Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported
financial results for its fourth quarter and full year ended
December 31, 2015.
Highlights for the fourth quarter of 2015 as compared to the
fourth quarter of 2014 include:
- Revenue decreased 6.8% to $997.5
million
- Comparable restaurant sales decreased
14.6%
- Restaurant level operating margin was
19.6%, a decrease of 700 basis points
- Net income was $67.9 million, a
decrease of 44.0%
- Diluted earnings per share was $2.17, a
decrease of 43.5%
- Opened 79 new restaurants
Highlights for the twelve months ended December 31, 2015 as
compared to the prior year include:
- Revenue increased 9.6% to $4.5
billion
- Comparable restaurant sales increased
0.2%
- Restaurant level operating margin was
26.1%, a decrease of 110 basis points
- Net income was $475.6 million, an
increase of 6.8%
- Diluted earnings per share was $15.10,
an increase of 6.9%
- Opened 229 new restaurants
“The fourth quarter of 2015 was the most challenging period in
Chipotle’s history, but the Centers for Disease Control and
Prevention has now concluded its investigation into the recent E.
coli incidents associated with Chipotle. We are pleased to have
this behind us and can place our full energies to implementing our
enhanced food safety plan that will establish Chipotle as an
industry leader in food safety. We are extremely focused on
executing this program, which designs layers of redundancy and
enhanced safety measures to reduce the food safety risk to a level
as near to zero as is possible. By adding these programs to an
already strong and proven food culture, we strongly believe that we
can establish Chipotle as a leader in food safety just as we have
become a leader in our quest for the very best ingredients we can
find,” said Steve Ells, founder, chairman and co-CEO of
Chipotle.
Fourth quarter 2015 results
Revenue for the quarter was $997.5 million, a 6.8% decrease
compared to the fourth quarter of 2014. The decrease was due
primarily to a 14.6% decrease in comparable restaurant sales. The
decrease in comparable restaurant sales was due to publicity during
the quarter surrounding food-borne illness incidents associated
with a number of Chipotle restaurants.
We opened 79 new restaurants during the quarter, bringing the
total restaurant count to 2,010.
Food costs were 33.8% of revenue, a decrease of 120 basis points
as compared to the fourth quarter of 2014, as a result of relief in
dairy, avocado and beef prices and the benefit of our menu price
increase, partially offset by costs related to food waste and
testing.
Restaurant level operating margin was 19.6% in the quarter, a
decrease of 700 basis points from the fourth quarter 2014. The
decrease was primarily driven by the significant decrease in
comparable restaurant sales and non-recurring costs related to the
food-borne illness incidents, partially offset by favorable food
costs.
General and administrative expenses were 4.7% of revenue, a
decrease of 100 basis points due primarily to lower non-cash
stock-based compensation expense and bonus costs, partially offset
by higher wages as we grew.
Net income for the fourth quarter of 2015 was $67.9 million, or
$2.17 per diluted share, compared to $121.2 million, or $3.84 per
diluted share, in the fourth quarter of 2014. Diluted earnings per
share of $2.17 was higher than prior expectations of $1.70 to $1.90
per share primarily driven by lower non-cash stock based
compensation expense related to vesting of performance shares.
Full year ended December 31, 2015 results
Revenue for the full year of 2015 was $4.5 billion, up 9.6% from
the prior year. The growth in revenue was driven by sales from new
restaurants not yet in the comparable base.
We opened 229 new restaurants during the full year of 2015,
bringing the total restaurant count to 2,010.
Food costs were 33.4% of revenue, a decrease of 120 basis points
as compared to the prior year, primarily as a result of the benefit
of menu price increases and relief in dairy and avocado costs. The
decrease was partially offset by inflation on beef.
Restaurant level operating margin was 26.1% for the full year of
2015, a decrease of 110 basis points from the prior year. The
decrease was primarily driven by higher labor and other operating
costs, partially offset by lower food costs.
