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8-K - 8-K - CHIPOTLE MEXICAN GRILL INCd666524d8k.htm

Exhibit 99.1

 

LOGO

PRESS RELEASE

Investor Relations:

Alex Spong

303-222-2552

 

Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2013 Results

Denver, Colorado (Business Wire) January 30, 2014 Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2013.

Highlights for the fourth quarter of 2013 as compared to the fourth quarter of 2012 include:

 

    Revenue increased 20.7% to $844.1 million

 

    Comparable restaurant sales increased 9.3%

 

    Restaurant level operating margin was 25.6%, an increase of 100 basis points

 

    Net income was $79.6 million, an increase of 29.8%

 

    Diluted earnings per share was $2.53, an increase of 29.7%

 

    Opened 56 new restaurants

Highlights for the twelve months ended December 31, 2013 as compared to the prior year include:

 

    Revenue increased 17.7% to $3.21 billion

 

    Comparable restaurant sales increased 5.6%

 

    Restaurant level operating margin was 26.6%, a decrease of 50 basis points

 

    Net income was $327.4 million, an increase of 17.8%

 

    Diluted earnings per share was $10.47, an increase of 19.7%

 

    Opened 185 new restaurants

“We are very proud of our accomplishments during 2013. Over the past 20 years, we have created a very unique and special restaurant company. Chipotle is a place that appeals to a diverse customer base throughout the country and beyond. We offer our customers a range of flavors from a focused selection of beautiful, top-quality ingredients that are expertly prepared by a passionate team of extraordinary people. Our focus on our unique people and food cultures has created an impressive demand for a restaurant experience that is redefining fast food for the better,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle.

Results for the fourth quarter 2013

Revenue for the quarter was $844.1 million, up 20.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 9.3% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by the impact of increased traffic.

During the quarter we opened 56 new restaurants, bringing the total restaurant count to 1,595.

Food costs were 33.9% of revenue, an increase of 40 basis points driven mostly by higher avocado costs and to a lesser extent from tomato and corn salsa costs, partially offset by lower dairy and steak costs.

Restaurant level operating margin was 25.6% in the quarter, an increase of 100 basis points from the prior year period. The increase was due to favorable sales leverage and lower marketing costs, partially offset by higher food costs.

G&A costs were 6.6% of revenue, up 40 basis points from the prior year due to higher bonus expenses and employee taxes. Net income for the fourth quarter of 2013 was $79.6 million, or $2.53 per diluted share, compared to $61.4 million, or $1.95 per diluted share, in the fourth quarter of 2012.


Results for the full year ended December 31, 2013

Revenue for the full year of 2013 was $3.21 billion, up 17.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 5.6% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic.

During the full year 185 new restaurants were opened, bringing the total restaurant count to 1,595.

Food costs were 33.4% of revenue, an increase of 80 basis points mostly from higher salsa, meat, and dairy costs.

Restaurant level operating margin was 26.6% for the full year 2013, a decrease of 50 basis points from the prior year. The decrease was primarily driven by higher food costs partially offset by favorable sales leverage from higher restaurant sales.

G&A costs for the full year 2013 were 6.3% of revenue, 40 basis points lower than the prior year. The decrease as a percent of revenue was driven by costs in 2012 from our biennial All Managers’ Conference and by the positive impact of comparable restaurant sales growth.

Net income for the full year 2013 was $327.4 million, or $10.47 per diluted share, compared to $278.0 million, or $8.75 per diluted share for 2012.

“Our fourth quarter and 2013 results demonstrated our ability to focus on and run great restaurants. Our empowered restaurant teams continued to delight our customers and provide an exceptional dining experience to our guests as more people were attracted to and visited our restaurants than ever before,” said Monty Moran, co-CEO of Chipotle.

Outlook

For 2014, management expects the following:

 

    180 – 195 new restaurant openings

 

    Low to mid single digit comparable restaurant sales excluding any menu price increases

 

    An estimated effective tax rate of 39.2%, which excludes federal work opportunity and R&D credits, which have not been renewed for 2014.

Definitions

The following definitions apply to these terms as used throughout this release:

Comparable restaurant sales 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 complete fourth quarter and full year 2013 financial results on Thursday, January 30, 2014 at 4:30 PM Eastern time.

The conference call can be accessed live over the phone by dialing 1-888-401-4674 or for international callers by dialing 1-719-867-0352. 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 6767597. The replay will be available until February 6, 2014. 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-CEO, 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 Responsibly Raised™ with respect for the animals, the land, and the farmers who produce the food. In order to achieve this vision, we focus on building a special people culture that is centered on creating teams of top performers empowered to achieve high standards. This people culture not only leads to a better dining experience for our customers, it also allows us to develop future leaders from within. Chipotle opened with a single restaurant in 1993 and currently operates more than 1,550 restaurants including six ShopHouse Southeast Asian Kitchen restaurants, and is an investor in an entity that owns and operates one Pizzeria Locale. For more information, visit Chipotle.com.


