Chipotle Mexican Grill, Inc. Announces First Quarter 2017 Results

DENVER - (BUSINESS WIRE) - April 25, 2017 - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its first quarter ended March 31, 2017.

Overview for the first quarter of 2017 as compared to the first quarter of 2016:

  • Revenue increased 28.1% to $1.07 billion
  • Comparable restaurant sales increased 17.8% (including 0.6% from recognized revenue previously deferred related to Chiptopia)
  • Restaurant level operating margin increased to 17.7% from 6.8%
  • Net income was $46.1 million, improved from a net loss of $26.4 million
  • Diluted earnings per share was $1.60, improved from a diluted net loss per share of $0.88
  • Opened 57 new restaurants

"2017 is off to a strong start, as our restaurant managers and teams are energized by our renewed focus on the customer," said Steve Ells, Founder, Chairman and CEO of Chipotle. "By simplifying the focus in our restaurants to only those elements that lead to a great guest experience, our operations have improved every single month, which gives us confidence that we are on our way to achieve our mission to ensure that great food made with whole unprocessed ingredients is accessible to everyone."

First quarter 2017 results

Revenue for the quarter was $1.07 billion, up 28.1% from the first quarter of 2016. The increase in revenue was driven by comparable restaurant sales increases and to a lesser extent by new restaurant openings. Comparable restaurant sales increased due to improved customer traffic, reduced promotional activity, and increased average check. Comparable restaurant sales increased 17.8%, which included a benefit of 0.6% due to previously deferred revenue related to Chiptopia recognized during the quarter. We opened 57 new restaurants during the quarter and closed 15 ShopHouse Southeast Asian Kitchen restaurants and one Chipotle restaurant. Our total restaurant count as of the end of the quarter was 2,291.

Food costs were 33.8% of revenue, a decrease of 150 basis points compared to the first quarter of 2016. The decrease was primarily driven by lower food waste and testing costs, and bringing the preparation of lettuce and bell peppers back to our restaurants. This decrease was partially offset by higher avocado prices.

Restaurant level operating margin was 17.7% in the quarter, an increase from 6.8% in the first quarter of 2016. The increase was primarily driven by sales leverage, lower marketing and promotional spend, efficiencies in labor, and lower food costs. The restaurant level operating margin also benefited by 0.15% from sales leverage related to recognizing revenue previously deferred from Chiptopia, slightly offset by free catering discounts for Chiptopia.

General and administrative expenses were 6.5% of revenue for the first quarter of 2017, a decrease of 90 basis points from the first quarter of 2016. In dollar terms, general and administrative expenses increased $7.4 million compared to the first quarter of 2016 due to increased non-cash stock based compensation and bonus expense, partially offset by lower legal and travel costs. Excluding stock based compensation, general and administrative expenses during the quarter were flat in dollar terms compared to last year. Stock compensation expense was higher during the first quarter of 2017 because the first quarter of 2016 included a reduction in expense for performance awards that were no longer expected to vest against performance criteria. Without this reduction, stock compensation expense was consistent in both years.

Net income for the first quarter of 2017 was $46.1 million, or $1.60 per diluted share, compared to net loss of $26.4 million, or a loss of $0.88 per diluted share, in the first quarter of 2016.

Outlook

For the full year of 2017, management is targeting the following:

  • Comparable restaurant sales increases in the high-single digits
  • 195 - 210 new restaurant openings
  • An estimated 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, or sales comps, represent the change in period-over-period sales for restaurants in operation for at least 13 full calendar months.

Comparable restaurant transactions represent the change in period-over-period transactions, including transactions with no sales dollars due to promotional discounts, for restaurants in operation for at least 13 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 2017 financial results on Tuesday, April 25, 2017 at 4:30 PM Eastern time.

The conference call can be accessed live over the phone by dialing 1-877-451-6152 or for international callers by dialing 1-201-389-0879. The call will be webcast live from the company's website on the investor relations page at ir.chipotle.com. An archived webcast will be available approximately one hour after the end of the call.

About Chipotle

Steve Ells, founder, chairman and 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, and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in an interactive style allowing people to get exactly what they want. Chipotle seeks out extraordinary ingredients that are not only fresh, but that are raised responsibly, with respect for the animals, the land, and the people who produce them. Chipotle prepares its food without the use of added colors, flavors or preservatives typically found in fast food. Chipotle opened with a single restaurant in Denver in 1993 and operates more than 2,300 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 comparable restaurant sales increases, number of new restaurant openings, and effective tax rate for 2017 are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate," "believe," "could," "continue," "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 due to factors such as changes in consumers' perceptions of our brand, including as a result of food-borne illness incidents beginning in late 2015, the impact of competition, including from sources outside the restaurant industry, 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 related to our marketing and advertising strategies, which may not be successful and may expose us to liabilities; security risks associated with the acceptance of electronic payment cards or electronic storage and processing of confidential customer or employee information; 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 philosophy, including supply shortages and potential liabilities from advertising claims and other marketing activities related to Food With Integrity; 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 and uncertainties arising from recent changes in our leadership; risks regarding 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 the investor relations page of our website at ir.chipotle.com.

