Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2012 Results

2013-02-06
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  • Chipotle Revenue increased 17.2% to $699.2 million - Comparable restaurant sales increased 3.8%

    Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2012.

    Highlights for the fourth quarter of 2012 as compared to the fourth quarter of 2011 include:

    • Revenue increased 17.2% to $699.2 million
    • Comparable restaurant sales increased 3.8%
    • Restaurant level operating margin was 24.6%, a decrease of 150 basis points
    • Net income was $61.4 million, an increase of 6.8%
    • Diluted earnings per share was $1.95, an increase of 7.7%
    • Opened 60 new restaurants

    Highlights for the twelve months ended December 31, 2012 as compared to the prior year include:

    • Revenue increased 20.3% to $2.73 billion
    • Comparable restaurant sales increased 7.1%
    • Restaurant level operating margin was 27.1%, an increase of 110 basis points
    • Net income was $278.0 million, an increase of 29.3%
    • Diluted earnings per share was $8.75, an increase of 29.4%
    • Opened 183 new restaurants

    “During 2012, we remained focused on our mission to change the way people think about and eat fast food. We're rewriting the fast food rules, sourcing more and more sustainably raised ingredients and respecting farmers, the environment, animals, and ultimately our customers. Our food culture has always set us apart from other fast food restaurants by using great quality ingredients and preparing food using classic cooking techniques in open kitchens on display for all to see. People appreciate these things and we’ll continue to stay focused on them,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle.

    Results for the fourth quarter 2012

    Revenue for the quarter was $699.2 million, up 17.2% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 3.8% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by the impact of increased traffic.

    During the quarter we opened 60 new restaurants, bringing the total restaurant count to 1,410.

    Food costs were 33.5% of revenue, an increase of 130 basis points driven by higher commodity costs. Higher commodity costs were primarily driven by increases in beef costs including steak and barbacoa, and to a lesser extent by increases in the cost of salsa ingredients and dairy.

    Restaurant level operating margin was 24.6% in the quarter, a decrease of 150 basis points from the prior year period. The decrease was primarily driven by higher food costs.

    G&A costs were 6.2% of revenue, down 20 basis points from the prior year period due to favorable sales leverage. Net income for the fourth quarter of 2012 was $61.4 million, or $1.95 per diluted share, compared to $57.5 million, or $1.81 per diluted share, in the fourth quarter of 2011.

    Results for the full year ended December 31, 2012

    Revenue for the full year of 2012 was $2.73 billion, up 20.3% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 7.1% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic as well as the impact from menu price increases, most of which were taken in 2011.

    During the full year, we opened 183 new Chipotle restaurants, bringing the total restaurant count to 1,410.

    Restaurant level operating margin was 27.1% for the full year 2012, an increase of 110 basis points from the prior year. The increase was primarily driven by the impact of leverage from higher restaurant sales partially offset by higher food costs.

    G&A costs for the full year 2012 were 6.7% of revenue, 10 basis points higher than the prior year. The increase as a percent of revenue was driven by higher non-cash 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 full year 2012 was $278.0 million, or $8.75 per diluted share, compared to $214.9 million, or $6.76 per diluted share for 2011.

    Our Board of Directors has also approved the investment of up to an additional $100 million, exclusive of commissions, to repurchase shares of our common stock. This repurchase authorization, in addition to up to approximately $80 million available as of February 5th for repurchases under previously announced repurchase authorizations, may be modified, suspended, or discontinued at any time.

    “Our empowered restaurant teams once again were able to attract more people into our restaurants, creating positive comparable sales at Chipotle despite a sluggish economy and the roll off of our price increase. We feel confident in our continued ability to drive sales growth in 2013 through a combination of new restaurant growth and our top performing, empowered restaurant teams creating an extraordinary dining experience for our customers,” said Monty Moran, co-CEO of Chipotle.

    Outlook

    For 2013, management expects the following:

    • 165 – 180 new restaurant openings
    • Flat to low single digit comparable restaurant sales excluding additional menu price increases
    • An effective full year tax rate of approximately 38.5%

    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 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.

    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 raised responsibly with respect for the animals, the land, and the farmers who produce the food. A similarly focused people culture, with an emphasis on identifying and empowering top performing employees, enables us to develop future leaders from within. Chipotle opened its first restaurant in 1993 and currently operates over 1,400 restaurants.

