Exhibit 99.1
DRAFT
Investor Relations:
Kate Giha
614-508-1303
Media:
Chris Arnold
303-222-5912
Chipotle Mexican Grill, Inc. Announces Third Quarter 2010 Results
Denver, Colorado – (Business Wire) – October 21, 2010 – Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2010.
Highlights for the third quarter of 2010 as compared to the third quarter of 2009 include:
| • | Revenue increased 23.0% to $476.9 million |
| • | Comparable restaurant sales increased 11.4% |
| • | Restaurant level operating margin was 27.7%, an increase of 220 basis points |
| • | Net income was $48.2 million, an increase of 39.9% |
| • | Diluted earnings per share was $1.52, an increase of 40.7% |
Highlights for the nine months ended September 30, 2010 as compared to the prior year include:
| • | Revenue increased 19.7% to $1.35 billion |
| • | Comparable restaurant sales increased 8.3% |
| • | Restaurant level operating margin was 26.9%, an increase of 180 basis points |
| • | Net income was $132.5 million, an increase of 39.1% |
| • | Diluted earnings per share was $4.18, an increase of 41.2% |
“We’re delighted that our continuing efforts to serve the very best food made from high quality ingredients raised with respect for the animals, the environment, and the farmers are resonating with our customers, allowing us to deliver double digit comps during the quarter. Our focus on strengthening our food culture, our people culture and our business model is resulting in even stronger customer loyalty and allowing us to deliver industry leading financial results,” said Founder, Chairman, and Co-CEO Steve Ells.
Third quarter 2010 results
Revenue for the quarter was $476.9 million, up 23.0% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.4% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter.
During the quarter Chipotle opened 22 new restaurants, bringing the total restaurant count to 1,023.
Restaurant level operating margin was 27.7% in the quarter, an increase of 220 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth.
G&A costs were 7.0% of revenue, up 70 basis points from the prior year period. The increase as a percent of revenue was driven by the impact of holding the biennial All Managers’ Conference in the third quarter and higher stock based compensation expense, partially offset by the positive impact of comparable restaurant sales growth.
Net income for the third quarter of 2010 was $48.2 million, or $1.52 per diluted share, compared to $34.5 million, or $1.08 per diluted share, in the third quarter of 2009.
Results for the nine months ended September 30, 2010
Revenue for the first nine months of 2010 was $1.35 billion, up 19.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 8.3% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic during the first nine months of 2010.
Year to date, Chipotle has opened 67 restaurants, including one restaurant in London and one in Toronto, Canada.
Restaurant level operating margin was 26.9% for the first nine months of 2010, an increase of 180 basis points over the prior year period. The increase was primarily driven by the impact of comparable restaurant sales growth, along with a decline in food costs.
G&A costs for the first nine months of 2010 were 6.6% of revenue, up 10 basis points from the prior year period. The increase as a percent of revenue was driven by higher stock based compensation expense and the biennial All Managers’ Conference, partially offset by the positive impact of comparable restaurant sales growth.
Net income for the first nine months of 2010 was $132.5 million, or $4.18 per diluted share, compared to $95.2 million, or $2.96 per diluted share, in the first nine months of 2009.
“Our strong people culture continues to drive our success in attracting loyal customers and delivering exceptional results. Our restaurant teams are ambitious, passionate, and dedicated to delivering the best dining experience possible, while developing talented future leaders from crew. Our Restaurateurs and restaurant managers who aspire to become Restaurateurs are committed to hiring and developing top performers to achieve high standards in our restaurants every day,” commented Monty Moran, Co-CEO.
Outlook
For 2010, management expects the following:
| • | 120-130 new restaurant openings |
| • | High single digit comparable restaurant sales growth |
| • | An effective tax rate of approximately 38.3% |
For 2011, management expects the following:
| • | 135-145 new restaurant openings |
| • | Low single digit comparable restaurant sales growth |
| • | An effective tax rate of approximately 38.4% |
Definitions
The following definitions apply to these terms as used throughout this release:
Comparable restaurant sales increases 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 third quarter 2010 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-888-337-8198 or 1-719-325-2178 for international callers. 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 2947394. The replay will be available until October 28, 2010. 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-Chief Executive Officer, 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 not only from using fresh ingredients, but ingredients that are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. Chipotle opened its first restaurant in 1993 and currently operates more than 1,000 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 increases and effective tax rate in 2010 and 2011, 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; 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; changes in consumer preferences, general economic conditions or consumer discretionary spending; increases in the cost of food ingredients and other key supplies; the risk of food-borne illnesses and other health concerns about our food; the potential for increased labor costs or difficulty retaining qualified employees; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; risks relating to our expansion into new markets; risks related to our development and implementation of a new marketing strategy; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; risks relating to litigation; 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; the effect of competition in the restaurant industry; risks related to the tax treatment of our separation from McDonald’s; 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 Web site at chipotle.com.
Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
| Three months ended September 30, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
Revenue | $ | 476,874 | 100.0 | % | $ | 387,581 | 100.0 | % | ||||||||
Restaurant operating costs: | ||||||||||||||||
Food, beverage and packaging | 145,688 | 30.6 | 119,473 | 30.8 | ||||||||||||
Labor | 115,234 | 24.2 | 96,419 | 24.9 | ||||||||||||
Occupancy | 32,096 | 6.7 | 28,677 | 7.4 | ||||||||||||
Other operating costs | 51,977 | 10.9 | 44,118 | 11.4 | ||||||||||||
General and administrative expenses | 33,522 | 7.0 | 24,555 | 6.3 | ||||||||||||
Depreciation and amortization | 17,319 | 3.6 | 15,451 | 4.0 | ||||||||||||
Pre-opening costs | 1,943 | 0.4 | 2,535 | 0.7 | ||||||||||||
Loss on disposal of assets | 1,511 | 0.3 | 1,544 | 0.4 | ||||||||||||
Total operating expenses | 399,290 | 83.7 | 332,772 | 85.9 | ||||||||||||
Income from operations | 77,584 | 16.3 | 54,809 | 14.1 | ||||||||||||
Interest and other income | 395 | 0.1 | 132 | 0.0 | ||||||||||||
Interest and other expense | (14 | ) | 0.0 | (74 | ) | 0.0 | ||||||||||
Income before income taxes | 77,965 | 16.3 | 54,867 | 14.2 | ||||||||||||
Provision for income taxes | (29,737 | ) | (6.2 | ) | (20,403 | ) | (5.3 | ) | ||||||||
Net income | $ | 48,228 | 10.1 | % | $ | 34,464 | 8.9 | % | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.55 | $ | 1.09 | ||||||||||||
Diluted | $ | 1.52 | $ | 1.08 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 31,031 | 31,625 | ||||||||||||||
Diluted | 31,629 | 31,949 | ||||||||||||||
Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
| Nine months ended September 30, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
Revenue | $ | 1,353,401 | 100.0 | % | $ | 1,130,873 | 100.0 | % | ||||||||
Restaurant operating costs: | ||||||||||||||||
Food, beverage and packaging | 411,518 | 30.4 | 349,564 | 30.9 | ||||||||||||
Labor | 334,041 | 24.7 | 285,375 | 25.2 | ||||||||||||
Occupancy | 94,956 | 7.0 | 83,801 | 7.4 | ||||||||||||
Other operating costs | 148,623 | 11.0 | 128,626 | 11.4 | ||||||||||||
General and administrative expenses | 89,857 | 6.6 | 74,071 | 6.5 | ||||||||||||
Depreciation and amortization | 51,106 | 3.8 | 45,368 | 4.0 | ||||||||||||
Pre-opening costs | 5,169 | 0.4 | 5,996 | 0.5 | ||||||||||||
Loss on disposal of assets | 4,292 | 0.3 | 4,752 | 0.4 | ||||||||||||
Total operating expenses | 1,139,562 | 84.2 | 977,553 | 86.4 | ||||||||||||
Income from operations | 213,839 | 15.8 | 153,320 | 13.6 | ||||||||||||
Interest and other income | 1,097 | 0.1 | 623 | 0.1 | ||||||||||||
Interest and other expense | (178 | ) | 0.0 | (333 | ) | 0.0 | ||||||||||
Income before income taxes | 214,758 | 15.9 | 153,610 | 13.6 | ||||||||||||
Provision for income taxes | (82,222 | ) | (6.1 | ) | (58,361 | ) | (5.2 | ) | ||||||||
Net income | $ | 132,536 | 9.8 | % | $ | 95,249 | 8.4 | % | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 4.24 | $ | 2.99 | ||||||||||||
Diluted | $ | 4.18 | $ | 2.96 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 31,278 | 31,827 | ||||||||||||||
Diluted | 31,731 | 32,168 | ||||||||||||||
Chipotle Mexican Grill, Inc.
