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8-K - FORM 8-K - CHIPOTLE MEXICAN GRILL INCd711927d8k.htm

Exhibit 99.1

 

LOGO

PRESS RELEASE

Investor Relations:

Alex Spong

303-222-2552

 

Chipotle Mexican Grill, Inc. Announces First Quarter 2014 Results

Denver, Colorado (Business Wire) April 17, 2014 Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its first quarter ended March 31, 2014.

Highlights for the first quarter of 2014 as compared to the first quarter of 2013 include:

 

    Revenue increased 24.4% to $904.2 million

 

    Comparable restaurant sales increased 13.4%

 

    Restaurant level operating margin was 25.9%, a decrease of 40 basis points

 

    Net income was $83.1 million, an increase of 8.5%

 

    Diluted earnings per share was $2.64, an increase of 7.8%

 

    Opened 44 new restaurants

“We are delighted that more and more people are choosing to visit our restaurants every day allowing us to deliver double digit comps during the quarter. Our food culture has always been a defining characteristic of Chipotle and continues to set us apart from other restaurants. We are confident that our special food culture will continue to attract more customers to visit Chipotle as customers better understand and connect how natural and high quality ingredients that are freshly prepared result in better tasting food,” said Steve Ells, Founder, Chairman and co-CEO of Chipotle.

“Our unique and compelling people culture is having a tremendous and growing impact on our business and is one of the key drivers behind our success. Our Restaurateurs, and the cultures they are creating in their restaurants, are allowing us to serve better tasting food and provide a better dining experience to our guests,” said Monty Moran, co-CEO.

First quarter 2014 results

Revenue for the quarter was $904.2 million, up 24.4% from the prior year period. The growth in revenue was from a 13.4% increase in comparable restaurant sales and new restaurants not in the comparable base. Comparable restaurant sales growth was driven primarily by increased traffic and to a lesser extent by an increase in average check and the benefit of one additional trading day in the quarter as compared to the first quarter of 2013.

During the quarter we opened 44 new restaurants, bringing the total restaurant count to 1,637.

Food costs were 34.5% of revenue, an increase of 150 basis points driven by higher commodity costs. Higher commodity costs were primarily driven by inflationary pressures in beef, avocados, and cheese prices.

Restaurant level operating margin was 25.9% in the quarter, a decrease of 40 basis points from the prior year period. The decrease was driven by higher food costs, partially offset by favorable sales leverage in labor and occupancy costs.

G&A costs were 7.4% of revenue, up 130 basis points from the prior year period primarily due to higher non-cash, non-economic stock compensation expense, and to a lesser extent from higher litigation costs.

Net income for the first quarter of 2014 was $83.1 million, or $2.64 per diluted share, compared to $76.6 million, or $2.45 per diluted share, in the first quarter of 2013. The first quarter of 2013 benefited by about $.10 per share related to 2012 tax credits.

Our Board of Directors has also approved the investment of up to an additional $100 million, exclusive of commissions, to repurchase shares of our common stock. This repurchase authorization, in addition to up to $77 million available as of March 31st for repurchases under previously announced repurchase authorizations, may be modified, suspended, or discontinued at any time.


Outlook

For 2014, management expects the following:

 

    180 – 195 new restaurant openings

 

    High single digit comparable restaurant sales increases, excluding any menu price increase

 

    An effective full year tax rate of approximately 39.1%.

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 first quarter 2014 financial results on Thursday, April 17, 2014 at 11:00 AM Eastern time. The conference call can be accessed live over the phone by dialing 1-888-490-2763 or for international callers by dialing 1-719-325-2249. 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 2712305. The replay will be available until April 24, 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 1,600 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 our attracting more customers to our restaurants, 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

(in thousands, except per share data)

(unaudited)

 

     Three months ended March 31  
     2014     2013  

Revenue

   $ 904,163        100.0   $ 726,751        100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Restaurant operating costs

        

(Exclusive of depreciation and amortization shown separately below):

        

Food, beverage and packaging

     311,792        34.5        239,589        33.0   

Labor

     208,208        23.0        171,469        23.6   

Occupancy

     54,846        6.1        47,620        6.6   

Other operating costs

     95,137        10.5        76,656        10.5   

General and administrative expenses

     66,917        7.4        44,211        6.1   

Depreciation and amortization

     25,754        2.8        22,936        3.2   

Pre-opening costs

     4,300        0.5        2,886        0.4   

Loss on disposal of assets

     1,559        0.2        1,340        0.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     768,513        85.0        606,707        83.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     135,650        15.0        120,044        16.5   

Interest and other income (expense), net

     689        0.1        266        0.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     136,339        15.1        120,310        16.6   

Provision for income taxes

     (53,270     (5.9     (43,726     (6.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 83,069        9.2   $ 76,584        10.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 2.67        $ 2.47     
  

 

 

     

 

 

   

Diluted

   $ 2.64        $ 2.45     
  

 

 

     

 

 

   

