Chipotle Mexican Grill, Inc. Announces First Quarter 2016 Results

DENVER - (BUSINESS WIRE) - Apr. 26, 2016 - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its first quarter ended March 31, 2016.

Highlights for the first quarter of 2016 as compared to the first quarter of 2015 include:

  • Revenue decreased 23.4% to $834.5 million
  • Comparable restaurant sales decreased 29.7%
  • Comparable restaurant transactions decreased 21.1%
  • Restaurant level operating margin was 6.8%, a decrease from 27.5%
  • Net loss was $26.4 million, a decrease from net income of $122.6 million
  • Diluted loss per share was $0.88, a decrease from diluted earnings per share of $3.88
  • Opened 58 new restaurants

"As our sales are on a gradual path to recovery, we remain focused on our mission of changing the way people think about and eat fast food. The best approach to re-building our business is to proudly serve safe and delicious food in our high-quality restaurants every single day, which is exactly what we will continue to do," said Steve Ells, founder, chairman and co-CEO of Chipotle.

First quarter 2016 results

Revenue for the quarter was $834.5 million, down 23.4% from the first quarter of 2015. The decrease in revenue was driven by a 29.7% decrease in comparable restaurant sales, partially offset by sales from new restaurant openings. Comparable restaurant sales declined primarily as a result of a decrease in the number of transactions in our restaurants, and to a lesser extent by a decline in average check, including an impact from sales promotions.

We opened 58 new restaurants during the quarter, bringing the total restaurant count to 2,066.

Food costs were 35.3% of revenue, an increase of 140 basis points as compared to the first quarter of 2015. The increase was driven by food testing and waste costs, and increased costs for pre-cut produce items. Increases in food costs were partially offset by relief in beef prices.

Restaurant level operating margin was 6.8% in the quarter, a decrease from 27.5% in the first quarter of 2015. The decrease was primarily driven by unfavorable sales leverage, and to a lesser extent by higher than usual marketing and promotional costs, and food testing and waste costs.

General and administrative expenses were 7.4% of revenue for the first quarter of 2016, an increase of 160 basis points over the first quarter of 2015 due to sales deleverage, partially offset by lower non-cash stock based compensation expense.

Net loss for the first quarter of 2016 was $26.4 million, or $0.88 per diluted share, compared to net income of $122.6 million, or $3.88 per diluted share, in the first quarter of 2015.

"Our restaurants and leadership teams have worked hard to overcome the challenges of the first quarter. What is most important is that we continue to build teams of top performers in our restaurants, and among our field leadership, which will allow us to continue to improve on our already high standards and exceptional customer experience. We have some of the best employees in the industry, which continues to serve as a competitive advantage, and we will continue to invest in our people culture to help expedite the next stage of growth for Chipotle," said Monty Moran, co-CEO

Outlook

For 2016, management expects the following:

  • 220 - 235 new restaurant openings
  • An effective full year tax rate of approximately 38.4%

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 first quarter 2016 financial results on Tuesday, April 26, 2016 at 5:00 PM Eastern time.

The conference call can be accessed live over the phone by dialing 1-877-718-5107 or for international callers by dialing 1-719-325-4797. 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 4763274. The replay will be available until May 3, 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 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 25 Chipotle restaurants outside the US and 14 ShopHouse Southeast Asian Kitchen restaurants, and is an investor in an entity that owns and operates four Pizzeria Locale restaurants. For more information, visit Chipotle.com.

Forward-Looking Statements

Certain statements in this press release, including statements regarding sales recovery, as well as statements under the heading "Outlook" of our expected number of new restaurant openings and effective tax rates in 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 comparisons 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, decreased overall consumer spending, 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 our 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 March 31,

 

 

 

2016

 

 

2015

Revenue

 

 

$

834,459

 

 

 

100.0

 

%

 

 

$

1,089,043

 

 

 

100.0

 

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

 

 

294,166

 

 

 

35.3

 

 

 

 

 

369,026

 

 

 

33.9

 

 

Labor

 

 

 

257,681

 

 

 

30.9

 

 

 

 

 

244,151

 

 

 

22.4

 

 

Occupancy

 

 

 

70,592

 

 

 

8.5

 

 

 

 

 

63,185

 

 

 

5.8

 

 

Other operating costs

 

 

 

155,189

 

 

 

18.6

 

 

 

 

 

113,541

 

 

 

