Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Relations:
Sandra Curlander
303-222-2539
Media:
Chris Arnold
303-222-5912
Chipotle Mexican Grill, Inc. Reports Third Quarter
2007 Results
| • | Diluted EPS Increased 72.2% to $0.62 |
| • | 28 New Restaurants Opened |
| • | Comparable Restaurant Sales Increased 12.4% |
Denver – (Business Wire) – October 30, 2007 – Chipotle Mexican Grill, Inc. (NYSE: CMG and CMG.B) today reported financial results for its third quarter ended September 30, 2007.
Highlights for the third quarter of 2007 as compared to the third quarter of 2006 include:
| • | Revenue increased 35.6% to $286.4 million |
| • | Comparable restaurant sales increased 12.4% |
| • | Restaurant level operating margins increased 150 basis points to 23.0% |
| • | Income from operations as a percentage of revenue increased 250 basis points to 11.0% |
| • | Net income increased 74.6% to $20.6 million |
| • | Diluted earnings per share increased 72.2% to $0.62 |
Highlights for the nine months ended September 30, 2007 as compared to the prior year period include:
| • | Revenue increased 32.1% to $796.9 million |
| • | Comparable restaurant sales increased 10.9% |
| • | Restaurant level operating margins increased 120 basis points to 22.4% |
| • | Income from operations as a percentage of revenue increased 240 basis points to 10.1% |
| • | Net income increased 73.4% to $53.0 million |
| • | Diluted earnings per share increased 68.4% to $1.60 |
“Our strong third quarter results give us confidence that we are on the right track in pursuing our vision to change the way the world thinks about and eats fast food,” said Chipotle Founder, Chairman and CEO Steve Ells. “Our customers appreciate our investment in Food With Integrity. Higher quality ingredients not only mean their food tastes better, but they can be confident that we will continue to seek ingredients that are raised with respect for the animals, the farmers, and the environment. During the quarter, we removed the growth hormone rBGH from our cheese in 90% of our restaurants. And, in addition to all of our restaurants already serving 100% naturally raised pork, about 80% now serve naturally raised chicken and nearly half serve naturally raised beef.”
Monty Moran, President & COO added, “Our commitment to empowering our managers and crews once again resulted in their collective contribution to our strong sales and restaurant level margins this quarter. We credit a significant amount of the continued improvement in our operating results to our managers’ and crews’ attention to detail and delivery of superior customer service. This commitment to developing great talent at the restaurant level, combined with the operational excellence demonstrated in our restaurants, will assure our continued success.”
Third Quarter 2007 Results
Revenue for the third quarter of 2007 increased 35.6% to $286.4 million from $211.3 million in the third quarter of 2006. This growth in revenue was attributable to new restaurants not in the comparable base and a 12.4% increase in comparable restaurant sales in the third quarter. Comparable restaurant sales growth was primarily due to an increase in customer visits. Chipotle opened 28 restaurants during the third quarter of 2007, including 26 restaurants in existing markets and two restaurants in new markets.
Restaurant level operating margins increased to 23.0% in the third quarter of 2007 from 21.5% in the third quarter of 2006, primarily due to efficiencies in labor, and menu price increases associated with the addition of naturally raised meats in certain markets which were partially offset by higher food costs.
General and administrative expenses were $19.3 million in the third quarter of 2007, or 6.7% of revenue, compared to $15.7 million in the third quarter of 2006, or 7.4% of revenue. In the third quarter of 2007, general and administrative expenses declined as a percentage of revenue primarily due to the effect of economies of scale from higher restaurant sales.
Income from operations increased to $31.4 million for the third quarter of 2007, compared to $17.9 million in the third quarter of 2006.
Net income for the third quarter of 2007 was $20.6 million, or $0.62 per diluted share, compared to $11.8 million, or $0.36 per diluted share in the third quarter of 2006.
Results for the nine months ended September 30, 2007
Revenue for the nine months ended September 30, 2007 increased 32.1% to $796.9 million from $603.2 million in the prior year period. This growth in revenue was attributable to new restaurants not in the comparable base and a 10.9% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily due to an increase in customer visits. Chipotle opened 88 restaurants during the period including 84 restaurants in existing markets and four restaurants in new markets.
Restaurant level operating margins increased to 22.4% in the period from 21.2% in the nine months ended September 30, 2006, primarily due to efficiencies in labor and menu price increases associated with the addition of naturally raised meats which were partially offset by higher food costs.
General and administrative expenses were $54.4 million for the nine months ended September 30, 2007, or 6.8% of revenue, compared to $48.6 million, or 8.1% of revenue for the prior year period. General and administrative expenses declined as a percentage of revenue primarily due to the effect of economies of scale from higher restaurant sales, and also include a benefit from the removal of the remaining $1.2 million reserve, or $0.02 per diluted share, associated with credit card transactions.
Income from operations increased to $80.7 million for the nine months ended September 30, 2007, compared to $46.5 million a year ago.
Net income for the nine months ended September 30, 2007 was $53.0 million, or $1.60 per diluted share, compared to $30.6 million, or $0.95 per diluted share in the prior year period.
