CMG
$313.22
Chipotle Mexican Grill
$.83
.27%
Earnings Details
2nd Quarter June 2017
Tuesday, July 25, 2017 4:05:05 PM
Tweet Share Watch
Summary

Chipotle Mexican Grill Beats

Chipotle Mexican Grill (CMG) reported 2nd Quarter June 2017 earnings of $2.32 per share on revenue of $1.2 billion. The consensus earnings estimate was $2.16 per share on revenue of $1.2 billion. The Earnings Whisper number was $2.19 per share. Revenue grew 17.1% on a year-over-year basis.

Chipotle Mexican Grill Inc operates Chipotle Mexican Grill restaurants, which serves a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients.

Results
Reported Earnings
$2.32
Earnings Whisper
$2.19
Consensus Estimate
$2.16
Reported Revenue
$1.17 Bil
Revenue Estimate
$1.19 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Chipotle Second Quarter Diluted EPS Increased 167% on Comparable Restaurant Sales Increase of 8.1% and Revenue Growth of 17.1%

Chipotle Mexican Grill, Inc. (CMG) today reported financial results for its second quarter ended June 30, 2017.

Overview for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016:

-- Revenue increased 17.1% to $1.17 billion

-- Comparable restaurant sales increased 8.1%

-- Restaurant level operating margin increased to 18.8% from 15.5%

-- Net income was $66.7 million, an increase from $25.6 million

-- Diluted earnings per share was $2.32, an increase from $0.87

-- Opened 50 new restaurants, and closed two restaurants

Overview for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016:

-- Revenue increased 22.1% to $2.24 billion

-- Comparable restaurant sales increased 12.5%

-- Restaurant level operating margin was 18.3%, an increase from 11.6%

Net income was $112.9 million, an increase from a net loss of $0.8 million

Diluted earnings per share was $3.92, an increase from diluted loss per share of $0.03

Opened 107 new restaurants and closed or relocated 18 restaurants, including the closure of 15 ShopHouse locations

"We saw encouraging signs in our improved financial results during the first half of the year. Recent events, however, have shown that we still have a lot of opportunity to improve our operations and deliver the outstanding experience that our customers expect," said Steve Ells, Founder, Chairman and CEO of Chipotle. "We will continue to strengthen our teams, enhance our technology, and expand our menu offerings in order to delight every customer who visits us."

Second quarter 2017 results

Revenue for the quarter was $1.17 billion, up 17.1% from the second quarter of 2016. The increase in revenue was driven by new restaurant openings and an 8.1% increase in comparable restaurant sales. Comparable restaurant sales improved primarily due to an increase in customer visits, along with an increase in average check as a result of a reduction in promotional activity. We opened 50 new restaurants during the quarter, and closed two restaurants, bringing the total restaurant count to 2,339.

Food costs were 34.1% of revenue, a decrease of 10 basis points as compared to the second quarter of 2016. Higher avocado costs were offset by lower costs from bringing the preparation of lettuce and bell peppers back into our restaurants, as well as the benefit of menu price increases in select restaurants in the second quarter of 2017, and a decrease in paper usage and costs.

Restaurant level operating margin was 18.8% in the quarter, an improvement from 15.5% in the second quarter of 2016. The increase was driven primarily by sales leverage along with more efficient scheduling and deployment of our managers and crew. Marketing and promotional expenses were 3.7% of sales, or 70 basis points lower than the second quarter of 2016, due primarily to lower promotional costs and sales leverage.

General and administrative expenses were 6.0% of revenue for the second quarter of 2017, a decrease of 110 basis points over the second quarter of 2016 primarily due to sales leverage. In dollar terms, general and administrative expenses decreased $0.7 million compared to the second quarter of 2016 due to lower legal expenses, partially offset by increased bonus expenses and non-cash stock based compensation expense.

Net income for the second quarter of 2017 increased 161% to $66.7 million, or $2.32 per diluted share, compared to net income of $25.6 million, or $0.87 per diluted share, in the second quarter of 2016.

Results for the six months ended June 30, 2017

Revenue for the first six months of 2017 was $2.24 billion, up 22.1% from the first six months of 2016. The increase in revenue was driven by a 12.5% increase in comparable restaurant sales and to a lesser extent by new restaurant openings. Comparable restaurant sales improved primarily due to an increase in customer visits, along with an increase in average check as a result of a reduction in promotional activity.

We opened 107 new restaurants during the first six months of 2017, and closed or relocated 18 restaurants, including the closure of 15 ShopHouse restaurants, bringing the total restaurant count to 2,339.

Food costs were 34.0% of revenue, a decrease of 70 basis points as compared to the first six months of 2016. The decrease was driven by cost savings from bringing the preparation of lettuce and bell peppers back to our restaurants, and lower food waste and testing costs. These combined cost savings were partially offset by higher avocado prices.

Restaurant level operating margin was 18.3% for the six months ended June 30, 2017, an improvement from 11.6% in the first six months of 2016. The increase was driven by sales leverage, labor efficiencies, and a decrease in promotional expenses. Marketing and promotional expenses were 3.5% of revenue during the first six months of 2017 compared to 5.4% of revenue during the first six months of 2016.

