Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2015 Results

CDC Investigation Over; Chipotle Welcomes Customers Back to Restaurants

DENVER - (BUSINESS WIRE) - Feb. 2, 2016 - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2015.

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

  • Revenue decreased 6.8% to $997.5 million
  • Comparable restaurant sales decreased 14.6%
  • Restaurant level operating margin was 19.6%, a decrease of 700 basis points
  • Net income was $67.9 million, a decrease of 44.0%
  • Diluted earnings per share was $2.17, a decrease of 43.5%
  • Opened 79 new restaurants

Highlights for the twelve months ended December 31, 2015 as compared to the prior year include:

  • Revenue increased 9.6% to $4.5 billion
  • Comparable restaurant sales increased 0.2%
  • Restaurant level operating margin was 26.1%, a decrease of 110 basis points
  • Net income was $475.6 million, an increase of 6.8%
  • Diluted earnings per share was $15.10, an increase of 6.9%
  • Opened 229 new restaurants

"The fourth quarter of 2015 was the most challenging period in Chipotle's history, but the Centers for Disease Control and Prevention has now concluded its investigation into the recent E. coli incidents associated with Chipotle. We are pleased to have this behind us and can place our full energies to implementing our enhanced food safety plan that will establish Chipotle as an industry leader in food safety. We are extremely focused on executing this program, which designs layers of redundancy and enhanced safety measures to reduce the food safety risk to a level as near to zero as is possible. By adding these programs to an already strong and proven food culture, we strongly believe that we can establish Chipotle as a leader in food safety just as we have become a leader in our quest for the very best ingredients we can find," said Steve Ells, founder, chairman and co-CEO of Chipotle.

Fourth quarter 2015 results

Revenue for the quarter was $997.5 million, a 6.8% decrease compared to the fourth quarter of 2014. The decrease was due primarily to a 14.6% decrease in comparable restaurant sales. The decrease in comparable restaurant sales was due to publicity during the quarter surrounding food-borne illness incidents associated with a number of Chipotle restaurants.

We opened 79 new restaurants during the quarter, bringing the total restaurant count to 2,010.

Food costs were 33.8% of revenue, a decrease of 120 basis points as compared to the fourth quarter of 2014, as a result of relief in dairy, avocado and beef prices and the benefit of our menu price increase, partially offset by costs related to food waste and testing.

Restaurant level operating margin was 19.6% in the quarter, a decrease of 700 basis points from the fourth quarter 2014. The decrease was primarily driven by the significant decrease in comparable restaurant sales and non-recurring costs related to the food-borne illness incidents, partially offset by favorable food costs.

General and administrative expenses were 4.7% of revenue, a decrease of 100 basis points due primarily to lower non-cash stock-based compensation expense and bonus costs, partially offset by higher wages as we grew.

Net income for the fourth quarter of 2015 was $67.9 million, or $2.17 per diluted share, compared to $121.2 million, or $3.84 per diluted share, in the fourth quarter of 2014. Diluted earnings per share of $2.17 was higher than prior expectations of $1.70 to $1.90 per share primarily driven by lower non-cash stock based compensation expense related to vesting of performance shares.

Full year ended December 31, 2015 results

Revenue for the full year of 2015 was $4.5 billion, up 9.6% from the prior year. The growth in revenue was driven by sales from new restaurants not yet in the comparable base.

We opened 229 new restaurants during the full year of 2015, bringing the total restaurant count to 2,010.

Food costs were 33.4% of revenue, a decrease of 120 basis points as compared to the prior year, primarily as a result of the benefit of menu price increases and relief in dairy and avocado costs. The decrease was partially offset by inflation on beef.

Restaurant level operating margin was 26.1% for the full year of 2015, a decrease of 110 basis points from the prior year. The decrease was primarily driven by higher labor and other operating costs, partially offset by lower food costs.

General and administrative expenses were 5.6% of revenue, a decrease of 110 basis points due to decreased non-cash stock-based compensation expense, lower bonus expense, and decreased expense associated with our biennial All Managers' Conference held in the third quarter of 2014, partially offset by higher wages as we grew.

Net income for the full year 2015 was $475.6 million, or $15.10 per diluted share, compared to $445.4 million, or $14.13 per diluted share in the full year 2014.

"2016 will be a very difficult year relative to our past performance. But, by staying true to our food culture and unique people culture, and layering on our rigorous food safety program, we are confident that we are now in a position to aggressively welcome customers into our restaurants and restore customer confidence in the things that make Chipotle great. With our full commitment to becoming an industry leader in food safety, and our continued focus on delivering an exceptional customer experience, we are confident that Chipotle will emerge as an even stronger company," said Monty Moran, co-CEO of Chipotle.

