Chipotle Mexican Grill, Inc. Announces Third Quarter 2015 Results

DENVER - (BUSINESS WIRE) - Oct. 20, 2015 - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2015.

Highlights for the third quarter of 2015 as compared to the third quarter of 2014 include:

  • Revenue increased 12.2% to $1.2 billion
  • Comparable restaurant sales increased 2.6%
  • Restaurant level operating margin was 28.3%, a decrease of 50 basis points
  • Net income was $144.9 million, an increase of 10.8%
  • Diluted earnings per share was $4.59, an increase of 10.6%
  • Opened 53 new restaurants

Highlights for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 include:

  • Revenue increased 15.3% to $3.5 billion
  • Comparable restaurant sales increased 5.5%
  • Restaurant level operating margin was 27.9%, an increase of 50 basis points
  • Net income was $407.7 million, an increase of 25.8%
  • Diluted earnings per share was $12.92, an increase of 25.6%
  • Opened 150 new restaurants

"Chipotle's third quarter results demonstrate the continued success of our vision to change the way people think about and eat fast food. As we have grown our restaurants through the year, we are able to push our standards higher in what we can accomplish with our food culture. We have currently returned carnitas to 90% of our restaurants, and will look to bring it back to 100% of restaurants during the fourth quarter. I am grateful for our customers' continued support of our animal welfare standards, and want to thank them for their patience while we have worked hard to address this issue. I am confident that we have the right food culture and people culture in place for us to continue our momentum," said Steve Ells, founder, chairman and co-CEO of Chipotle.

Third quarter 2015 results

Revenue for the quarter was $1.2 billion, up 12.2% from the third quarter of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 2.6% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in customer visits, and to a lesser extent from a menu price increase taken in certain markets in the third quarter of 2015.

We opened 53 new restaurants during the quarter, bringing the total restaurant count to 1,931.

Food costs were 33.0% of revenue, a decrease of 130 basis points as compared to the third quarter of 2014, as a result of relief in avocado and dairy prices and the benefit of our menu price increase, partially offset by increased beef and packaging costs.

Restaurant level operating margin was 28.3% in the quarter, a decrease of 50 basis points from the third quarter of 2014. The decrease was primarily driven by increased labor costs, and higher marketing and promotion costs, partially offset by lower food costs as a percent of revenue.

General and administrative expenses were 5.8% of revenue, a decrease of 80 basis points due to costs in the third quarter of 2014 associated with our biennial All Managers' Conference, and lower bonus and non-cash stock-based compensation expense in the third quarter of 2015, partially offset by higher wages as we grew.

Net income for the third quarter of 2015 was $144.9 million, or $4.59 per diluted share, compared to $130.8 million, or $4.15 per diluted share, in the third quarter of 2014.

Results for the nine months ended September 30, 2015

Revenue for the first nine months of 2015 was $3.5 billion, up 15.3% from the first nine months of 2014. The growth in revenue was driven by new restaurants not in the comparable base and a 5.5% increase in comparable restaurant sales. Comparable restaurant sales growth was driven primarily by an increase in average check, which includes the benefit of menu price increases, and to a lesser extent increased traffic.

We opened 150 new restaurants during the first nine months of 2015, bringing the total restaurant count to 1,931.

Food costs were 33.3% of revenue, a decrease of 120 basis points as compared to the first nine months of 2014, as a result of the benefit of our menu price increase and relief in dairy and avocado prices, partially offset by increased beef and packaging costs.

Restaurant level operating margin was 27.9% for the first nine months of 2015, an increase of 50 basis points from the prior year. The increase was primarily driven by favorable sales leverage, partially offset by higher labor costs as a percent of revenue.

General and administrative expenses were 5.8% of revenue, a decrease of 120 basis points due to lower non-cash stock-based compensation expense and lower bonus costs, partially offset by higher wages as we grew.

Net income for the first nine months of 2015 was $407.7 million, or $12.92 per diluted share, compared to $324.1 million, or $10.29 per diluted share, in the first nine months of 2014.

"At Chipotle, each of us is rewarded based on our ability to make the people around us better. We are proud that our restaurant teams understand this, and continue to find the most capable people, and elevate them to be top performers who are committed to creating Restaurateur teams. This culture is inspiring to our people, and leads to excellent restaurant operations, and a terrific guest experience. As we approach 2,000 restaurants, I'm excited to watch our top performers become the next wave of leadership at Chipotle," said Monty Moran, co-CEO of Chipotle.