Consolidated Balance Sheet
(in thousands, except per share data)
| September 30, 2010 | December 31, 2009 | |||||||
| (unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 210,996 | $ | 219,566 | ||||
Accounts receivable, net of allowance for doubtful accounts of $99 and $339 as of September 30, 2010 and December 31, 2009, respectively | 4,446 | 4,763 | ||||||
Inventory | 7,175 | 5,614 | ||||||
Current deferred tax asset | 3,758 | 3,134 | ||||||
Prepaid expenses | 18,933 | 14,377 | ||||||
Available-for-sale securities | 90,000 | 50,000 | ||||||
Income tax receivable | 10,091 | — | ||||||
Total current assets | 345,399 | 297,454 | ||||||
Leasehold improvements, property and equipment, net | 658,423 | 636,411 | ||||||
Other assets | 6,610 | 5,701 | ||||||
Goodwill | 21,939 | 21,939 | ||||||
Total assets | $ | 1,032,371 | $ | 961,505 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 35,641 | $ | 25,230 | ||||
Accrued payroll and benefits | 39,085 | 41,404 | ||||||
Accrued liabilities | 28,590 | 31,216 | ||||||
Current portion of deemed landlord financing | 117 | 96 | ||||||
Income tax payable | — | 4,207 | ||||||
Total current liabilities | 103,433 | 102,153 | ||||||
Deferred rent | 118,394 | 106,395 | ||||||
Deemed landlord financing | 3,693 | 3,782 | ||||||
Deferred income tax liability | 36,448 | 38,863 | ||||||
Other liabilities | 9,374 | 6,851 | ||||||
Total liabilities | 271,342 | 258,044 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2010 and December 31, 2009 | — | — | ||||||
Common stock, $0.01 par value, 230,000 shares authorized, 33,749 and 33,473 shares issued as of September 30, 2010 and December 31, 2009, respectively | 338 | 335 | ||||||
Additional paid-in capital | 575,554 | 539,880 | ||||||
Treasury stock, at cost, 2,810 and 1,990 shares at September 30, 2010 and December 31, 2009, respectively | (225,796 | ) | (114,316 | ) | ||||
Accumulated other comprehensive income | 864 | 29 | ||||||
Retained earnings | 410,069 | 277,533 | ||||||
Total shareholders’ equity | 761,029 | 703,461 | ||||||
Total liabilities and shareholders’ equity | $ | 1,032,371 | $ | 961,505 | ||||
Chipotle Mexican Grill, Inc.
Consolidated Statement of Cash Flows
(unaudited)
(in thousands)
| Nine months ended September 30, | ||||||||
| 2010 | 2009 | |||||||
Operating activities | ||||||||
Net income | $ | 132,536 | $ | 95,249 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 51,106 | 45,368 | ||||||
Deferred income tax (benefit) provision | (3,039 | ) | 10,381 | |||||
Loss on disposal of assets | 4,292 | 4,752 | ||||||
Bad debt allowance | (228 | ) | (245 | ) | ||||
Stock-based compensation | 17,846 | 11,479 | ||||||
Other | — | 172 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 545 | 755 | ||||||
Inventory | (1,560 | ) | (1,069 | ) | ||||
Prepaid expenses | (4,553 | ) | (1,594 | ) | ||||
Other assets | (903 | ) | (637 | ) | ||||
Accounts payable | 4,883 | 3,230 | ||||||
Accrued liabilities | (4,948 | ) | 1,676 | |||||
Income tax receivable/payable | (14,298 | ) | (4,691 | ) | ||||
Deferred rent | 11,994 | 12,497 | ||||||
Other long-term liabilities | 2,523 | 1,770 | ||||||
Net cash provided by operating activities | 196,196 | 179,093 | ||||||
Investing activities | ||||||||
Purchases of leasehold improvements, property and equipment, net | (71,179 | ) | (80,282 | ) | ||||
Purchase of available-for-sale securities | (90,000 | ) | — | |||||
Maturity of available-for-sale securities | 50,000 | 99,990 | ||||||
Net cash provided by (used in) investing activities | (111,179 | ) | 19,708 | |||||
Financing activities | ||||||||
Proceeds from option exercises | 11,295 | 11,406 | ||||||
Excess tax benefit on stock-based compensation | 5,887 | 10,257 | ||||||
Payments on deemed landlord financing | (68 | ) | (61 | ) | ||||
Acquisition of treasury stock | (111,480 | ) | (70,001 | ) | ||||
Net cash used in financing activities | (94,366 | ) | (48,399 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 779 | — | ||||||
Net change in cash and cash equivalents | (8,570 | ) | 150,402 | |||||
Cash and cash equivalents at beginning of period | 219,566 | 88,044 | ||||||
Cash and cash equivalents at end of period | $ | 210,996 | $ | 238,446 | ||||
Supplemental disclosures of cash flow information | ||||||||
Increase in purchases of leasehold improvements, property and equipment accrued in accounts payable | $ | 5,525 | $ | 5,435 | ||||
Chipotle Mexican Grill, Inc.
Supplemental Financial and Other Data
(dollars in thousands)
(unaudited)
| For the three months ended | ||||||||||||||||||||
| Sept. 30, 2010 | June 30, 2010 | Mar. 31, 2010 | Dec. 31, 2009 | Sept. 30, 2009 | ||||||||||||||||
Number of restaurants opened | 22 | 25 | 20 | 45 | 26 | |||||||||||||||
Restaurant relocations or closures | — | — | — | — | (1 | ) | ||||||||||||||
Number of restaurants at end of period | 1,023 | 1,001 | 976 | 956 | 911 | |||||||||||||||
Average restaurant sales | $ | 1,806 | $ | 1,763 | $ | 1,736 | $ | 1,728 | $ | 1,736 | ||||||||||
Comparable restaurant sales increases | 11.4 | % | 8.7 | % | 4.3 | % | 2.0 | % | 2.7 | % | ||||||||||