Forward-Looking Statements

Certain statements in this press release, including statements regarding the appeal of and demand for our restaurant experience, as well as statements under the heading “Outlook” of our expected number of new restaurant openings, comparable restaurant sales increases, and effective tax rates in 2014, 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 due to factors such as decreased consumer spending and economic uncertainty or our failure to attract customers to our brand or retain our existing customers; our possible inability to increase menu prices or realize the benefits of menu price increases, or the impact of competition; 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; increases in the cost of food ingredients and other key supplies; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of immigration enforcement activities; security risks associated with the acceptance of electronic payment cards or electronic storage of confidential customer or employee information; the risk of food-borne illnesses and other health concerns about our food; risks relating to our expansion into international markets; the impact of federal, state or local government regulations relating to our employees, our restaurant design, or the sale of food or alcoholic beverages; risks associated with our Food With Integrity strategy, including supply shortages; the effect of competition in the restaurant industry; risks relating to litigation and negative publicity; risks that our investments in new concepts will not be successful; risks related to our marketing and advertising strategies; our dependence on key personnel; risks relating to our insurance coverage and self-insurance; 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; 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 and Comprehensive Income

(unaudited)

(in thousands, except per share data)

 

     Three Months ended December 31  
     2013     2012  

Revenue

   $ 844,147        100.0   $ 699,161        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Restaurant operating costs

        

(Exclusive of depreciation and amortization shown separately below):

        

Food, beverage and packaging

     285,912        33.9        234,330        33.5   

Labor

     193,818        23.0        167,301        23.9   

Occupancy

     52,795        6.3        45,391        6.5   

Other operating costs

     95,389        11.3        80,350        11.5   

General and administrative expenses

     55,844        6.6        43,174        6.2   

Depreciation and amortization

     24,903        3.0        22,141        3.2   

Pre-opening costs

     4,775        0.6        3,383        0.5   

Loss on disposal of assets

     1,607        0.2        903        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     715,043        84.7        596,973        85.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     129,104        15.3        102,188        14.6   

Interest and other income, net

     390        —          462        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     129,494        15.3        102,650        14.7   

Provision for income taxes

     (49,872     (5.9     (41,297     (5.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 79,622        9.4   $ 61,353        8.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income:

        

Foreign currency translation adjustments

     222          242     
  

 

 

     

 

 

   

Comprehensive income

   $ 79,844        $ 61,595     
  

 

 

     

 

 

   

Earnings per share:

        

Basic

   $ 2.57        $ 1.96     
  

 

 

     

 

 

   

Diluted

   $ 2.53        $ 1.95     
  

 

 

     

 

 

   

Weighted average common shares outstanding:

        

Basic

     31,019          31,303     
  

 

 

     

 

 

   

Diluted

     31,425          31,486     
  

 

 

     

 

 

   


Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Income and Comprehensive Income

(in thousands, except per share data)

 

     Year ended December 31  
     2013     2012  

Revenue

   $ 3,214,591        100.0   $ 2,731,224        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Restaurant operating costs

        

(Exclusive of depreciation and amortization shown separately below):

        

Food, beverage and packaging

     1,073,514        33.4        891,003        32.6   

Labor

     739,800        23.0        641,836        23.5   

Occupancy

     199,107        6.2        171,435        6.3   

Other operating costs

     347,401        10.8        286,610        10.5   

General and administrative expenses

     203,733        6.3        183,409        6.7   

Depreciation and amortization

     96,054        3.0        84,130        3.1   

Pre-opening costs

     15,511        0.5        11,909        0.4   

Loss on disposal of assets

     6,751        0.2        5,027        0.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,681,871        83.4        2,275,359        83.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     532,720        16.6        455,865        16.7   

Interest and other income, net

     1,751        0.1        1,820        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     534,471        16.6        457,685        16.8   

Provision for income taxes

     (207,033     (6.4     (179,685     (6.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 327,438        10.2   $ 278,000        10.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income:

        

Foreign currency translation adjustments

     596          827     
  

 

 

     

 

 

   

Comprehensive income

   $ 328,034        $ 278,827     
  

 

 

     

 

 

   

Earnings per share:

        

Basic

   $ 10.58        $ 8.82     
  

 

 

     

 

 

   

Diluted

   $ 10.47        $ 8.75     
  

 

 

     

 

 

   

Weighted average common shares outstanding:

        

Basic

     30,957          31,513     
  

 

 

     

 

