Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2013 Results

  Chipotle Mexican Grill, Inc. Announces Fourth Quarter and Full Year 2013   Results  Business Wire  DENVER -- January 30, 2014  Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and full year ended December 31, 2013.  Highlights for the fourth quarter of 2013 as compared to the fourth quarter of 2012 include:    *Revenue increased 20.7% to $844.1 million   *Comparable restaurant sales increased 9.3%   *Restaurant level operating margin was 25.6%, an increase of 100 basis     points   *Net income was $79.6 million, an increase of 29.8%   *Diluted earnings per share was $2.53, an increase of 29.7%   *Opened 56 new restaurants  Highlights for the twelve months ended December 31, 2013 as compared to the prior year include:    *Revenue increased 17.7% to $3.21 billion   *Comparable restaurant sales increased 5.6%   *Restaurant level operating margin was 26.6%, a decrease of 50 basis points   *Net income was $327.4 million, an increase of 17.8%   *Diluted earnings per share was $10.47, an increase of 19.7%   *Opened 185 new restaurants  “We are very proud of our accomplishments during 2013. Over the past 20 years, we have created a very unique and special restaurant company. Chipotle is a place that appeals to a diverse customer base throughout the country and beyond. We offer our customers a range of flavors from a focused selection of beautiful, top-quality ingredients that are expertly prepared by a passionate team of extraordinary people. Our focus on our unique people and food cultures has created an impressive demand for a restaurant experience that is redefining fast food for the better,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle.  Results for the fourth quarter 2013  Revenue for the quarter was $844.1 million, up 20.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 9.3% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by the impact of increased traffic.  During the quarter we opened 56 new restaurants, bringing the total restaurant count to 1,595.  Food costs were 33.9% of revenue, an increase of 40 basis points driven mostly by higher avocado costs and to a lesser extent from tomato and corn salsa costs, partially offset by lower dairy and steak costs.  Restaurant level operating margin was 25.6% in the quarter, an increase of 100 basis points from the prior year period. The increase was due to favorable sales leverage and lower marketing costs, partially offset by higher food costs.  G&A costs were 6.6% of revenue, up 40 basis points from the prior year due to higher bonus expenses and employee taxes. Net income for the fourth quarter of 2013 was $79.6 million, or $2.53 per diluted share, compared to $61.4 million, or $1.95 per diluted share, in the fourth quarter of 2012.  Results for the full year ended December 31, 2013  Revenue for the full year of 2013 was $3.21 billion, up 17.7% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 5.6% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic.  During the full year 185 new restaurants were opened, bringing the total restaurant count to 1,595.  Food costs were 33.4% of revenue, an increase of 80 basis points mostly from higher salsa, meat, and dairy costs.  Restaurant level operating margin was 26.6% for the full year 2013, a decrease of 50 basis points from the prior year. The decrease was primarily driven by higher food costs partially offset by favorable sales leverage from higher restaurant sales.  G&A costs for the full year 2013 were 6.3% of revenue, 40 basis points lower than the prior year. The decrease as a percent of revenue was driven by costs in 2012 from our biennial All Managers' Conference and by the positive impact of comparable restaurant sales growth.  Net income for the full year 2013 was $327.4 million, or $10.47 per diluted share, compared to $278.0 million, or $8.75 per diluted share for 2012.  “Our fourth quarter and 2013 results demonstrated our ability to focus on and run great restaurants. Our empowered restaurant teams continued to delight our customers and provide an exceptional dining experience to our guests as more people were attracted to and visited our restaurants than ever before,” said Monty Moran, co-CEO of Chipotle.  Outlook  For 2014, management expects the following:    *180 – 195 new restaurant openings   *Low to mid single digit comparable restaurant sales excluding any menu     price increases   *An estimated effective tax rate of 39.2%, which excludes federal work     opportunity and R&D credits, which have not been renewed for 2014.  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 13^th 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 complete fourth quarter and full year 2013 financial results on Thursday, January 30, 2014 at 4:30 PM Eastern time.  The conference call can be accessed live over the phone by dialing 1-888-401-4674 or for international callers by dialing 1-719-867-0352. 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 6767597. The replay will be available until February 6, 2014. 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 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 Responsibly Raised™ with respect for the animals, the land, and the farmers who produce the food. In order toachievethis vision, we focus on building a special people culturethat is centered on creatingteams 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 currently operates more than 1,550 restaurants including six ShopHouse Southeast Asian Kitchen restaurants, and is an investor in an entity that owns and operates one Pizzeria Locale. For more information, visit Chipotle.com.  