General and administrative expenses were 6.2% of revenue for the first six months of 2017, a decrease of 100 basis points compared to the first six months of 2016, primarily due to sales leverage. In dollar terms, general and administrative costs increased $6.8 million compared to the first six months of 2016 due to increased non-cash stock based compensation expense and bonus expense, partially offset by lower legal costs, and lower meeting costs due to an all-team employee meeting held in February 2016. Stock compensation expense was higher during the first six months of 2017 because the first six months of 2016 included a reduction in expense for performance share awards that were no longer expected to vest against performance criteria.

Net income for the first six months of 2017 was $112.9 million, or $3.92 per diluted share, compared to net loss of $0.8 million, or $0.03 per diluted share, for the six months ended June 30, 2016.

Update on Data Security Investigation

Chipotle also reported today the completion of a forensic investigation into the previously-disclosed payment card security incident involving Chipotle restaurants. Based on the findings of the investigation as of May 26, 2017, Chipotle posted a list of restaurants apparently affected and specific time frames, along with steps guests can take, at www.chipotle.com/security and www.chipotle.ca/security. The time frames that were initially listed varied by restaurant but began no earlier than March 24, 2017, and ended no later than April 18, 2017. Updated findings from the completed investigation have confirmed the original time frames listed for almost 99% of the restaurants, or found that some were even shorter than what was originally reported. For 1.2% of the affected restaurants, the time frames were slightly broadened from what was initially listed, although still within the March 24, 2017, to April 18, 2017, time frame. Additionally, for one restaurant, the time frame may include March 17, 2017, and two additional restaurants have been added to the list of affected restaurants in Canada.

To view the updated time frames by restaurant, guests can visit www.Chipotle.com/security (U.S. locations) or www.chipotle.ca/security (Canada locations).

Outlook

For 2017, management targets:

-- Comparable restaurant sales increases in the high single digits

-- 195 - 210 new restaurant openings

-- An estimated 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, 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 its second quarter 2017 financial results on Tuesday, July 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 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 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, land, and people who produce them. Chipotle prepares its food using real, whole ingredients, and is the only national restaurant brand that prepares its food using no added colors, flavors or other industrial additives typically found in fast food. Chipotle opened with a single restaurant in Denver in 1993 and now 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, 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 changes in 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
(in thousands, except per share data)
(unaudited)
Three months ended June 30,
2017
2016
Revenue
$ 1,169,409
100.0 %
$ 998,383
100.0 %
Restaurant operating costs (exclusive of depreciation and
amortization shown separately below):
Food, beverage and packaging
399,152
34.1
341,902
34.2
Labor
305,851
26.2
276,926
27.7
Occupancy
80,321
6.9
72,354
7.2
Other operating costs
163,685
14.0
152,156
15.2
General and administrative expenses
70,075
6.0
70,756
7.1
Depreciation and amortization
41,081
3.5
36,074
3.6
Pre-opening costs
2,903
0.2
4,133
0.4
(Gain) loss on disposal and impairment of assets
(384 )
-
3,187
0.3
Total operating expenses
1,062,684
90.9
957,488
95.9
Income from operations
106,725
9.1
40,895
4.1
Interest and other income, net
1,049
0.1
786
0.1
Income before income taxes
107,774
9.2
41,681
4.2
Provision for income taxes
(41,044 )
(3.5 )
(16,085 )
(1.6 )
Net income
$
66,730
5.7 %
$
25,596
2.6 %
Other comprehensive income (loss), net of income taxes
Foreign currency translation adjustments
2,136
(765 )
Unrealized gain (loss) on investments, net of tax benefit (expense)
(58 )
509
of $37 and ($348)
Other comprehensive income (loss), net of income taxes
2,078
(256 )
Comprehensive income
$
68,808
$
25,340
Earnings per share:
Basic
$
2.33
$
0.88
Diluted
$
2.32
$
0.87
Weighted average common shares outstanding:
Basic
28,649
29,207
Diluted
28,800
29,340
Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Operations and Comprehensive
Income
(in thousands, except per share data)
(unaudited)
Six months ended June 30,
2017
2016
Revenue
$ 2,238,238
100.0 %
$ 1,832,842
100.0 %
Restaurant operating costs (exclusive of depreciation and
amortization shown separately below):
Food, beverage and packaging
760,947
34.0
636,068
34.7
Labor
593,702
26.5
534,607
29.2
Occupancy
159,283
7.1
142,946
7.8
Other operating costs
314,294
14.0
307,345
16.8
General and administrative expenses
139,516
6.2
132,766
7.2
Depreciation and amortization
80,360
3.6
70,862
3.9
Pre-opening costs
6,972
0.3
8,554
0.5
Loss on disposal and impairment of assets
3,266
0.1
5,403
0.3
Total operating expenses
2,058,340
92.0
1,838,551
100.3
Income (loss) from operations
179,898
8.0
(5,709 )
(0.3 )
Interest and other income, net
2,237
0.1
2,912
0.2
Income (loss) before income taxes
182,135
8.1
(2,797 )
(0.2 )
Benefit (provision) for income taxes
(69,285 )
(3.1 )
1,961
0.1
Net income (loss)
$
112,850
5.0 %
$
(836 )
(0.0 )%
Other comprehensive income, net of income taxes
Foreign currency translation adjustments
2,811
1,164
Unrealized gain (loss) on investments, net of income taxes of $131
(240 )
2,402
and ($1,531)
Other comprehensive income, net of income taxes
2,571
3,566
Comprehensive income
$
115,421
$
2,730
Earnings per share:
Basic
$
3.93
$
(0.03 )
Diluted
$
3.92
$
(0.03 )
Weighted average common shares outstanding:
Basic
28,699
29,550
Diluted
28,825
29,550
Chipotle Mexican Grill, Inc.
Condensed Consolidated Balance Sheet
(in thousands, except per share data)
June 30,
December 31,
2017
2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
175,137
$
87,880
Accounts receivable, net of allowance for doubtful accounts of $39
24,940
40,451
and $259 as of June 30, 2017 and December 31, 2016, respectively
Inventory
19,126
15,019
Prepaid expenses and other current assets
50,296
44,080
Income tax receivable
-
5,108
Investments
394,466
329,836
Total current assets
663,965
522,374
Leasehold improvements, property and equipment, net
1,328,280
1,303,558
Long term investments
-
125,055
Other assets
54,367
53,177
Goodwill
21,939
21,939
Total assets
$
2,068,551
$
2,026,103
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
$
80,976
$
78,363
Accrued payroll and benefits
85,169
76,301
Accrued liabilities
98,311
127,129
Income tax payable
3,329
-
Total current liabilities
267,785
281,793
Deferred rent
301,825
288,927
Deferred income tax liability
12,866
18,944
Other liabilities
35,879
33,946
Total liabilities
618,355
623,610
Shareholders’ equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no
-
-
shares issued as of June 30, 2017 and December 31, 2016, respectively
Common stock $0.01 par value, 230,000 shares authorized, and 35,849
358
358
and 35,833 shares issued as of June 30, 2017 and December 31, 2016,
respectively
Additional paid-in capital
1,276,285
1,238,875
Treasury stock, at cost, 7,264 and 7,019 common shares at June 30,
(2,154,517 )
(2,049,389 )
2017 and December 31, 2016, respectively
Accumulated other comprehensive income (loss)
(5,591 )
(8,162 )
Retained earnings
2,333,661
2,220,811
Total shareholders’ equity
1,450,196
1,402,493
Total liabilities and shareholders’ equity
$
2,068,551
$
2,026,103
Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in thousands)
Six months ended June 30,
2017
2016
Operating activities
Net income (loss)
$
112,850
$
(836 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization
80,360
70,862
Deferred income tax (benefit) provision
(5,939 )
3,789
Loss on disposal and impairment of assets
3,266
5,403
Bad debt allowance
181
(120 )
Stock-based compensation expense
36,846
30,038
Excess tax benefit on stock-based compensation
-
(1,982 )
Other
(107 )
(352 )
Changes in operating assets and liabilities:
Accounts receivable
15,372
15,201
Inventory
(4,530 )
(1,921 )
Prepaid expenses and other current assets
(6,143 )
(12,267 )
Other assets
(984 )
1,832
Accounts payable
8,271
(13,675 )
Accrued liabilities
(21,856 )
31,973
Income tax payable/receivable
8,480
34,919
Deferred rent
15,463
16,944
Other long-term liabilities
2,052
(143 )
Net cash provided by operating activities
243,582
179,665
Investing activities
Purchases of leasehold improvements, property and equipment
(113,715 )
(126,712 )
Purchases of investments
(19,922 )
-
Maturities of investments
80,000
45,000
Proceeds from sale of investments
-
540,648
Net cash provided by (used in) investing activities
(53,637 )
458,936
Financing activities
Acquisition of treasury stock
(103,827 )
(700,036 )
Excess tax benefit on stock-based compensation
-
1,982
Stock plan transactions and other financing activities
9
12
Net cash used in financing activities
(103,818 )
(698,042 )
Effect of exchange rate changes on cash and cash equivalents
1,130
1,396
Net change in cash and cash equivalents
87,257
(58,045 )
Cash and cash equivalents at beginning of period
87,880
248,005
Cash and cash equivalents at end of period
$
175,137
$
189,960
Chipotle Mexican Grill, Inc.
Supplemental Financial and Other Data
(dollars in thousands)
For the three months ended
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
Jun. 30,
2017
2017
2016
2016
2016
Number of restaurants opened
50
57
72
55
58
Restaurant relocations/closures
(2 )
(16 )
-
(1 )
-
Number of restaurants at end of period
2,339
2,291
2,250
2,178
2,124
Average restaurant sales
$ 1,957
$ 1,931
$ 1,868
$ 1,914
$ 2,067
Comparable restaurant sales increase (decrease)
8.1 %
17.8 %
(4.8 %)
(21.9 %)
(23.6 %)

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170725006381r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170725006381/en/

SOURCE: Chipotle Mexican Grill, Inc.

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