Weighted average common shares outstanding:

        

Basic

     31,061          31,012     
  

 

 

     

 

 

   

Diluted

     31,486          31,229     
  

 

 

     

 

 

   

Comprehensive income

   $ 82,938        $ 75,480     
  

 

 

     

 

 

   


Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)

 

     March 31     December 31  
     2014     2013  
     (unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 411,592      $ 323,203   

Accounts receivable, net of allowance for doubtful accounts of $1,170 and $1,190 as of March 31, 2014 and December 31, 2013, respectively

     16,582        24,016   

Inventory

     15,202        13,044   

Current deferred tax asset

     13,799        13,212   

Prepaid expenses and other current assets

     38,213        34,204   

Income tax receivable

     —          3,657   

Investments

     295,403        254,971   
  

 

 

   

 

 

 

Total current assets

     790,791        666,307   

Leasehold improvements, property and equipment, net

     983,047        963,238   

Long term investments

     313,601        313,863   

Other assets

     46,302        43,933   

Goodwill

     21,939        21,939   
  

 

 

   

 

 

 

Total assets

   $ 2,155,680      $ 2,009,280   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 66,729      $ 59,022   

Accrued payroll and benefits

     56,332        67,195   

Accrued liabilities

     68,703        73,011   

Income tax payable

     35,478        —     
  

 

 

   

 

 

 

Total current liabilities

     227,242        199,228   

Deferred rent

     199,480        192,739   

Deferred income tax liability

     57,576        55,434   

Other liabilities

     26,349        23,591   
  

 

 

   

 

 

 

Total liabilities

     510,647        470,992   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of March 31, 2014 and December 31, 2013, respectively

     —          —     

Common stock $0.01 par value, 230,000 shares authorized, and 35,323 and 35,245 shares issued as of March 31, 2014 and December 31, 2013, respectively

     353        352   

Additional paid-in capital

     956,382        919,840   

Treasury stock, at cost, 4,235 and 4,212 common shares at March 31, 2014 and December 31, 2013, respectively

     (673,157     (660,421

Accumulated other comprehensive income

     1,489        1,620   

Retained earnings

     1,359,966        1,276,897   
  

 

 

   

 

 

 

Total shareholders’ equity

     1,645,033        1,538,288   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 2,155,680      $ 2,009,280   
  

 

 

   

 

 

 


Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(in thousands)

 

     Three months ended March 31  
     2014     2013  

Operating activities

    

Net income

   $ 83,069      $ 76,584   

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

    

Depreciation and amortization

     25,754        22,936   

Deferred income tax provision (benefit)

     1,551        (1,923

Loss on disposal of assets

     1,559        1,340   

Bad debt allowance

     (20     9   

Stock-based compensation expense

     27,359        15,387   

Excess tax benefit on stock-based compensation

     (8,955     (1,869

Other

     64        177   

Changes in operating assets and liabilities:

    

Accounts receivable

     7,439        1,309   

Inventory

     (2,160     (340

Prepaid expenses and other current assets

     (4,014     (4,376

Other assets

     (2,365     (1,588

Accounts payable

     8,006        773   

Accrued liabilities

     (15,159     (33,893

Income tax payable/receivable

     48,088        42,721   

Deferred rent

     6,764        5,880   

Other long-term liabilities

     2,798        2,123   
  

 

 

   

 

 

 

Net cash provided by operating activities

     179,778        125,250   
  

 

 

   

 

 

 

Investing activities

    

Purchases of leasehold improvements, property and equipment

     (47,230     (36,495

Purchases of investments

     (89,782     (54,598

Maturities of investments

     49,500        39,500   
  

 

 

   

 

 

 

Net cash used in investing activities

     (87,512     (51,593
  

 

 

   

 

 

 

Financing activities

    

Acquisition of treasury stock

     (12,736     (50,965

Excess tax benefit on stock-based compensation

     8,955        1,869   

Other financing proceeds (payments)

     (56     120   
  

 

 

   

 

 

 

Net cash used in financing activities

     (3,837     (48,976
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (40     (304

Net change in cash and cash equivalents

     88,389        24,377   

Cash and cash equivalents at beginning of period

     323,203        322,553   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 411,592      $ 346,930   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

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

   $ (290   $ 2,813   
  

 

 

   

 

 

 


Chipotle Mexican Grill, Inc.

Supplemental Financial and Other Data

(dollars in thousands)

 

     For the three months ended  
     Mar. 31,     Dec.31,     Sep. 30,     Jun. 30,     Mar. 31,  
     2014     2013     2013     2013     2013  

Number of restaurants opened

     44        56        37        44        48   

Restaurant relocations

     (2     —          —          —          —     

Number of restaurants at end of period

     1,637        1,595        1,539        1,502        1,458   

Average restaurant sales

   $ 2,226      $ 2,169      $ 2,140      $ 2,119      $ 2,105   

Comparable restaurant sales increases

     13.4     9.3     6.2     5.5     1.0