               

    Chipotle Mexican Grill, Inc.

    Condensed Consolidated Statement of Income and Comprehensive Income

    (unaudited)

    (in thousands, except per share data)

     
    Three Months ended December 31
    2012   2011  
    Revenue $ 699,161   100.0   % $ 596,749   100.0   %
    Restaurant operating costs
    (Exclusive of depreciation and amortization shown separately below):
    Food, beverage and packaging 234,330 33.5 191,898 32.2
    Labor 167,301 23.9 142,080 23.8
    Occupancy 45,391 6.5 38,647 6.5
    Other operating costs 80,350 11.5 68,435 11.5
    General and administrative expenses 43,174 6.2 37,988 6.4
    Depreciation and amortization 22,141 3.2 19,198 3.2
    Pre-opening costs 3,383 0.5 3,145 0.5
    Loss on disposal of assets 903   0.1   1,490   0.2  
    Total operating expenses 596,973   85.4   502,881   84.3  
    Income from operations 102,188 14.6 93,868 15.7
    Interest and other income (expense), net 462   0.1   414   0.1  
    Income before income taxes 102,650 14.7 94,282 15.8
    Provision for income taxes (41,297 ) (5.9 )   (36,809 ) (6.2 )  
    Net income $ 61,353   8.8   % $ 57,473   9.6   %
    Other comprehensive income:
    Foreign currency translation adjustments 242   (493 )
    Comprehensive income $ 61,595   $ 56,980  
    Earnings per share:
    Basic $ 1.96   $ 1.84  
    Diluted $ 1.95   $ 1.81  
    Weighted average common shares outstanding:
    Basic 31,303   31,281  
    Diluted 31,486   31,784  
     
               

    Chipotle Mexican Grill, Inc.

    Condensed Consolidated Statement of Income and Comprehensive Income

    (in thousands, except per share data)

     
    Year ended December 31
    2012   2011  
    Revenue $ 2,731,224   100.0   % $ 2,269,548   100.0   %
    Restaurant operating costs
    (Exclusive of depreciation and amortization shown separately below):
    Food, beverage and packaging 891,003 32.6 738,720 32.5
    Labor 641,836 23.5 543,119 23.9
    Occupancy 171,435 6.3 147,274 6.5
    Other operating costs 286,610 10.5 251,208 11.1
    General and administrative expenses 183,409 6.7 149,426 6.6
    Depreciation and amortization 84,130 3.1 74,938 3.3
    Pre-opening costs 11,909 0.4 8,495 0.4
    Loss on disposal of assets 5,027   0.2   5,806   0.3  
    Total operating expenses 2,275,359   83.3   1,918,986   84.6  
    Income from operations 455,865 16.7 350,562 15.4
    Interest and other income (expense), net 1,820   0.1   (857 ) (0.0 )
    Income before income taxes 457,685 16.8 349,705 15.4
    Provision for income taxes (179,685 ) (6.6 )   (134,760 ) (5.9 )  
    Net income $ 278,000   10.2   % $ 214,945   9.5   %
    Other comprehensive income:
    Foreign currency translation adjustments 827   (409 )
    Comprehensive income $ 278,827   $ 214,536  
    Earnings per share:
    Basic $ 8.82   $ 6.89  
    Diluted $ 8.75   $ 6.76  
    Weighted average common shares outstanding:
    Basic 31,513   31,217  
    Diluted 31,783   31,775  
     
           

    Chipotle Mexican Grill, Inc.

    Condensed Consolidated Balance Sheet

    (in thousands, except per share data)