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

(unaudited)

(in thousands, except per share data)

 

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

Revenue

 

 

$

1,068,829

 

 

 

100.0

%

 

 

$

834,459

 

 

 

100.0

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food, beverage and packaging

 

 

 

361,795

 

 

 

33.8

 

 

 

 

294,166

 

 

 

35.3

 

Labor

 

 

 

287,851

 

 

 

26.9

 

 

 

 

257,681

 

 

 

30.9

 

Occupancy

 

 

 

78,962

 

 

 

7.4

 

 

 

 

70,592

 

 

 

8.5

 

Other operating costs

 

 

 

150,609

 

 

 

14.1

 

 

 

 

155,189

 

 

 

18.6

 

General and administrative expenses

 

 

 

69,441

 

 

 

6.5

 

 

 

 

62,010

 

 

 

7.4

 

Depreciation and amortization

 

 

 

39,279

 

 

 

3.7

 

 

 

 

34,788

 

 

 

4.2

 

Pre-opening costs

 

 

 

4,069

 

 

 

0.4

 

 

 

 

4,421

 

 

 

0.5

 

Loss on disposal and impairment of assets

 

 

 

3,650

 

 

 

0.3

 

 

 

 

2,216

 

 

 

0.3

 

Total operating expenses

 

 

 

995,656

 

 

 

93.2

 

 

 

 

881,063

 

 

 

105.6

 

Income (loss) from operations

 

 

 

73,173

 

 

 

6.8

 

 

 

 

(46,604

)

 

 

(5.6

)

Interest and other income, net

 

 

 

1,188

 

 

 

0.1

 

 

 

 

2,126

 

 

 

0.3

 

Income (loss) before income taxes

 

 

 

74,361

 

 

 

7.0

 

 

 

 

(44,478

)

 

 

(5.3

)

Benefit (provision) for income taxes

 

 

 

(28,241

)

 

 

(2.6

)

 

 

 

18,046

 

 

 

2.2

 

Net income (loss)

 

 

$

46,120

 

 

 

4.3

%

 

 

$

(26,432

)

 

 

(3.2

)%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

675

 

 

 

 

 

 

 

1,929

 

 

 

 

Unrealized gain (loss) on investments, net of tax benefit (expense) of $94 and ($1,182)

 

 

 

(182

)

 

 

 

 

 

 

1,893

 

 

 

 

Other comprehensive income (loss), net of income taxes

 

 

 

493

 

 

 

 

 

 

 

3,822

 

 

 

 

Comprehensive income (loss)

 

 

$

46,613

 

 

 

 

 

 

$

(22,610

)

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

1.60

 

 

 

 

 

 

$

(0.88

)

 

 

 

Diluted

 

 

$

1.60

 

 

 

 

 

 

$

(0.88

)

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

28,750

 

 

 

 

 

 

 

29,893

 

 

 

 

Diluted

 

 

 

28,850

 

 

 

 

 

 

 

29,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

2017

 

 

2016

 

 

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

$

122,413

 

 

 

$

87,880

 

Accounts receivable, net of allowance for doubtful accounts of $40 and $259 as of March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

21,582

 

 

 

 

40,451

 

Inventory

 

 

 

 

 

18,319

 

 

 

 

15,019

 

Prepaid expenses and other current assets

 

 

 

 

 

47,023

 

 

 

 

44,080

 

Income tax receivable

 

 

 

 

 

-

 

 

 

 

5,108

 

Investments

 

 

 

 

 

454,627

 

 

 

 

329,836

 

Total current assets

 

 

 

 

 

663,964

 

 

 

 

522,374

 

Leasehold improvements, property and equipment, net

 

 

 

 

 

1,322,622

 

 

 

 

1,303,558

 

Long term investments

 

 

 

 

 

-

 

 

 

 

125,055

 

Other assets

 

 

 

 

 

53,737

 

 

 

 

53,177

 

Goodwill

 

 

 

 

 

21,939

 

 

 

 

21,939

 

Total assets

 

 

 

 

$

2,062,262

 

 

 

$

2,026,103

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

$

83,840

 

 

 

$

78,363

 

Accrued payroll and benefits

 

 

 

 

 

96,730

 

 

 

 

76,301

 

Accrued liabilities

 

 

 

 

 

101,114

 

 

 

 

127,129

 

Income tax payable

 

 

 

 

 

24,639

 

 

 

 

-

 

Total current liabilities

 

 

 

 

 

306,323

 

 

 

 

281,793

 

Deferred rent

 