On January 28, 2016, Chipotle was served with a subpoena broadening the scope of the previously-announced criminal investigation by the U.S. Attorney's office for the Central District of California. The new subpoena requires us to produce documents and information related to company-wide food safety matters dating back to January 1, 2013, and supersedes the subpoena served in December 2015 that was limited to a single Chipotle restaurant in Simi Valley, California. We intend to fully cooperate in the investigation.

Additionally, our Board of Directors has approved the investment of up to an additional $300 million, exclusive of commissions, to repurchase shares of our common stock. This repurchase authorization, in addition to up to approximately $178 million available as of January 31 for repurchases under previously announced repurchase authorizations, may be modified, suspended, or discontinued at any time.

Outlook

For 2016, management expects the following:

  • 220-235 new restaurant openings
  • An effective full year tax rate of approximately 39.0%

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 fourth quarter and full year 2015 financial results on Tuesday, February 2, 2016 at 5:00 PM Eastern time.

The conference call can be accessed live over the phone by dialing 1-888-523-1232 or for international callers by dialing 1-719-325-4877. 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 214044. The replay will be available until February 9, 2016. 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 2,000 restaurants, including 23 Chipotle restaurants outside the US, 13 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 and effective tax rates for 2016, as well as statements regarding our enhanced food safety plan and restoring customer confidence in Chipotle, 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, including as a result of recent food-borne illness incidents, the impact of competition, or our possible inability to increase menu prices or realize the benefits of menu price increases; the risk of food-borne illnesses and other health concerns about our food or dining out generally; 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 or higher food costs due to new supply chain protocols; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of market pressures, enhanced food safety procedures in our restaurants, or new regulatory requirements; 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 possible governmental actions related to food-borne illness incidents, as well as 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 December 31,

 

2015

 

2014

Revenue

$

997,507

 

 

100.0

%

 

$

1,069,811

 

 

100.0

%

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

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

337,065

 

 

33.8

 

 

 

373,991

 

 

35.0

 

Labor

 

260,585

 

 

26.1

 

 

 

237,310

 

 

22.2

 

Occupancy

 

68,143

 

 

6.8

 

 

 

60,930

 

 

5.7

 

Other operating costs

 

136,184

 

 

13.7

 

 

 

112,732

 

 

10.5

 

General and administrative expenses

 

46,875

 

 

4.7

 

 

 

60,929

 

 

5.7

 

Depreciation and amortization

 

34,140

 

 

3.4

 

 

 

29,750

 

 

2.8

 

Pre-opening costs

 

5,452

 

 

0.5

 

 

 

4,088

 

 

0.4

 

Loss on disposal of assets

 

5,450

 

 

0.5

 

 

 

2,209

 

 

0.2

 

Total operating expenses

 

893,894

 

 

89.6

 

 

 

881,939

 

 

82.4

 

Income from operations

 

103,613

 

 

10.4

 

 

 

187,872

 

 

17.6

 

Interest and other income (expense), net

 

1,795

 

 

0.2

 

 

 

885

 

 

0.1

 

Income before income taxes

 

105,408

 

 

10.6

 

 

 

188,757

 

 

17.6

 

Provision for income taxes

 

(37,534

)

 

(3.8

)

 

 

(67,523

)

 

(6.3

)

Net income

$

67,874

 

 

6.8

%

 

$

121,234

 

 

11.3

%

Other comprehensive loss, net of income taxes:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(1,718

)

 

 

 

 

(1,008

)

 

 

Unrealized loss on investments, net of income taxes of
$946 and $0

 

(1,522

)

 

 

 

 

-

 

 

 

Other comprehensive loss, net of income taxes

 

(3,240

)

 

 

 

 

(1,008

)

 

 

Comprehensive income

$

64,634

 

 

 

 

$

120,226

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

$

2.19

 

 

 

 

$

3.91

 

 

 

Diluted

$

2.17

 

 

 

 

$

3.84

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

31,027

 

 

 

 

 

31,024

 

 

 

Diluted

 

31,312

 

 

 

 

 

31,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

2015

 

2014

Revenue

$

4,501,223

 

 

100.0

%

 

$

4,108,269

 

 

100.0

%

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

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

1,503,835

 

 

33.4

 

 

 

1,420,994

 

 

34.6

 

Labor

 

1,045,726

 

 

23.2

 

 

 

904,407

 