Outlook

For 2015, management expects the following:

  • We are increasing our guidance to 215-225 new restaurant openings, up from the previously announced range of 190-205
  • Low-to-mid single digit comparable restaurant sales increases
  • An effective full year tax rate of approximately 38.7%

For 2016, management expects the following:

  • 220-235 new restaurant openings
  • Low-single digit comparable restaurant sales increases
  • An effective full year tax rate of approximately 38.7%

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 restaurants in operation for at least 13 full calendar months.

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 the third quarter 2015 financial results on Tuesday, October 20, 2015 at 4:30 PM Eastern time.

The conference call can be accessed live over the phone by dialing 1-888-474-8920 or for international callers by dialing 1-719-325-2352. 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 732953. The replay will be available until October 27, 2015. 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-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 raised responsibly 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 operates more than 1,900 restaurants, including 22 Chipotle restaurants outside the US, 11 ShopHouse Southeast Asian Kitchen restaurants, and is an investor in a consolidated entity that owns and operates three Pizzeria Locale 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 trends, and effective tax rates in 2015 and 2016, 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 changes in consumers' acceptance of and enthusiasm for our brand, decreased overall consumer spending, 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 market pressures or new regulatory requirements; the risk of food-borne illnesses and other health concerns about our food or dining out generally; risks relating to our expansion into new 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 and potential liabilities from advertising claims and other marketing activities related to Food With Integrity; security risks associated with the acceptance of electronic payment cards or electronic storage and processing of confidential customer or employee information; risks relating to litigation, including class action litigation regarding employment laws, advertising claims or other matters; risks relating to our insurance coverage and self-insurance; our dependence on key personnel; risks related to our marketing and advertising strategies and ability to protect our brand and reputation; risks associated with our ability to effectively manage our growth; 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
(in thousands, except per share data)
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

 

 

2015

 

 

 

2014

 

 

Revenue

 

 

$

1,216,890

 

   

100.0

 

%

   

$

1,084,222

 

 

100.0

 

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

 

 

401,051

 

 

33.0

 

 

 

 

372,063

 

 

34.3

 

 

Labor

 

 

 

270,076

 

 

22.2

 

 

 

 

230,360

 

 

21.2

 

 

Occupancy

 

 

 

66,391

 

 

5.5

 

 

 

 

58,838

 

 

5.4

 

 

Other operating costs

 

 

 

134,879

 

 

11.1

 

 

 

 

110,957

 

 

10.2

 

 

General and administrative expenses

 

 

 

70,066

 

 

5.8

 

 

 

 

71,172

 

 

6.6

 

 

Depreciation and amortization

 

 

 

33,145

 

 

2.7

 

 

 

 

27,961

 

 

2.6

 

 

Pre-opening costs

 

 

 

4,367

 

 

0.4

 

 

 

 

3,829

 

 

0.4

 

 

Loss on disposal of assets

 

 

 

2,156

 

 

0.2

 

 

 

 

1,606

 

 

0.1

 

 

Total operating expenses

 

 

 

982,131

 

 

80.7

 

 

 

 

876,786

 

 

80.9

 

 

Income from operations

 

 

 

234,759

 

 

19.3

 

 

 

 

207,436

 

 

19.1

 

 

Interest and other income (expense), net

 

 

 

1,518

 

 

0.1

 

 

 

 

785

 

 

0.1

 

 

Income before income taxes

 

 

 

236,277

 

 

19.4

 

 

 

 

208,221

 

 

19.2

 

 

Provision for income taxes

 

 

 

(91,394

)

 

(7.5

)

 

 

 

(77,420

)

 

(7.1

)

 

Net income

 

 

$

144,883

 

 

11.9

 

%

 

$

130,801

 

 

12.1

 

%

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

4.65

 

 

 

 

 

$

4.22

 

 

 

 

Diluted

 

 

$

4.59

 

 

 

 

 

$

4.15

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

31,187

 

 

 

 

 

 

31,020

 

 

 

 

Diluted

 

 

 

31,548

 

 

 

 

 

 

31,547

 

 

 

 

Comprehensive income

 

 

$

143,165

 

 

 

 

 

$

129,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Income and Comprehensive Income
 (in thousands, except per share data)
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2015