10.4

 

 

General and administrative expenses

 

 

 

62,010

 

 

 

7.4

 

 

 

 

 

63,061

 

 

 

5.8

 

 

Depreciation and amortization

 

 

 

34,788

 

 

 

4.2

 

 

 

 

 

30,643

 

 

 

2.8

 

 

Pre-opening costs

 

 

 

4,421

 

 

 

0.5

 

 

 

 

 

3,435

 

 

 

0.3

 

 

Loss on disposal of assets

 

 

 

2,216

 

 

 

0.3

 

 

 

 

 

4,200

 

 

 

0.4

 

 

Total operating expenses

 

 

 

881,063

 

 

 

105.6

 

 

 

 

 

891,242

 

 

 

81.8

 

 

Income (loss) from operations

 

 

 

(46,604

)

 

 

(5.6

)

 

 

 

 

197,801

 

 

 

18.2

 

 

Interest and other income (expense), net

 

 

 

2,126

 

 

 

0.3

 

 

 

 

 

1,223

 

 

 

0.1

 

 

Income (loss) before income taxes

 

 

 

(44,478

)

 

 

(5.3

)

 

 

 

 

199,024

 

 

 

18.3

 

 

Benefit (provision) for income taxes

 

 

 

18,046

 

 

 

2.2

 

 

 

 

 

(76,383

)

 

 

(7.0

)

 

Net income (loss)

 

 

$

(26,432

)

 

 

(3.2

)

%

 

 

$

122,641

 

 

 

11.3

 

%

Other comprehensive income (loss), net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

1,929

 

 

 

 

 

 

 

 

(4,712

)

 

 

 

 

Unrealized gain (loss) on investments, net of income taxes
of $1,182 and $0

 

 

 

1,893

 

 

 

 

 

 

 

 

-

 

 

 

 

 

Other comprehensive income (loss), net of income taxes

 

 

 

3,822

 

 

 

 

 

 

 

 

(4,712

)

 

 

 

 

Comprehensive income (loss)

 

 

$

(22,610

)

 

 

 

 

 

 

$

117,929

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

(0.88

)

 

 

 

 

 

 

$

3.95

 

 

 

 

 

Diluted

 

 

$

(0.88

)

 

 

 

 

 

 

$

3.88

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

29,893

 

 

 

 

 

 

 

 

31,036

 

 

 

 

 

Diluted

 

 

 

29,893

 

 

 

 

 

 

 

 

31,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

250,805

 

 

 

$

248,005

 

Accounts receivable, net of allowance for doubtful accounts of $1,136 and $1,176 as of
March 31, 2016 and December 31, 2015, respectively

 

 

 

23,692

 

 

 

 

38,283

 

Inventory

 

 

 

16,885

 

 

 

 

15,043

 

Prepaid expenses and other current assets

 

 

 

48,317

 

 

 

 

39,965

 

Income tax receivable

 

 

 

35,041

 

 

 

 

58,152

 

Investments

 

 

 

-

 

 

 

 

415,199

 

Total current assets

 

 

 

374,740

 

 

 

 

814,647

 

Leasehold improvements, property and equipment, net

 

 

 

1,241,602

 

 

 

 

1,217,220

 

Long term investments

 

 

 

455,679

 

 

 

 

622,939

 

Other assets

 

 

 

46,860

 

 

 

 

48,321

 

Goodwill

 

 

 

21,939

 

 

 

 

21,939

 

Total assets

 

 

$

2,140,820

 

 

 

$

2,725,066

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

76,606

 

 

 

$

85,709

 

Accrued payroll and benefits

 

 

 

80,606

 

 

 

 

64,958

 

Accrued liabilities

 

 

 

114,751

 

 

 

 

129,275

 

Total current liabilities

 

 

 

271,963

 

 

 

 

279,942

 

Deferred rent

 

 

 

260,652

 

 

 

 

251,962

 

Deferred income tax liability

 

 

 

35,735

 

 

 

 

32,305

 

Other liabilities

 

 

 

32,216

 

 

 

 

32,883

 

Total liabilities

 

 

 

600,566

 

 

 

 

597,092

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of March 31,
2016 and December 31, 2015, respectively

 

 

 

-

 

 

 

 

-

 

Common stock $0.01 par value, 230,000 shares authorized, and 35,797 and 35,790 shares
issued as of March 31, 2016 and December 31, 2015, respectively