 

22.0

 

Occupancy

 

262,412

 

 

5.8

 

 

 

230,868

 

 

5.6

 

Other operating costs

 

514,963

 

 

11.4

 

 

 

434,244

 

 

10.6

 

General and administrative expenses

 

250,214

 

 

5.6

 

 

 

273,897

 

 

6.7

 

Depreciation and amortization

 

130,368

 

 

2.9

 

 

 

110,474

 

 

2.7

 

Pre-opening costs

 

16,922

 

 

0.4

 

 

 

15,609

 

 

0.4

 

Loss on disposal of assets

 

13,194

 

 

0.3

 

 

 

6,976

 

 

0.2

 

Total operating expenses

 

3,737,634

 

 

83.0

 

 

 

3,397,469

 

 

82.7

 

Income from operations

 

763,589

 

 

17.0

 

 

 

710,800

 

 

17.3

 

Interest and other income (expense), net

 

6,278

 

 

0.1

 

 

 

3,503

 

 

0.1

 

Income before income taxes

 

769,867

 

 

17.1

 

 

 

714,303

 

 

17.4

 

Provision for income taxes

 

(294,265

)

 

(6.5

)

 

 

(268,929

)

 

(6.5

)

Net income

$

475,602

 

 

10.6

%

 

$

445,374

 

 

10.8

%

Other comprehensive loss, net of income taxes:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(6,322

)

 

 

 

 

(2,049

)

 

 

Unrealized loss on investments, net of income taxes of
$946 and $0

 

(1,522

)

 

 

 

 

-

 

 

 

Other comprehensive loss, net of income taxes

 

(7,844

)

 

 

 

 

(2,049

)

 

 

Comprehensive income

$

467,758

 

 

 

 

$

443,325

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

$

15.30

 

 

 

 

$

14.35

 

 

 

Diluted

$

15.10

 

 

 

 

$

14.13

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

31,092

 

 

 

 

 

31,038

 

 

 

Diluted

 

31,494

 

 

 

 

 

31,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

December 31,

 

 

2015

 

2014

 

 

 

 

(as adjusted)1

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

248,005

 

 

$

419,465

 

Accounts receivable, net of allowance for doubtful accounts of $1,176 and $1,199 as of December
31, 2015 and December 31, 2014, respectively

 

 

38,283

 

 

 

34,839

 

Inventory

 

 

15,043

 

 

 

15,332

 

Prepaid expenses and other current assets

 

 

39,965

 

 

 

34,795

 

Income tax receivable

 

 

58,152

 

 

 

16,488

 

Investments

 

 

415,199

 

 

 

338,592

 

Total current assets

 

 

814,647

 

 

 

859,511

 

Leasehold improvements, property and equipment, net

 

 

1,217,220

 

 

 

1,106,984

 

Long term investments

 

 

622,939

 

 

 

496,106

 

Other assets

 

 

48,321

 

 

 

42,777

 

Goodwill

 

 

21,939

 

 

 

21,939

 

Total assets

 

$

2,725,066

 

 

$

2,527,317

 

Liabilities and shareholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

85,709

 

 

$

69,613

 

Accrued payroll and benefits

 

 

64,958

 

 

 

73,894

 

Accrued liabilities

 

 

129,275

 

 

 

102,203

 

Total current liabilities

 

 

279,942

 

 

 

245,710

 

Deferred rent

 

 

251,962

 

 

 

219,414

 

Deferred income tax liability

 

 

32,305

 

 

 

21,561

 

Other liabilities

 

 

32,883

 

 

 

28,263

 

Total liabilities

 

 

597,092

 

 

 

514,948

 

Shareholders' equity:

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

Common stock $0.01 par value, 230,000 shares authorized, and 35,790 and 35,394 shares issued as
of December 31, 2015 and December 31, 2014, respectively

 

 

358

 

 

 

354

 

Additional paid-in capital

 

 

1,172,628

 

 

 

1,038,932

 

Treasury stock, at cost, 5,206 and 4,367 common shares at December 31, 2015 and December 31,
2014, respectively

 

 

(1,234,612

)

 

 

(748,759

)

Accumulated other comprehensive income (loss)

 

 

(8,273

)

 

 

(429

)

Retained earnings

 

 

2,197,873

 

 

 

1,722,271

 

Total shareholders' equity

 

 

2,127,974

 

 

 

2,012,369

 

Total liabilities and shareholders' equity

 

$

2,725,066

 

 

$

2,527,317

 

 

 

 

 

 

 

 

 

 

1 Balances were adjusted because we adopted Financial Accounting Standards Board Accounting Standards Update No.
2015-07, "Income Taxes" which requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet.