 

 

 

 

297,843

 

 

 

 

288,927

 

Deferred income tax liability

 

 

 

 

 

15,741

 

 

 

 

18,944

 

Other liabilities

 

 

 

 

 

34,633

 

 

 

 

33,946

 

Total liabilities

 

 

 

 

 

654,540

 

 

 

 

623,610

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

-

 

 

 

 

-

 

Common stock $0.01 par value, 230,000 shares authorized, and 35,838 and 35,833 shares issued as of March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

358

 

 

 

 

358

 

Additional paid-in capital

 

 

 

 

 

1,255,528

 

 

 

 

1,238,875

 

Treasury stock, at cost, 7,160 and 7,019 common shares at March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

(2,107,426

)

 

 

 

(2,049,389

)

Accumulated other comprehensive income (loss)

 

 

 

 

 

(7,669

)

 

 

 

(8,162

)

Retained earnings

 

 

 

 

 

2,266,931

 

 

 

 

2,220,811

 

Total shareholders' equity

 

 

 

 

 

1,407,722

 

 

 

 

1,402,493

 

Total liabilities and shareholders' equity

 

 

 

 

$

2,062,262

 

 

 

$

2,026,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(unaudited)

(in thousands)

 

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

 

$

46,120

 

 

 

$

(26,432

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

39,279

 

 

 

 

34,788

 

Deferred income tax (benefit) provision

 

 

 

(3,107

)

 

 

 

2,259

 

Loss on disposal and impairment of assets

 

 

 

3,650

 

 

 

 

2,216

 

Bad debt allowance

 

 

 

180

 

 

 

 

(40

)

Stock-based compensation expense

 

 

 

16,456

 

 

 

 

10,505

 

Excess tax benefit on stock-based compensation

 

 

 

-

 

 

 

 

(680

)

Other

 

 

 

(8

)

 

 

 

(174

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

18,693

 

 

 

 

14,642

 

Inventory

 

 

 

(3,737

)

 

 

 

(1,833

)

Prepaid expenses and other current assets

 

 

 

(2,928

)

 

 

 

(8,337

)

Other assets

 

 

 

(412

)

 

 

 

1,468

 

Accounts payable

 

 

 

708

 

 

 

 

(8,852

)

Accrued liabilities

 

 

 

(3,693

)

 

 

 

10,397

 

Income tax payable/receivable

 

 

 

29,751

 

 

 

 

23,796

 

Deferred rent

 

 

 

8,882

 

 

 

 

8,569

 

Other long-term liabilities

 

 

 

745

 

 

 

 

(613

)

Net cash provided by operating activities

 

 

 

150,579

 

 

 

 

61,679

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of leasehold improvements, property and equipment

 

 

 

(57,088

)

 

 

 

(62,921

)

Maturities of investments

 

 

 

-

 

 

 

 

45,000

 

Proceeds from sale of investments

 

 

 

-

 

 

 

 

540,648

 

Net cash provided by (used in) investing activities

 

 

 

(57,088

)

 

 

 

522,727

 

Financing activities

 

 

 

 

 

 

 

 

Acquisition of treasury stock

 

 

 

(59,137

)

 

 

 

(583,802

)

Excess tax benefit on stock-based compensation

 

 

 

-

 

 

 

 

680

 

Stock plan transactions and other financing activities

 

 

 

6

 

 

 

 

(10

)

Net cash used in financing activities

 

 

 

(59,131

)

 

 

 

(583,132

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

173

 

 

 

 

1,526

 

Net change in cash and cash equivalents

 

 

 

34,533

 

 

 

 

2,800

 

Cash and cash equivalents at beginning of period

 

 

 

87,880

 

 

 

 

248,005

 

Cash and cash equivalents at end of period

 

 

$

122,413

 

 

 

$

250,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2017

 

2016

 

2016

 

2016

 

2016

Number of restaurants opened

 

 

 

57

 

 

 

72

 

 

 

55

 

 

 

58

 

 

 

58

 

Restaurant relocations/closures

 

 

 

(16

)

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

(2

)

Number of restaurants at end of period

 

 

 

2,291

 

 

 

2,250

 

 

 

2,178

 

 

 

2,124

 

 

 

2,066

 

Average restaurant sales

 

 

$

1,931

 

 

$

1,868

 

 

$

1,914

 

 

$

2,067

 

 

$

2,230

 

Comparable restaurant sales increase (decrease)

 

 

 

17.8

%

 

 

(4.8

%)

 

 

(21.9

%)

 

 

(23.6

%)

 

 

(29.7

%)

Contact:

Mark Alexee
Chipotle Mexican Grill, Inc.
303-605-1042
malexee@chipotle.com

View source version on businesswire.com: http://www.businesswire.com/news/home/20170425006668/en/

SOURCE Chipotle Mexican Grill, Inc.

###

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