Forward-Looking Statements  Certain statements in this press release, including statements regarding the appeal of and demand for our restaurant experience, as well as statements under the heading “Outlook” of our expected number of new restaurant openings, comparable restaurant sales increases, and effective tax rates in 2014, 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 decreased consumer spending and economic uncertainty or our failure to attract customers to our brand or retain our existing customers; our possible inability to increase menu prices or realize the benefits of menu price increases, or the impact of competition; 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; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of immigration enforcement activities; security risks associated with the acceptance of electronic payment cards or electronic storage of confidential customer or employee information; the risk of food-borne illnesses and other health concerns about our food; risks relating to our expansion into international 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; the effect of competition in the restaurant industry; risks relating to litigation and negative publicity; risks that our investments in new concepts will not be successful; risks related to our marketing and advertising strategies; our dependence on key personnel; risks relating to our insurance coverage and self-insurance; 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; 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 (unaudited) (in thousands, except per share data)                                                                                                          Three Months ended December 31                                  2013                    2012 Revenue                          $ 844,147    100.0 %   $ 699,161    100.0 % Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and packaging       285,912     33.9        234,330     33.5 Labor                              193,818     23.0        167,301     23.9 Occupancy                          52,795      6.3         45,391      6.5 Other operating costs              95,389      11.3        80,350      11.5 General and administrative         55,844      6.6         43,174      6.2 expenses Depreciation and amortization      24,903      3.0         22,141      3.2 Pre-opening costs                  4,775       0.6         3,383       0.5 Loss on disposal of assets        1,607      0.2       903        0.1    Total operating expenses          715,043    84.7      596,973    85.4   Income from operations             129,104     15.3        102,188     14.6 Interest and other income, net    390        -         462        0.1    Income before income taxes         129,494     15.3        102,650     14.7 Provision for income taxes        (49,872 )   (5.9  )    (41,297 )   (5.9  ) Net income                       $ 79,622     9.4   %   $ 61,353     8.8   % Other comprehensive income: Foreign currency translation      222                   242      adjustments Comprehensive income             $ 79,844               $ 61,595   Earnings per share: Basic                            $ 2.57                 $ 1.96     Diluted                          $ 2.53                 $ 1.95     Weighted average common shares outstanding: Basic                             31,019                31,303   Diluted                           31,425                31,486                                                                            Chipotle Mexican Grill, Inc. Condensed Consolidated Statement of Income and Comprehensive Income (in thousands, except per share data)                                                                                                                                                                         Year ended December 31                              2013                      2012 Revenue                      $ 3,214,591    100.0 %   $ 2,731,224    100.0 % Restaurant operating costs (Exclusive of depreciation and amortization shown separately below): Food, beverage and             1,073,514     33.4        891,003       32.6 packaging Labor                          739,800       23.0        641,836       23.5 Occupancy                      199,107       6.2         171,435       6.3 Other operating costs          347,401       10.8        286,610       10.5 General and administrative     203,733       6.3         183,409       6.7 expenses Depreciation and               96,054        3.0         84,130        3.1 amortization Pre-opening costs              15,511        0.5         11,909        0.4 Loss on disposal of assets    6,751        0.2       5,027        0.2    Total operating expenses      2,681,871    83.4      2,275,359    83.3   Income from operations         532,720       16.6        455,865       16.7 Interest and other income,    1,751        0.1       1,820        0.1    net Income before income taxes     534,471       16.6        457,685       16.8 Provision for income taxes    (207,033  )   (6.4  )    (179,685  )   (6.6  ) Net income                   $ 327,438      10.2  %   $ 278,000      10.2  % Other comprehensive income: Foreign currency              596                     827        translation adjustments Comprehensive income         $ 328,034                $ 278,827    Earnings per share: Basic                        $ 10.58                  $ 8.82       Diluted                      $ 10.47                  $ 8.75       Weighted average common shares outstanding: Basic                         30,957                  31,513     Diluted                       31,281                  31,783                                                                              Chipotle Mexican Grill,Inc. Condensed Consolidated Balance Sheet (in thousands, except per share data)                                                                                                                 December 31                                                  2013            2012                                                                   Assets Current assets: Cash and cash equivalents                        $ 323,203       $ 322,553 Accounts receivable, net of allowance for          24,016          16,800 doubtful accounts of $1,190 and $1,187 as of December 31, 2013 and 2012, respectively Inventory                                          13,044          11,096 Current deferred tax asset                         13,212          8,862 Prepaid expenses and other current assets          34,204          27,378 Income tax receivable                              3,657           9,612 Investments                                       254,971       150,306    Total current assets                               666,307         546,607 Leasehold improvements, property and               963,238         866,703 equipment, net Long term