 

 

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

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2015

 

2014

Operating activities

 

 

 

 

 

 

Net income

 

$

475,602

 

 

$

445,374

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

130,368

 

 

 

110,474

 

Deferred income tax (benefit) provision

 

 

11,666

 

 

 

(20,671

)

Loss on disposal of assets

 

 

13,194

 

 

 

6,976

 

Bad debt allowance

 

 

(23

)

 

 

9

 

Stock-based compensation expense

 

 

57,911

 

 

 

96,440

 

Excess tax benefit on stock-based compensation

 

 

(74,442

)

 

 

(21,667

)

Other

 

 

582

 

 

 

104

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(3,504

)

 

 

(10,966

)

Inventory

 

 

262

 

 

 

(2,307

)

Prepaid expenses and other current assets

 

 

(5,259

)

 

 

(658

)

Other assets

 

 

(5,619

)

 

 

1,071

 

Accounts payable

 

 

19,525

 

 

 

2,168

 

Accrued liabilities

 

 

(7,440

)

 

 

35,019

 

Income tax payable/receivable

 

 

32,756

 

 

 

8,831

 

Deferred rent

 

 

32,911

 

 

 

27,025

 

Other long-term liabilities

 

 

4,826

 

 

 

4,845

 

Net cash provided by operating activities

 

 

683,316

 

 

 

682,067

 

Investing activities

 

 

 

 

 

 

Purchases of leasehold improvements, property and equipment

 

 

(257,418

)

 

 

(252,590

)

Purchases of investments

 

 

(559,372

)

 

 

(521,004

)

Maturities of investments

 

 

352,650

 

 

 

254,750

 

Net cash used in investing activities

 

 

(464,140

)

 

 

(518,844

)

Financing activities

 

 

 

 

 

 

Acquisition of treasury stock

 

 

(460,675

)

 

 

(88,338

)

Excess tax benefit on stock-based compensation

 

 

74,442

 

 

 

21,667

 

Stock plan transactions and other financing activities

 

 

(207

)

 

 

(66

)

Net cash used in financing activities

 

 

(386,440

)

 

 

(66,737

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(4,196

)

 

 

(224

)

Net change in cash and cash equivalents

 

 

(171,460

)

 

 

96,262

 

Cash and cash equivalents at beginning of year

 

 

419,465

 

 

 

323,203

 

Cash and cash equivalents at end of year

 

$

248,005

 

 

$

419,465

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

Income taxes paid

 

$

248,547

 

 

$

280,687

 

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

 

$

(2,870

)

 

$

9,424

 

Increase in acquisition of treasury stock accrued in accrued liabilities

 

$

25,178

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

Dec. 31,

 

Sep. 30,

 

Jun. 30,

 

Mar. 31,

 

Dec. 31,

 

 

2015

 

2015

 

2015

 

2015

 

2014

Number of restaurants opened

 

 

79

 

 

 

53

 

 

 

48

 

 

 

49

 

 

 

60

 

Restaurant relocations

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

Number of restaurants at end of period

 

 

2,010

 

 

 

1,931

 

 

 

1,878

 

 

 

1,831

 

 

 

1,783

 

Average restaurant sales

 

$

2,424

 

 

$

2,532

 

 

$

2,530

 

 

$

2,516

 

 

$

2,472

 

Comparable restaurant sales increase (decrease)

 

 

(14.6

%)

 

 

2.6

%

 

 

4.3

%

 

 

10.4

%

 

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

SOURCE: Chipotle Mexican Grill, Inc.

Contact:

Mark Alexee
Chipotle Mexican Grill, Inc.
Investor Relations:
303-605-1042

###

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Jimmy John's Sandwiches
One of the fastest growing franchises in the U.S., Jimmy John’s has been making fresh, fast, tasty sandwiches since 1983.
Spavia Day Spa
The Spavia Day Spa business model is built around 10 years of experience, giving you the tools and support you need to accomplish your personal and...
The Simple Greek
The Simple Greek is redefining the traditional Greek restaurant with an interactive concept that combines premium ingredients, open kitchens and...
Sonic Drive-In
Here's your chance to own a SONIC® Drive-in Franchise Restaurant. As the nation's largest drive-in chain, SONIC® has successfully served up hot,...
SpeedPro Imaging
SpeedPro Imaging is the ONLY franchise available exclusively focusing on wide format printing, the highest margin and fastest growing niche in the...

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