10-QPeriod: Q3 FY2010

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 22, 2010For Securities:CMG

Summary

Chipotle Mexican Grill, Inc. (CMG) reported strong financial performance for the nine months ended September 30, 2010. Revenue grew by 19.7% to $1.35 billion, driven by both new restaurant openings and an 8.3% increase in comparable restaurant sales. Net income rose significantly by 39.1% to $132.5 million, leading to diluted earnings per share of $4.18, up from $2.96 in the prior year period. The company continued its aggressive expansion, opening 67 new restaurants year-to-date and planning for further growth, while also actively repurchasing shares under its authorized program. Key operational highlights include progress in their 'Food With Integrity' initiative, with increased percentages of naturally raised beef and organically grown beans. However, the company noted temporary challenges with naturally raised chicken supply, impacting food costs. Management expressed confidence in their liquidity and capital resources, expecting to fund growth and stock repurchases through operating cash flow and existing cash balances, with no significant off-balance sheet arrangements identified. Despite challenges such as potential increases in food costs and ongoing litigation, CMG demonstrated robust sales growth and profitability.

Financial Highlights

43 data points
Beta

Net Income

$48.23M

EPS (Diluted)

$0.03

Total Assets

$1.03B

Cash & Equivalents

$211.00M

Free Cash Flow

$37.71M

Financial Statements
Beta
Operating Expenses$399.29M
Operating Income$77.58M
Net Income$48.23M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)1.55B
Shares Outstanding (Diluted)1.58B

Key Highlights

  • 1Revenue increased by 19.7% to $1.35 billion for the first nine months of 2010 compared to the same period in 2009.
  • 2Net income grew by 39.1% to $132.5 million, with diluted EPS rising to $4.18 from $2.96.
  • 3Comparable restaurant sales increased by 8.3% for the nine months ended September 30, 2010, driven by customer visits.
  • 4The company opened 67 new restaurants in the first nine months of 2010 and plans to open between 120-130 for the full year.
  • 5Chipotle repurchased approximately $109.3 million of its common stock during the first nine months of 2010.
  • 6Food, beverage, and packaging costs as a percentage of revenue decreased slightly due to favorable food costs, though higher naturally raised beef costs were noted.
  • 7The company continues to advance its 'Food With Integrity' initiative, increasing naturally raised and organic ingredient percentages, despite some supply challenges for naturally raised chicken.

Frequently Asked Questions

Chipotle's revenue growth was driven by a combination of opening new restaurants and an increase in comparable restaurant sales. New restaurant openings contributed $131.1 million to sales, while comparable restaurant sales increased by 8.3%, adding $91.5 million.

Chipotle is increasing its use of naturally raised beef and organically grown beans. However, supply challenges for naturally raised chicken led to a temporary decrease in its usage, benefiting food costs in the short term. Management expects food costs as a percentage of revenue to increase in the fourth quarter of 2010 and potentially in 2011 due to inflationary pressures and continued Food With Integrity initiatives.

Chipotle plans to open between 120 and 130 restaurants in 2010 and 135-145 in 2011. They are also introducing 'A Model' restaurants in established markets with lower investment costs, aiming to pursue additional opportunities and mitigate pressures from the commercial real estate market.

Chipotle is involved in ongoing litigation related to ADA compliance (serving line wall height) and employee record-keeping/wage and hour practices. While the company is contesting these cases, it's not possible to estimate the outcome or potential liability at this time. Management currently does not believe these matters will be material to the annual consolidated financial statements, but acknowledges that significant liabilities could adversely affect financial results.