     
    December 31
    2012 2011
     
    Assets
    Current assets:
    Cash and cash equivalents $ 322,553 $ 401,243
    Accounts receivable, net of allowance for doubtful accounts of $1,187 and $208 as of 16,800 8,389
    December 31, 2012 and 2011, respectively
    Inventory 11,096 8,913
    Current deferred tax asset 8,862 6,238
    Prepaid expenses and other current assets 27,378 21,404
    Income tax receivable 9,612 -
    Investments 150,306   55,005  
    Total current assets 546,607 501,192
    Leasehold improvements, property and equipment, net 866,703 751,951
    Long term investments 190,868 128,241
    Other assets 42,550 21,985
    Goodwill 21,939   21,939  
    Total assets $ 1,668,667   $ 1,425,308  
    Liabilities and shareholders' equity
    Current liabilities:
    Accounts payable $ 58,700 $ 46,382
    Accrued payroll and benefits 71,731 60,241
    Accrued liabilities 56,278 46,456
    Current portion of deemed landlord financing 143 133
    Income tax payable -   4,241  
    Total current liabilities 186,852 157,453
    Deferred rent 167,057 143,284
    Deemed landlord financing 3,386 3,529
    Deferred income tax liability 48,947 64,381
    Other liabilities 16,499   12,435  
    Total liabilities 422,741   381,082  
    Shareholders' equity:
    Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of
    December 31, 2012 and 2011 - -
    Common stock $0.01 par value, 230,000 shares authorized, and 34,912 and 34,357
    shares issued as of December 31, 2012 and 2011, respectively 349 344
    Additional paid-in capital 816,612 676,652
    Treasury stock, at cost, 3,819 and 3,105 common shares at December 31, 2012
    and 2011, respectively (521,518 ) (304,426 )
    Accumulated other comprehensive income 1,024 197
    Retained earnings 949,459   671,459  
    Total shareholders' equity 1,245,926   1,044,226  
    Total liabilities and shareholders' equity $ 1,668,667   $ 1,425,308  
     
           

    Chipotle Mexican Grill, Inc.

    Condensed Consolidated Statement of Cash Flows

    (in thousands)

     
    Years ended December 31
    2012 2011
    Operating activities
    Net income $ 278,000 $ 214,945
    Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization 84,130 74,938
    Deferred income tax provision (benefit) (18,057 ) 11,935
    Loss on disposal of assets 5,027 5,806
    Bad debt allowance 1,046 239
    Stock-based compensation expense 64,276 41,382
    Excess tax benefit on stock-based compensation (73,210 ) (38,786 )
    Other 522 2,501
    Changes in operating assets and liabilities:
    Accounts receivable (9,438 ) (2,970 )
    Inventory (2,180 ) (1,816 )
    Prepaid expenses and other current assets (5,954 ) (5,399 )
    Other assets (20,539 ) (7,350 )
    Accounts payable 7,849 9,432
    Accrued liabilities 21,307 17,451
    Income tax payable/receivable 59,357 66,555
    Deferred rent 23,765 19,624
    Other long-term liabilities 4,062   2,609  
    Net cash provided by operating activities 419,963   411,096  
     
    Investing activities
    Purchases of leasehold improvements, property and equipment (197,037 ) (151,147 )
    Acquisition of interests in equity method investment - (586 )
    Purchases of investments (213,462 ) (183,251 )
    Maturities of investments 55,000   124,766  
    Net cash used in investing activities (355,499 ) (210,218 )
     
    Financing activities
    Acquisition of treasury stock (217,092 ) (63,508 )
    Proceeds from employee stock plan transactions 481 574
    Excess tax benefit on stock-based compensation 73,210 38,786
    Payments on deemed landlord financing (133 ) (120 )
    Net cash used in financing activities (143,534 ) (24,268 )
     
    Effect of exchange rate changes on cash and cash equivalents 380 (205 )
    Net change in cash and cash equivalents (78,690 ) 176,405
    Cash and cash equivalents at beginning of period 401,243   224,838  
    Cash and cash equivalents at end of period $ 322,553   $ 401,243  
     
    Supplemental disclosures of cash flow information
    Income taxes paid $ 138,385   $ 56,270  
    Increase in purchases of leasehold improvements, property and equipment accrued
    in accounts payable $ 4,455   $ 3,249  
     
               

    Chipotle Mexican Grill, Inc.

    Supplemental Financial and Other Data

    (dollars in thousands)

     
    For the three months ended
    December 31, September 30, June 30, March 31, December 31,
    2012 2012 2012 2012 2011
    Number of restaurants opened 60 36 55 32 67
    Restaurant relocations - (2) (1) - -
    Number of restaurants at end of period 1,410 1,350 1,316 1,262 1,230
    Average restaurant sales $ 2,113 $ 2,119 $ 2,106 $ 2,072 $ 2,013
    Comparable restaurant sales increases 3.8% 4.8% 8.0% 12.7% % 11.1%


    Logos, product and company names mentioned are the property of their respective owners.

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