investments                              313,863         190,868 Other assets                                       43,933          42,550 Goodwill                                          21,939        21,939     Total assets                                     $ 2,009,280    $ 1,668,667  Liabilities and shareholders' equity Current liabilities: Accounts payable                                 $ 59,022        $ 58,700 Accrued payroll and benefits                       67,195          71,731 Accrued liabilities                               73,011        56,421     Total current liabilities                          199,228         186,852 Deferred rent                                      192,739         167,057 Deferred income tax liability                      55,434          48,947 Other liabilities                                 23,591        19,885     Total liabilities                                 470,992       422,741    Shareholders' equity: Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2013 and 2012, respectively           -               - Common stock $0.01 par value, 230,000 shares authorized, and 35,245 and 34,912 shares issued as of December 31, 2013 and          352             349 2012, respectively Additional paid-in capital                         919,840         816,612 Treasury stock, at cost, 4,212 and 3,819 common shares at December 31, 2013 and 2012, respectively                             (660,421  )     (521,518  ) Accumulated other comprehensive income             1,620           1,024 Retained earnings                                 1,276,897     949,459    Total shareholders' equity                        1,538,288     1,245,926  Total liabilities and shareholders' equity       $ 2,009,280    $ 1,668,667                                                                                 Chipotle Mexican Grill,Inc. Condensed Consolidated Statement of Cash Flows (in thousands)                                                                                                                                                                                       Years ended December 31                                                    2013           2012 Operating activities Net income                                         $ 327,438      $ 278,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                        96,054         84,130 Deferred income tax provision (benefit)              2,103          (18,057  ) Loss on disposal of assets                           6,751          5,027 Bad debt allowance                                   19             1,046 Stock-based compensation expense                     63,657         64,276 Excess tax benefit on stock-based compensation       (38,379  )     (73,210  ) Other                                                507            522 Changes in operating assets and liabilities: Accounts receivable                                  (7,238   )     (9,438   ) Inventory                                            (1,950   )     (2,180   ) Prepaid expenses and other current assets            (6,806   )     (5,954   ) Other assets                                         (1,354   )     (20,539  ) Accounts payable                                     2,052          7,849 Accrued liabilities                                  12,020         21,307 Income tax payable/receivable                        44,334         59,357 Deferred rent                                        25,715         23,765 Other long-term liabilities                         3,857        4,062     Net cash provided by operating activities           528,780      419,963                                                                      Investing activities Purchases of leasehold improvements, property        (199,926 )     (197,037 ) and equipment Purchases of investments                             (387,639 )     (213,462 ) Maturities of investments                           159,250      55,000    Net cash used in investing activities               (428,315 )    (355,499 )                                                                    Financing activities Acquisition of treasury stock                        (138,903 )     (217,092 ) Proceeds from employee stock plan transactions       316            481 Excess tax benefit on stock-based compensation       38,379         73,210 Other financing payments                            (143     )    (133     ) Net cash used in financing activities               (100,351 )    (143,534 )                                                                    Effect of exchange rate changes on cash and cash     536            380 equivalents Net change in cash and cash equivalents              650            (78,690  ) Cash and cash equivalents at beginning of period    322,553      401,243   Cash and cash equivalents at end of period         $ 323,203     $ 322,553                                                                      Supplemental disclosures of cash flow information Income taxes paid                                  $ 160,973     $ 138,385   Increase (decrease) in purchases of leasehold improvements, property and equipment accrued in accounts payable              $ (1,736   )   $ 4,455                                                                                    Chipotle Mexican Grill,Inc. Supplemental Financial and Other Data (dollars in thousands)                                                                                For the three months ended                December 31,   September      June 30,    March 31,   December                               30,                                    31,                2013           2013           2013        2013        2012 Number of restaurants       56             37            44          48          60 opened Number of restaurants       1,595          1,539         1,502       1,458       1,410 at end of period Average restaurant     $  2,169       $  2,140       $ 2,119     $ 2,105     $ 2,113 sales Comparable restaurant        9.3    %       6.2    %      5.5   %     1.0   %     3.8   % sales increases                                                                        Contact:  Chipotle Mexican Grill, Inc. Investor Relations: Alex Spong, 303-222-2552