10-QPeriod: Q1 FY2012

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 20, 2012For Securities:CMG

Summary

Chipotle Mexican Grill, Inc. (CMG) reported a strong first quarter for 2012, with revenue increasing by 25.8% to $640.6 million compared to the same period last year. This growth was driven by a combination of new restaurant openings (32 in the quarter) and a robust 12.7% increase in comparable restaurant sales. Net income rose significantly by 35.1% to $62.7 million, or $1.97 per diluted share. The company continues to expand its store base, planning to open 155-165 new restaurants in 2012, including international expansion into Paris. Despite rising food costs, particularly for beef and chicken, Chipotle managed to improve its operating margin through effective cost management in labor, occupancy, and other operating expenses as a percentage of revenue. The company also continued its share repurchase program, buying back $16.3 million worth of stock in the quarter. While facing ongoing legal proceedings related to ADA compliance and employee documentation, management expressed confidence in their compliance and the minimal impact on financial statements. The company maintains a solid liquidity position with $613.7 million in cash and investments to fund future growth and strategic initiatives.

Financial Highlights

43 data points
Beta

Net Income

$62.66M

EPS (Diluted)

$0.04

Total Assets

$1.53B

Cash & Equivalents

$370.19M

Free Cash Flow

-$12.49M

Financial Statements
Beta
Operating Expenses$538.38M
Operating Income$102.22M
Net Income$62.66M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)1.57B
Shares Outstanding (Diluted)1.59B

Key Highlights

  • 1Revenue increased by 25.8% to $640.6 million for Q1 2012.
  • 2Comparable restaurant sales grew by 12.7%, driven by customer visits and menu price increases.
  • 3Net income rose by 35.1% to $62.7 million, with diluted EPS of $1.97.
  • 4Opened 32 new restaurants in Q1 2012, with plans for 155-165 in full year 2012.
  • 5Food costs as a percentage of revenue increased slightly to 32.2% due to inflationary pressures on beef and chicken.
  • 6Stock-based compensation expense significantly increased to $20.8 million, impacting general and administrative expenses.
  • 7Company repurchased $16.3 million of common stock in the first quarter.

Frequently Asked Questions

Revenue growth was primarily driven by two factors: the opening of 32 new restaurants in the quarter and a significant increase of 12.7% in comparable restaurant sales. These factors contributed $67.8 million and $63.2 million to the revenue increase, respectively.

While food, beverage, and packaging costs increased by 26.8% to $206.6 million, they represented 32.2% of revenue, a slight increase from 32.0% in the prior year's quarter. This rise was attributed to inflationary pressures on beef and chicken. However, the impact was partially offset by menu price increases and lower produce costs. The company expects food cost inflation to continue.

Chipotle is involved in several legal matters, including ADA compliance cases related to serving line wall heights and an investigation by the U.S. Department of Homeland Security concerning employee work authorization documents. While the company is actively defending these cases and believes its practices are compliant, the outcome and potential liabilities are not yet determinable, although management does not believe they will be material to the annual consolidated financial statements.

Chipotle plans to open between 155 to 165 new restaurants in 2012. This includes international expansion with plans for a restaurant in Paris, France, and one ShopHouse location. Approximately 30% of the openings will be 'A Model' restaurants, located in secondary trade areas with lower investment and occupancy costs.