 

   

Diluted

     31,281          31,783     
  

 

 

     

 

 

   


Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)

 

     December 31  
     2013     2012  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 323,203      $ 322,553   

Accounts receivable, net of allowance for doubtful accounts of $1,190 and $1,187 as of December 31, 2013 and 2012, respectively

     24,016        16,800   

Inventory

     13,044        11,096   

Current deferred tax asset

     13,212        8,862   

Prepaid expenses and other current assets

     34,204        27,378   

Income tax receivable

     3,657        9,612   

Investments

     254,971        150,306   
  

 

 

   

 

 

 

Total current assets

     666,307        546,607   

Leasehold improvements, property and equipment, net

     963,238        866,703   

Long term investments

     313,863        190,868   

Other assets

     43,933        42,550   

Goodwill

     21,939        21,939   
  

 

 

   

 

 

 

Total assets

   $ 2,009,280      $ 1,668,667   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 59,022      $ 58,700   

Accrued payroll and benefits

     67,195        71,731   

Accrued liabilities

     73,011        56,421   
  

 

 

   

 

 

 

Total current liabilities

     199,228        186,852   

Deferred rent

     192,739        167,057   

Deferred income tax liability

     55,434        48,947   

Other liabilities

     23,591        19,885   
  

 

 

   

 

 

 

Total liabilities

     470,992        422,741   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2013 and 2012, respectively

     —            —       

Common stock $0.01 par value, 230,000 shares authorized, and 35,245 and 34,912 shares issued as of December 31, 2013 and 2012, respectively

     352        349   

Additional paid-in capital

     919,840        816,612   

Treasury stock, at cost, 4,212 and 3,819 common shares at December 31, 2013 and 2012, respectively

     (660,421     (521,518

Accumulated other comprehensive income

     1,620        1,024   

Retained earnings

     1,276,897        949,459   
  

 

 

   

 

 

 

Total shareholders’ equity

     1,538,288        1,245,926   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 2,009,280      $ 1,668,667   
  

 

 

   

 

 

 


Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(in thousands)

 

     Years ended December 31  
     2013     2012  

Operating activities

    

Net income

   $ 327,438      $ 278,000   

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

    

Depreciation and amortization

     96,054        84,130   

Deferred income tax provision (benefit)

     2,103        (18,057

Loss on disposal of assets

     6,751        5,027   

Bad debt allowance

     19        1,046   

Stock-based compensation expense

     63,657        64,276   

Excess tax benefit on stock-based compensation

     (38,379     (73,210

Other

     507        522   

Changes in operating assets and liabilities:

    

Accounts receivable

     (7,238     (9,438

Inventory

     (1,950     (2,180

Prepaid expenses and other current assets

     (6,806     (5,954

Other assets

     (1,354     (20,539

Accounts payable

     2,052        7,849   

Accrued liabilities

     12,020        21,307   

Income tax payable/receivable

     44,334        59,357   

Deferred rent

     25,715        23,765   

Other long-term liabilities

     3,857        4,062   
  

 

 

   

 

 

 

Net cash provided by operating activities

     528,780        419,963   
  

 

 

   

 

 

 

Investing activities

    

Purchases of leasehold improvements, property and equipment

     (199,926     (197,037

Purchases of investments

     (387,639     (213,462

Maturities of investments

     159,250        55,000   
  

 

 

   

 

 

 

Net cash used in investing activities

     (428,315     (355,499
  

 

 

   

 

 

 

Financing activities

    

Acquisition of treasury stock

     (138,903     (217,092

Proceeds from employee stock plan transactions

     316        481   

Excess tax benefit on stock-based compensation

     38,379        73,210   

Other financing payments

     (143     (133
  

 

 

   

 

 

 

Net cash used in financing activities

     (100,351     (143,534
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     536        380   

Net change in cash and cash equivalents

     650        (78,690

Cash and cash equivalents at beginning of period

     322,553        401,243   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 323,203      $ 322,553   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

Income taxes paid

   $ 160,973      $ 138,385   
  

 

 

   

 

 

 

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

   $ (1,736   $ 4,455   
  

 

 

   

 

 

 


Chipotle Mexican Grill, Inc.

Supplemental Financial and Other Data

(dollars in thousands)

 

     For the three months ended  
     December 31,     September 30,     June 30,     March 31,     December 31,  
     2013     2013     2013     2013     2012  

Number of restaurants opened

     56        37        44        48        60   

Number of restaurants at end of period

     1,595        1,539        1,502        1,458        1,410   

Average restaurant sales

   $ 2,169      $ 2,140      $ 2,119      $ 2,105      $ 2,113   

Comparable restaurant sales increases

     9.3     6.2     5.5     1.0     3.8