 

 

 

358

 

 

 

 

358

 

Additional paid-in capital

 

 

 

1,184,143

 

 

 

 

1,172,628

 

Treasury stock, at cost, 6,449 and 5,206 common shares at March 31, 2016 and December 31,
2015, respectively

 

 

 

(1,811,237

)

 

 

 

(1,234,612

)

Accumulated other comprehensive income (loss)

 

 

 

(4,451

)

 

 

 

(8,273

)

Retained earnings

 

 

 

2,171,441

 

 

 

 

2,197,873

 

Total shareholders' equity

 

 

 

1,540,254

 

 

 

 

2,127,974

 

Total liabilities and shareholders' equity

 

 

$

2,140,820

 

 

 

$

2,725,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2016

 

 

2015

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

 

$

(26,432

)

 

 

$

122,641

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

34,788

 

 

 

 

30,643

 

Deferred income tax (benefit) provision

 

 

 

2,259

 

 

 

 

(5,551

)

Loss on disposal of assets

 

 

 

2,216

 

 

 

 

4,200

 

Bad debt allowance

 

 

 

(40

)

 

 

 

(27

)

Stock-based compensation expense

 

 

 

10,505

 

 

 

 

16,986

 

Excess tax benefit on stock-based compensation

 

 

 

(680

)

 

 

 

(10,827

)

Other

 

 

 

(174

)

 

 

 

119

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

14,642

 

 

 

 

13,300

 

Inventory

 

 

 

(1,833

)

 

 

 

(737

)

Prepaid expenses and other current assets

 

 

 

(8,337

)

 

 

 

(2,516

)

Other assets

 

 

 

1,468

 

 

 

 

(3,825

)

Accounts payable

 

 

 

(8,852

)

 

 

 

14,831

 

Accrued liabilities

 

 

 

10,397

 

 

 

 

(21,367

)

Income tax payable/receivable

 

 

 

23,796

 

 

 

 

75,314

 

Deferred rent

 

 

 

8,569

 

 

 

 

6,780

 

Other long-term liabilities

 

 

 

(613

)

 

 

 

2,755

 

Net cash provided by operating activities

 

 

 

61,679

 

 

 

 

242,719

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of leasehold improvements, property and equipment

 

 

 

(62,921

)

 

 

 

(59,363

)

Purchases of investments

 

 

 

-

 

 

 

 

(139,114

)

Maturities of investments

 

 

 

45,000

 

 

 

 

95,000

 

Proceeds from sale of investments

 

 

 

540,648

 

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

 

522,727

 

 

 

 

(103,477

)

Financing activities

 

 

 

 

 

 

 

 

Acquisition of treasury stock

 

 

 

(583,802

)

 

 

 

(23,249

)

Excess tax benefit on stock-based compensation

 

 

 

680

 

 

 

 

10,827

 

Stock plan transactions and other financing activities

 

 

 

(10

)

 

 

 

(119

)

Net cash used in financing activities

 

 

 

(583,132

)

 

 

 

(12,541

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

1,526

 

 

 

 

(3,209

)

Net change in cash and cash equivalents

 

 

 

2,800

 

 

 

 

123,492

 

Cash and cash equivalents at beginning of period

 

 

 

248,005

 

 

 

 

419,465

 

Cash and cash equivalents at end of period

 

 

$

250,805

 

 

 

$

542,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2016

 

 

2015

 

 

2015

 

 

2015

 

 

2015

Number of restaurants opened

 

 

 

58

 

 

 

 

79

 

 

 

 

53

 

 

 

 

48

 

 

 

 

49

 

Restaurant relocations

 

 

 

(2

)

 

 

 

-

 

 

 

 

-

 

 

 

 

(1

)

 

 

 

(1

)

Number of restaurants at end of period

 

 

 

2,066

 

 

 

 

2,010

 

 

 

 

1,931

 

 

 

 

1,878

 

 

 

 

1,831

 

Average restaurant sales

 

 

$

2,230

 

 

 

$

2,424

 

 

 

$

2,532

 

 

 

$

2,530

 

 

 

$

2,516

 

Comparable restaurant sales increase
(decrease)

 

 

 

(29.7

%)

 

 

 

(14.6

%)

 

 

 

2.6

%

 

 

 

4.3

%

 

 

 

10.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Chipotle Mexican Grill, Inc.

Contact:

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

###

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