“We are pleased with our third quarter’s double digit comparable restaurant sales increase, along with our improvement in labor costs, both of which contributed to the strength of our restaurant level margins,” said Jack Hartung, Chief Finance and Development Officer. “With nine months of the year behind us, we now expect to achieve our 10th consecutive year of double digit comparable restaurant sales increases for the full year in 2007. With our strong unit growth opportunities and restaurant economic model, we remain comfortable with our ability to grow fully diluted earnings per share at an average annual rate of at least 25% over the long-term.”
Outlook
For the full year 2007, management now expects comparable restaurant sales increases in the low double digit range.
Management also expects the following for 2007:
| • | 110 - 120 new restaurant openings, of which 88 have already opened through September 30, 2007 |
| • | Non-cash stock compensation expense of approximately $8.0 million to $8.5 million which includes 10 months of expense for the 2007 grants |
| • | An effective tax rate of approximately 37.7% |
| • | Diluted weighted average common shares outstanding of approximately 33.35 million |
For the full year 2008, management expects the following:
| • | Comparable restaurant sales increases in the low to mid single digit range |
| • | 130 – 140 new restaurant openings |
| • | An effective tax rate of approximately 37.7% |
Definitions
The following definitions apply to these terms as used throughout this release:
Comparable restaurant sales increases include company-operated restaurants only and represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its 13th full calendar month of operation.
Average restaurant sales refers to the average trailing 12-month sales for company-operated 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.
New markets are defined as markets opened within the calendar year.
Conference Call
Chipotle will host a conference call to discuss third quarter 2007 financial results today at 5:00 PM Eastern Time. Hosting the call will be Steve Ells, Founder, Chairman and Chief Executive Officer, Monty Moran, President and Chief Operating Officer, and Jack Hartung, Chief Finance and Development Officer.
The conference call can be accessed live over the phone by dialing 1-888-609-5689 or for international callers by dialing 1-913-312-6694. A replay will be available one hour after the call and can be accessed by dialing 1-888-203-1112 or 1-719-457-0820 for international callers; the password is 5275348. The replay will be available until November 6, 2007. The call will be webcast live from the Company’s Web site at www.chipotle.com under the investor relations section. An archived webcast will be available approximately one hour after the end of the call.
About Chipotle
Chipotle Mexican Grill offers 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 not only from using fresh ingredients, but ingredients that are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. Chipotle opened its first restaurant in 1993 and currently operates more than 670 restaurants. For more information, visit www.chipotle.com.
Forward-Looking Statements
Certain statements in this press release, including statements under the heading “Outlook” and elsewhere in the release related to our expected comparable restaurant sales increases, our projected earnings per share growth, the number of restaurants we intend to open, our expected stock compensation expense, effective tax rate, and our expected number of diluted common shares, 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: 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 uncertainty of our ability to achieve targeted levels of comparable restaurant sales increases; risks relating to our expansion into new markets; the risk of food-borne illnesses and other health concerns about our food products; changes in the availability and costs of food; risks relating to our separation from McDonald’s; changes in consumer preferences, general economic conditions or consumer discretionary spending; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; the impact of litigation; our ability to protect our name and logo and other proprietary information; the potential effects of inclement weather; the effect of competition in the restaurant industry; risks related to our having two classes of publicly-traded common stock; 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 Web site at www.chipotle.com.
Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
| Three months ended September 30, | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| Revenue: |
||||||||||||||
| Restaurant sales |
$ | 286,431 | 100.0 | % | $ | 210,381 | 99.6 | % | ||||||
| Franchise royalties and fees |
— | 0.0 | 879 | 0.4 | ||||||||||
