676   

Income tax receivable/payable

     (14,298     (4,691

Deferred rent

     11,994        12,497   

Other long-term liabilities

     2,523        1,770   
                

Net cash provided by operating activities

     196,196        179,093   
                

Investing activities

    

Purchases of leasehold improvements, property and equipment, net

     (71,179     (80,282

Purchase of available-for-sale securities

     (90,000     —     

Maturity of available-for-sale securities

     50,000        99,990   
                

Net cash provided by (used in) investing activities

     (111,179     19,708   
                

Financing activities

    

Proceeds from option exercises

     11,295        11,406   

Excess tax benefit on stock-based compensation

     5,887        10,257   

Payments on deemed landlord financing

     (68     (61

Acquisition of treasury stock

     (111,480     (70,001
                

Net cash used in financing activities

     (94,366     (48,399
                

Effect of exchange rate changes on cash and cash equivalents

     779        —     

Net change in cash and cash equivalents

     (8,570     150,402   

Cash and cash equivalents at beginning of period

     219,566        88,044   
                

Cash and cash equivalents at end of period

   $ 210,996      $ 238,446   
                

Supplemental disclosures of cash flow information

    

Increase in purchases of leasehold improvements, property and equipment accrued in accounts payable

   $ 5,525      $ 5,435   
                


 

Chipotle Mexican Grill, Inc.

Supplemental Financial and Other Data

(dollars in thousands)

(unaudited)

 

     For the three months ended  
   Sept. 30,
2010
    June 30,
2010
    Mar. 31,
2010
    Dec. 31,
2009
    Sept. 30,
2009
 

Number of restaurants opened

     22        25        20        45        26   

Restaurant relocations or closures

     —          —          —          —          (1

Number of restaurants at end of period

     1,023        1,001        976        956        911   

Average restaurant sales

   $ 1,806      $ 1,763      $ 1,736      $ 1,728      $ 1,736   

Comparable restaurant sales increases

     11.4     8.7     4.3     2.0     2.7