General and administrative expenses were 5.6% of revenue, a
decrease of 110 basis points due to decreased non-cash stock-based
compensation expense, lower bonus expense, and decreased expense
associated with our biennial All Managers’ Conference held in the
third quarter of 2014, partially offset by higher wages as we
grew.
Net income for the full year 2015 was $475.6 million, or $15.10
per diluted share, compared to $445.4 million, or $14.13 per
diluted share in the full year 2014.
“2016 will be a very difficult year relative to our past
performance. But, by staying true to our food culture and unique
people culture, and layering on our rigorous food safety program,
we are confident that we are now in a position to aggressively
welcome customers into our restaurants and restore customer
confidence in the things that make Chipotle great. With our full
commitment to becoming an industry leader in food safety, and our
continued focus on delivering an exceptional customer experience,
we are confident that Chipotle will emerge as an even stronger
company,” said Monty Moran, co-CEO of Chipotle.
On January 28, 2016, Chipotle was served with a subpoena
broadening the scope of the previously-announced criminal
investigation by the U.S. Attorney’s office for the Central
District of California. The new subpoena requires us to produce
documents and information related to company-wide food safety
matters dating back to January 1, 2013, and supersedes the subpoena
served in December 2015 that was limited to a single Chipotle
restaurant in Simi Valley, California. We intend to fully cooperate
in the investigation.
Additionally, our Board of Directors has approved the investment
of up to an additional $300 million, exclusive of commissions, to
repurchase shares of our common stock. This repurchase
authorization, in addition to up to approximately $178 million
available as of January 31 for repurchases under previously
announced repurchase authorizations, may be modified, suspended, or
discontinued at any time.
Outlook
For 2016, management expects the following:
- 220-235 new restaurant openings
- An effective full year tax rate of
approximately 39.0%
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 restaurants in operation for at least
13 full calendar months.
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 the fourth
quarter and full year 2015 financial results on Tuesday, February
2, 2016 at 5:00 PM Eastern time.
The conference call can be accessed live over the phone by
dialing 1-888-523-1232 or for international callers by dialing
1-719-325-4877. 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 214044. The replay will be
available until February 9, 2016. 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 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 raised
responsibly with respect for the animals, the land, and the farmers
who produce the food. In order to achieve this vision, we
focus on building a special people culture that is centered on
creating teams 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 operates more than 2,000 restaurants, including 23
Chipotle restaurants outside the US, 13 ShopHouse Southeast Asian
Kitchen restaurants, and is an investor in a consolidated entity
that owns and operates three Pizzeria Locale 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 number of new
restaurant openings and effective tax rates for 2016, as well as
statements regarding our enhanced food safety plan and restoring
customer confidence in Chipotle, 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 changes in consumers’ acceptance
of and enthusiasm for our brand, including as a result of recent
food-borne illness incidents, the impact of competition, 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 new
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 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 strategy, including supply
shortages and potential liabilities from advertising claims and
other marketing activities related to Food With Integrity; security
risks associated with the acceptance of electronic payment cards or
electronic storage and processing of confidential customer or
employee information; 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; risks related to our marketing and advertising
strategies and 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 our
website at chipotle.com.
