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

DENVER--(BUSINESS WIRE) - Jan. 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 RaisedTM 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 website 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

 

 

24,016

 

 

 

16,800

 

December 31, 2013 and 2012, respectively

 

 

 

 

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

%

 

 

 

 

 

 

 

 

 

 

 

Source: Chipotle Mexican Grill, Inc.

Contact:

Chipotle Mexican Grill, Inc.
Investor Relations
Alex Spong
303-222-2552

 

###

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