| Total revenue |
286,431 | 100.0 | 211,260 | 100.0 | ||||||||||
| Restaurant operating costs: |
||||||||||||||
| Food, beverage and packaging |
92,075 | 32.1 | 65,436 | 31.0 | ||||||||||
| Labor |
75,395 | 26.3 | 59,629 | 28.2 | ||||||||||
| Occupancy |
19,745 | 6.9 | 15,040 | 7.1 | ||||||||||
| Other operating costs |
33,240 | 11.6 | 25,744 | 12.2 | ||||||||||
| General and administrative expenses |
19,279 | 6.7 | 15,723 | 7.4 | ||||||||||
| Depreciation and amortization |
11,167 | 3.9 | 8,676 | 4.1 | ||||||||||
| Pre-opening costs |
2,350 | 0.8 | 2,053 | 1.0 | ||||||||||
| Loss on disposal of assets |
1,784 | 0.6 | 1,106 | 0.5 | ||||||||||
| 255,035 | 89.0 | 193,407 | 91.5 | |||||||||||
| Income from operations |
31,396 | 11.0 | 17,853 | 8.5 | ||||||||||
| Interest income |
1,597 | 0.6 | 2,015 | 1.0 | ||||||||||
| Interest expense |
(74 | ) | — | (68 | ) | — | ||||||||
| Income before income taxes |
32,919 | 11.5 | 19,800 | 9.4 | ||||||||||
| Provision for income taxes |
(12,315 | ) | (4.3 | ) | (7,998 | ) | (3.8 | ) | ||||||
| Net income |
$ | 20,604 | 7.2 | % | $ | 11,802 | 5.6 | % | ||||||
| Earnings per share: |
||||||||||||||
| Basic |
$ | 0.63 | $ | 0.36 | ||||||||||
| Diluted |
$ | 0.62 | $ | 0.36 | ||||||||||
| Weighted average common shares outstanding: |
||||||||||||||
| Basic |
32,706 | 32,499 | ||||||||||||
| Diluted |
33,171 | 32,885 | ||||||||||||
Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
| Nine months ended September, | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| Revenue: |
||||||||||||||
| Restaurant sales |
$ | 796,137 | 99.9 | % | $ | 601,028 | 99.6 | % | ||||||
| Franchise royalties and fees |
735 | 0.1 | 2,183 | 0.4 | ||||||||||
| Total revenue |
796,872 | 100.0 | 603,211 | 100.0 | ||||||||||
| Restaurant operating costs: |
||||||||||||||
| Food, beverage and packaging |
254,209 | 31.9 | 188,009 | 31.2 | ||||||||||
| Labor |
211,965 | 26.6 | 169,507 | 28.1 | ||||||||||
| Occupancy |
55,355 | 6.9 | 43,250 | 7.2 | ||||||||||
| Other operating costs |
96,663 | 12.1 | 74,855 | 12.4 | ||||||||||
| General and administrative expenses |
54,397 | 6.8 | 48,633 | 8.1 | ||||||||||
| Depreciation and amortization |
31,907 | 4.0 | 24,988 | 4.1 | ||||||||||
| Pre-opening costs |
6,730 | 0.8 | 4,668 | 0.8 | ||||||||||
| Loss on disposal of assets |
4,919 | 0.6 | 2,845 | 0.5 | ||||||||||
| 716,145 | 89.9 | 556,755 | 92.3 | |||||||||||
| Income from operations |
80,727 | 10.1 | 46,456 | 7.7 | ||||||||||
| Interest income |
4,617 | 0.6 | 4,607 | 0.8 | ||||||||||
| Interest expense |
(223 | ) | — | (197 | ) | — | ||||||||
| Income before income taxes |
85,121 | 10.7 | 50,866 | 8.4 | ||||||||||
| Provision for income taxes |
(32,096 | ) | (4.0 | ) | (20,284 | ) | (3.4 | ) | ||||||
| Net income |
$ | 53,025 | 6.7 | % | $ | 30,582 | 5.1 | % | ||||||
| Earnings per share: |
||||||||||||||
| Basic |
$ | 1.63 | $ | 0.96 | ||||||||||
| Diluted |
$ | 1.60 | $ | 0.95 | ||||||||||
| Weighted average common shares outstanding: |
||||||||||||||
| Basic |
32,622 | 31,888 | ||||||||||||
| Diluted |
33,049 | 32,295 | ||||||||||||
Chipotle Mexican Grill, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
| As of | ||||||
| September 30, 2007 |
December 31, 2006 | |||||
| Total current assets |
$ | 188,649 | $ | 178,837 | ||
| Total assets |
$ | 683,367 | $ | 604,208 | ||
| Total current liabilities |
$ | 70,256 | $ | 61,201 | ||
| Total liabilities |
$ | 146,600 | $ | 130,251 | ||
| Total shareholders’ equity |
$ | 536,767 | $ | 473,957 | ||
Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
| Nine months ended September 30, |
||||||||
| 2007 | 2006 | |||||||
| Cash provided by operating activities |
$ | 105,573 | $ | 73,489 | ||||
| Cash used in investing activities |
$ | (103,854 | ) | $ | (62,499 | ) | ||
| Cash provided by financing activities |
$ | 12,296 | $ | 146,514 | ||||
Chipotle Mexican Grill, Inc.
Supplemental Financial Data
(dollars in thousands)
(unaudited)
| For the three months ended | ||||||||||||||||||||
| Sept. 30, 2007 |
June 30, 2007 |
Mar. 31, 2007 |
Dec. 31, 2006 |
Sept. 30, 2006 |
||||||||||||||||
| Number of company-operated restaurants opened |
28 | 32 | 28 | 35 | 30 | |||||||||||||||
| Franchise acquisitions |
— | 4 | 4 | — | — | |||||||||||||||
| Restaurant relocations or closures |
— | (1 | ) | — | (1 | ) | (1 | ) | ||||||||||||
| Number of company-operated restaurants* |
668 | 640 | 605 | 573 | 539 | |||||||||||||||
| Average restaurant sales |
$ | 1,708 | $ | 1,674 | $ | 1,631 | $ | 1,611 | $ | 1,584 | ||||||||||
| Comparable restaurant sales increases |
12.4 | % | 11.6 | % | 8.3 | % | 10.1 | % | 11.6 | % | ||||||||||
| * | All restaurants are company-operated as of June 30, 2007. Excludes four restaurants operated by franchisees as of March 31, 2007 and eight restaurants operated by franchisees for all prior periods. |