Chipotle Mexican Grill,
Inc.Condensed Consolidated Statement of Income and
Comprehensive Income(in thousands, except per share
data)(unaudited)
Three months ended December 31, 2015
2014 Revenue $ 997,507 100.0 % $ 1,069,811
100.0 %
Restaurant operating costs (exclusive of
depreciation andamortization shown separately below):
Food, beverage and packaging 337,065 33.8 373,991 35.0 Labor
260,585 26.1 237,310 22.2 Occupancy 68,143 6.8 60,930 5.7 Other
operating costs 136,184 13.7 112,732 10.5 General and
administrative expenses 46,875 4.7 60,929 5.7 Depreciation and
amortization 34,140 3.4 29,750 2.8 Pre-opening costs 5,452 0.5
4,088 0.4 Loss on disposal of assets 5,450 0.5
2,209 0.2 Total operating expenses
893,894 89.6 881,939 82.4 Income
from operations 103,613 10.4 187,872 17.6 Interest and other income
(expense), net 1,795 0.2 885 0.1
Income before income taxes 105,408 10.6 188,757 17.6
Provision for income taxes (37,534 ) (3.8 ) (67,523 )
(6.3 ) Net income $ 67,874 6.8 % $ 121,234 11.3 %
Other comprehensive loss, net of income taxes: Foreign currency
translation adjustments (1,718 ) (1,008 )
Unrealized loss on investments, net of
income taxes of$946 and $0
(1,522 ) - Other comprehensive loss, net of
income taxes (3,240 ) (1,008 ) Comprehensive income $
64,634 $ 120,226 Earnings per share: Basic $ 2.19
$ 3.91 Diluted $ 2.17 $ 3.84 Weighted
average common shares outstanding: Basic 31,027
31,024 Diluted 31,312 31,542
Chipotle Mexican Grill,
Inc.Condensed Consolidated Statement of Income and
Comprehensive Income(in thousands, except per share
data)
Year ended December 31, 2015
2014 Revenue $ 4,501,223 100.0 % $ 4,108,269
100.0 %
Restaurant operating costs (exclusive of
depreciation andamortization shown separately below):
Food, beverage and packaging 1,503,835 33.4 1,420,994 34.6 Labor
1,045,726 23.2 904,407 22.0 Occupancy 262,412 5.8 230,868 5.6 Other
operating costs 514,963 11.4 434,244 10.6 General and
administrative expenses 250,214 5.6 273,897 6.7 Depreciation and
amortization 130,368 2.9 110,474 2.7 Pre-opening costs 16,922 0.4
15,609 0.4 Loss on disposal of assets 13,194 0.3
6,976 0.2 Total operating expenses
3,737,634 83.0 3,397,469 82.7
Income from operations 763,589 17.0 710,800 17.3 Interest
and other income (expense), net 6,278 0.1
3,503 0.1 Income before income taxes 769,867
17.1 714,303 17.4 Provision for income taxes (294,265 ) (6.5
) (268,929 ) (6.5 ) Net income $ 475,602 10.6 % $
445,374 10.8 % Other comprehensive loss, net of income
taxes: Foreign currency translation adjustments (6,322 ) (2,049 )
Unrealized loss on investments, net of
income taxes of$946 and $0
(1,522 ) - Other comprehensive loss, net of
income taxes (7,844 ) (2,049 ) Comprehensive income $
467,758 $ 443,325 Earnings per share: Basic $ 15.30
$ 14.35 Diluted $ 15.10 $ 14.13
Weighted average common shares outstanding: Basic 31,092
31,038 Diluted 31,494
31,512
Chipotle Mexican
Grill, Inc.Condensed Consolidated Balance
Sheet(in thousands, except per share data)
December 31, 2015 2014
(as adjusted)1
Assets Current assets: Cash and cash equivalents $ 248,005 $
419,465
Accounts receivable, net of allowance for
doubtful accounts of $1,176 and $1,199 as of December31, 2015 and
December 31, 2014, respectively
38,283 34,839 Inventory 15,043 15,332 Prepaid expenses and other
current assets 39,965 34,795 Income tax receivable 58,152 16,488
Investments 415,199 338,592 Total
current assets 814,647 859,511 Leasehold improvements, property and
equipment, net 1,217,220 1,106,984 Long term investments 622,939
496,106 Other assets 48,321 42,777 Goodwill 21,939
21,939 Total assets $ 2,725,066 $ 2,527,317
Liabilities and shareholders' equity Current
liabilities: Accounts payable $ 85,709 $ 69,613 Accrued payroll and
benefits 64,958 73,894 Accrued liabilities 129,275
102,203 Total current liabilities 279,942 245,710
Deferred rent 251,962 219,414 Deferred income tax liability 32,305
21,561 Other liabilities 32,883 28,263
Total liabilities 597,092 514,948
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000
shares authorized, no shares issued as of December 31,2015 and
December 31, 2014, respectively
- -
Common stock $0.01 par value, 230,000
shares authorized, and 35,790 and 35,394 shares issued asof
December 31, 2015 and December 31, 2014, respectively
358 354 Additional paid-in capital 1,172,628 1,038,932
Treasury stock, at cost, 5,206 and 4,367
common shares at December 31, 2015 and December 31,2014,
respectively
(1,234,612 ) (748,759 ) Accumulated other comprehensive income
(loss) (8,273 ) (429 ) Retained earnings 2,197,873
1,722,271 Total shareholders' equity 2,127,974
2,012,369 Total liabilities and shareholders'
equity $ 2,725,066 $ 2,527,317
1 Balances were adjusted because we
adopted Financial Accounting Standards Board Accounting Standards
Update No.2015-07, “Income Taxes” which requires that deferred tax
liabilities and assets be classified as noncurrent in a classified
balance sheet.