 

 

 

2014

 

 

Revenue

 

 

$

3,503,716

 

    

100.0

 

%

    

$

3,038,458

 

 

100.0

 

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

 

 

1,166,770

 

 

33.3

 

 

 

 

1,047,003

 

 

34.5

 

 

Labor

 

 

 

785,141

 

 

22.4

 

 

 

 

667,097

 

 

22.0

 

 

Occupancy

 

 

 

194,269

 

 

5.5

 

 

 

 

169,938

 

 

5.6

 

 

Other operating costs

 

 

 

378,779

 

 

10.8

 

 

 

 

321,512

 

 

10.6

 

 

General and administrative expenses

 

 

 

203,339

 

 

5.8

 

 

 

 

212,968

 

 

7.0

 

 

Depreciation and amortization

 

 

 

96,228

 

 

2.7

 

 

 

 

80,724

 

 

2.7

 

 

Pre-opening costs

 

 

 

11,470

 

 

0.3

 

 

 

 

11,521

 

 

0.4

 

 

Loss on disposal of assets

 

 

 

7,744

 

 

0.2

 

 

 

 

4,767

 

 

0.2

 

 

Total operating expenses

 

 

 

2,843,740

 

 

81.2

 

 

 

 

2,515,530

 

 

82.8

 

 

Income from operations

 

 

 

659,976

 

 

18.8

 

 

 

 

522,928

 

 

17.2

 

 

Interest and other income (expense), net

 

 

 

4,483

 

 

0.1

 

 

 

 

2,618

 

 

0.1

 

 

Income before income taxes

 

 

 

664,459

 

 

19.0

 

 

 

 

525,546

 

 

17.3

 

 

Provision for income taxes

 

 

 

(256,731

)

 

(7.3

)

 

 

 

(201,406

)

 

(6.6

)

 

Net income

 

 

$

407,728

 

 

11.6

 

%

 

$

324,140

 

 

10.7

 

%

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

13.10

 

 

 

 

 

$

10.44

 

 

 

 

Diluted

 

 

$

12.92

 

 

 

 

 

$

10.29

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

31,115

 

 

 

 

 

 

31,043

 

 

 

 

Diluted

 

 

 

31,556

 

 

 

 

 

 

31,502

 

 

 

 

Comprehensive income

 

 

$

403,029

 

 

 

 

 

$

323,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.
Condensed Consolidated Balance Sheet
(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

604,162

 

 

$

419,465

 

Accounts receivable, net of allowance for doubtful accounts of $1,172 and $1,199 as of September 30, 2015 and December 31, 2014, respectively

 

 

 

24,157

 

 

 

34,839

 

Inventory

 

 

 

17,524

 

 

 

15,332

 

Current deferred tax asset

 

 

 

20,563

 

 

 

18,968

 

Prepaid expenses and other current assets

 

 

 

37,760

 

 

 

34,795

 

Income tax receivable

 

 

 

13,486

 

 

 

16,488

 

Investments

 

 

 

355,581

 

 

 

338,592

 

Total current assets

 

 

 

1,073,233

 

 

 

878,479

 

Leasehold improvements, property and equipment, net

 

 

 

1,180,957

 

 

 

1,106,984

 

Long term investments

 

 

 

625,098

 

 

 

496,106

 

Other assets

 

 

 

46,695

 

 

 

42,777

 

Goodwill

 

 

 

21,939

 

 

 

21,939

 

Total assets

 

 

$

2,947,922

 

 

$

2,546,285

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

 

$

77,250

 

 

$

69,613

 

Accrued payroll and benefits

 

 

 

80,334

 

 

 

73,894

 

Accrued liabilities

 

 

 

86,660

 

 

 

102,203

 

Total current liabilities

 

 

 

244,244

 

 

 

245,710

 

Deferred rent

 

 

 

240,669

 

 

 

219,414

 

Deferred income tax liability

 

 

 

29,602

 

 

 

40,529

 

Other liabilities

 

 

 

31,919

 

 

 

28,263

 

Total liabilities

 

 

 

546,434

 

 

 

533,916

 

Shareholders' equity:

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2015 and December 31, 2014, respectively

 

 

 

-

 

 

 

-

 

Common stock $0.01 par value, 230,000 shares authorized, and 35,789 and 35,394 shares issued as of September 30, 2015 and December 31, 2014, respectively