Chipotle Mexican
Grill, Inc.Condensed Consolidated Statement of Cash
Flows(in thousands)
Year ended December 31, 2015
2014 Operating activities Net income $ 475,602 $
445,374 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 130,368 110,474
Deferred income tax (benefit) provision 11,666 (20,671 ) Loss on
disposal of assets 13,194 6,976 Bad debt allowance (23 ) 9
Stock-based compensation expense 57,911 96,440 Excess tax benefit
on stock-based compensation (74,442 ) (21,667 ) Other 582 104
Changes in operating assets and liabilities: Accounts receivable
(3,504 ) (10,966 ) Inventory 262 (2,307 ) Prepaid expenses and
other current assets (5,259 ) (658 ) Other assets (5,619 ) 1,071
Accounts payable 19,525 2,168 Accrued liabilities (7,440 ) 35,019
Income tax payable/receivable 32,756 8,831 Deferred rent 32,911
27,025 Other long-term liabilities 4,826 4,845
Net cash provided by operating activities 683,316
682,067
Investing activities Purchases
of leasehold improvements, property and equipment (257,418 )
(252,590 ) Purchases of investments (559,372 ) (521,004 )
Maturities of investments 352,650 254,750
Net cash used in investing activities (464,140 )
(518,844 )
Financing activities Acquisition of
treasury stock (460,675 ) (88,338 ) Excess tax benefit on
stock-based compensation 74,442 21,667 Stock plan transactions and
other financing activities (207 ) (66 ) Net cash used
in financing activities (386,440 ) (66,737 ) Effect
of exchange rate changes on cash and cash equivalents (4,196 ) (224
) Net change in cash and cash equivalents (171,460 ) 96,262 Cash
and cash equivalents at beginning of year 419,465
323,203 Cash and cash equivalents at end of year $
248,005 $ 419,465
Supplemental disclosures of cash
flow information Income taxes paid $ 248,547 $ 280,687
Increase (decrease) in purchases of
leasehold improvements, property and equipment accrued inaccounts
payable and accrued liabilities
$ (2,870 ) $ 9,424 Increase in acquisition of treasury stock
accrued in accrued liabilities $ 25,178 $ -
Chipotle Mexican
Grill, Inc.Supplemental Financial and Other
Data(dollars in thousands)
For the three months
ended Dec. 31, Sep. 30, Jun. 30, Mar.
31, Dec. 31, 2015 2015 2015
2015 2014 Number of restaurants opened 79 53 48 49 60
Restaurant relocations - - (1 ) (1 ) (1 ) Number of restaurants at
end of period 2,010 1,931 1,878 1,831 1,783 Average restaurant
sales $ 2,424 $ 2,532 $ 2,530 $ 2,516 $ 2,472 Comparable restaurant
sales increase (decrease) (14.6 %) 2.6 % 4.3 % 10.4 % 16.1 %
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Chipotle Mexican Grill, Inc.Investor
Relations:Mark Alexee, 303-605-1042
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