 

 

 

358

 

 

 

354

 

Additional paid-in capital

 

 

 

1,172,140

 

 

 

1,038,932

 

Treasury stock, at cost, 4,596 and 4,367 common shares at September 30, 2015 and December 31, 2014, respectively

 

 

 

(895,881

)

 

 

(748,759

)

Accumulated other comprehensive income (loss)

 

 

 

(5,128

)

 

 

(429

)

Retained earnings

 

 

 

2,129,999

 

 

 

1,722,271

 

Total shareholders' equity

 

 

 

2,401,488

 

 

 

2,012,369

 

Total liabilities and shareholders' equity

 

 

$

2,947,922

 

 

$

2,546,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

Net income

 

 

$

407,728

 

 

$

324,140

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

96,228

 

 

 

80,724

 

Deferred income tax (benefit) provision

 

 

 

(12,542

)

 

 

(19,045

)

Loss on disposal of assets

 

 

 

7,744

 

 

 

4,767

 

Bad debt allowance

 

 

 

(27

)

 

 

(10

)

Stock-based compensation expense

 

 

 

59,725

 

 

 

82,156

 

Excess tax benefit on stock-based compensation

 

 

 

(74,861

)

 

 

(12,971

)

Other

 

 

 

273

 

 

 

9

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

 

10,637

 

 

 

5,250

 

Inventory

 

 

 

(2,212

)

 

 

(2,851

)

Prepaid expenses and other current assets

 

 

 

(3,028

)

 

 

547

 

Other assets

 

 

 

(3,967

)

 

 

(3,723

)

Accounts payable

 

 

 

7,101

 

 

 

14,706

 

Accrued liabilities

 

 

 

(7,434

)

 

 

11,462

 

Income tax payable/receivable

 

 

 

77,858

 

 

 

41,274

 

Deferred rent

 

 

 

21,532

 

 

 

19,380

 

Other long-term liabilities

 

 

 

3,808

 

 

 

3,941

 

Net cash provided by operating activities

 

 

 

588,563

 

 

 

549,756

 

Investing activities

 

 

 

 

 

 

 

Purchases of leasehold improvements, property and equipment

 

 

 

(181,840

)

 

 

(160,400

)

Purchases of investments

 

 

 

(433,829

)

 

 

(390,632

)

Maturities of investments

 

 

 

287,450

 

 

 

171,250

 

Net cash used in investing activities

 

 

 

(328,219

)

 

 

(379,782

)

Financing activities

 

 

 

 

 

 

 

Acquisition of treasury stock

 

 

 

(147,122

)

 

 

(63,405

)

Excess tax benefit on stock-based compensation

 

 

 

74,862

 

 

 

12,971

 

Stock plan transactions and other financing activities

 

 

 

(225

)

 

 

(69

)

Net cash used in financing activities

 

 

 

(72,485

)

 

 

(50,503

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

(3,162

)

 

 

(56

)

Net change in cash and cash equivalents

 

 

 

184,697

 

 

 

119,415

 

Cash and cash equivalents at beginning of year

 

 

 

419,465

 

 

 

323,203

 

Cash and cash equivalents at end of period

 

 

$

604,162

 

 

$

442,618

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

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

 

 

$

(1,032

)

 

$

13,804

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.
Supplemental Financial and Other Data
(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

Sep. 30,

   

Jun. 30,

    

Mar. 31,

    

Dec. 31,

    

Sep. 30,

 

 

 

2015

 

 

2015

 

 

2015

 

 

2014

 

 

2014

 

Number of restaurants opened

 

 

 

53

 

 

 

48

 

 

 

49

 

 

 

60

 

 

 

43

 

Restaurant relocations

 

 

 

-

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

 

 

-

 

Number of restaurants at end of period

 

 

 

1,931

 

 

 

1,878

 

 

 

1,831

 

 

 

1,783

 

 

 

1,724

 

Average restaurant sales

 

 

$

2,532

 

 

$

2,530

 

 

$

2,516

 

 

$

2,472

 

 

$

2,403

 

Comparable restaurant sales increases

 

 

 

2.6%

 

 

 

4.3%

 

 

 

10.4%

 

 

 

16.1%

 

 

 

19.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Chipotle

Contact:

Mark Alexee
Chipotle
Investor Relations
303-605-1042

###

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