8-K
Chipotle Mexican Grill Inc (CMG)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2023
CHIPOTLE MEXICAN GRILL, INC.
(Exact name of registrant as specified in its charter)
| Delaware <br>(State or other <br>jurisdiction of <br>incorporation) | 1-32731 <br>(Commission File Number) | 84-1219301 <br>(I.R.S. Employer <br>Identification No.) |
|---|
610 Newport Center Drive, Suite 1100 Newport Beach, CA 92660 (Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (949) 524-4000
Not Applicable (Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|
| ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $0.01 per share | CMG | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On October 26, 2023, we issued a press release announcing earnings and other financial results for our fiscal quarter ended September 30, 2023, and that management would review these results in a conference call at 4:30 pm Eastern time on October 26, 2023.
Item 8.01 Other Events.
On October 26, 2023, we announced that our Board of Directors has authorized repurchases of common stock with a total aggregate purchase price of $300 million, exclusive of commissions. This repurchase authorization is in addition to previously announced repurchase authorizations. The repurchase program may be modified, suspended, or discontinued at any time.
Item 9.01 Financial Statements and Exhibits.
Exhibit Index
| Exhibit Number | Exhibit Description |
|---|---|
| 99.1 | Chipotle Mexican Grill, Inc. Press Release, dated October 26, 2023 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Chipotle Mexican Grill, Inc. | ||
|---|---|---|
| October 26, 2023 | By: | /s/ John R. Hartung |
| Name: John R. Hartung | ||
| Title: Chief Financial and Administrative Officer |
Ex 991 Q32023
Exhibit 99.1 | EARNINGS RELEASE | | --- | | PR Contact: Laurie Schalow | | (949) 524-4035 | | MediaRelations@chipotle.com | | IR Contact: Cindy Olsen, CFA | | (949) 524-4205 | | Cindy.Olsen@chipotle.com |
Chipotle ANNOUNCES THIRD QUARTER 2023 RESULTS
Comparable sales increase 5% driven by transaction growth as margins expand
NEWPORT BEACH, Calif. – October 26, 2023 – Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2023.
Third quarter highlights, year over year: | · | Total revenue increased 11.3% to $2.5 billion | | --- | --- | | · | Comparable restaurant sales increased 5.0% | | --- | --- | | · | Operating margin was 16.0%, an increase from 15.1% | | --- | --- | | · | Restaurant level operating margin was 26.3% 1, an increase of 100 basis points | | --- | --- | | · | Diluted earnings per share was $11.32, a 23.0% increase from $9.20. Adjusted diluted earnings per share, which excluded a $0.04 after-tax impact from expenses related to corporate restructuring, was $11.361, a 19.5% increase from $9.511. | | --- | --- | | · | Opened 62 new restaurants with 54 locations including a Chipotlane | | --- | --- | "Chipotle’s value proposition including customized, delicious culinary served quickly with great hospitality, is stronger than ever which is translating to great results including sustained positive transaction growth. We remain focused on developing exceptional people, preparing delicious food and fast throughput which will further strengthen our brand and continue to position us for long term growth,” said Brian Niccol, Chairman and CEO, Chipotle.
Results for the three months ended September 30, 2023:
Total revenue in the third quarter was $2.5 billion, an increase of 11.3% compared to the third quarter of 2022. The increase in total revenue was driven by new restaurant openings, and a 5.0% increase in comparable restaurant sales attributable to higher transactions and, to a lesser extent, an increase in average check. Digital sales represented 36.6% of total food and beverage revenue.
We opened 62 new restaurants during the third quarter with 54 locations including a Chipotlane. These formats continue to perform well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.
Food, beverage and packaging costs in the third quarter were 29.7% of total revenue, a decrease of about 10 basis points compared to the third quarter of 2022. The benefit from last year’s menu price increases was mostly offset by inflation across several food costs, primarily beef and queso.
Restaurant level operating margin in the third quarter was 26.3% compared to 25.3% in the third quarter of 2022. The improvement was primarily due to the benefit of sales leverage, partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.
1 Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.
General and administrative expenses for the third quarter were $159.5 million on a GAAP basis, or $158.2 million on a non-GAAP basis, excluding $1.3 million of corporate restructuring costs related to the May 2023 optimization of our organizational structure. GAAP and non-GAAP general and administrative expenses for the third quarter also include $119.3 million of underlying general and administrative expenses, $34.3 million of non-cash stock compensation, $3.4 million of higher performance-based accruals and payroll taxes on equity vesting and exercises and $1.2 million of other costs, primarily related to our upcoming All Managers Conference scheduled for the first quarter of 2024.
The effective income tax rate for the third quarter was 24.2% compared to 24.4% in the third quarter of 2022. The decrease in the effective income tax rate was primarily due to a decrease in uncertain tax position reserves and higher income tax credits, mostly offset by a decrease in tax benefits from option exercises and equity vesting.
Net income for the third quarter was $313.2 million, or $11.32 per diluted share, compared to $257.1 million, or $9.20 per diluted share, in the third quarter of 2022. In the third quarter of 2023, excluding the $0.04 after-tax impact from expenses related to corporate restructuring, adjusted diluted earnings per share was $11.36.
During the third quarter, our Board of Directors approved the investment of up to an additional $300 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $368.4 million was available as of September 30, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $226.3 million of stock at an average price per share of $1,913.98 during the third quarter.
More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of October.
Outlook
For 2023, management is anticipating the following: | · | Fourth quarter and full year comparable restaurant sales growth in the mid to high-single digit range | | --- | --- | | · | 255 to 285 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes utility, construction, permit and inspection delays do not worsen | | --- | --- | | · | An estimated underlying effective full year tax rate between 25% and 27% before discrete items | | --- | --- | For 2024, management is anticipating the following: | · | 285 to 315 new restaurant openings, which assumes utility, construction, permit and inspection delays do not worsen | | --- | --- | Definitions
The following definitions apply to these terms as used throughout this release: | · | Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months. | | --- | --- | | · | Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months. | | --- | --- | | · | Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue. | | --- | --- | | · | Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales include revenue deferrals associated with Chipotle Rewards. | | --- | --- | Conference Call Details
Chipotle will host a conference call on Thursday, October 26, 2023, at 4:30 PM Eastern time to discuss third quarter 2023 financial results as well as provide a business update for the fourth quarter 2023.
The conference call can be accessed live over the phone by dialing 1-888-317-6003, or for international callers by dialing 1-412-317-6061, and use code: 3311473. The call will be webcast live from the company's website on the investor relations page at ir.chipotle.com/events. An archived webcast will be available approximately one hour after the end of the call.
1 Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had over 3,300 restaurants as of September 30, 2023, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants in North America and Europe. Chipotle is ranked on the Fortune 500 and is recognized on the 2023 list for Fortune’s Most Admired Companies and Time Magazine’s Most Influential Companies. With over 110,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. For more information or to place an order online, visit WWW.CHIPOTLE.COM.
Forward-Looking Statements
Certain statements in this press release and in the October 26, 2023, conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements under “Outlook” about our anticipated fourth quarter and full year 2023 comparable restaurant sales growth, goals for number of new restaurant openings, and estimated underlying effective full year tax rate, as well as statements about expected restaurants with Chipotlanes and rate of expansion, future labor costs, future general and administrative and other costs, future estimated tax rates and future long-term prospects. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “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 currently available operating, financial and competitive information available to us as of the date of this release 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, including but not limited to: increasing wage inflation and the competitive labor market, including as a result of regulations such as California AB 1228, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs (including beef, tortillas, queso, salsa, beans and rice); risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification or destruction of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors and the expected costs to accelerate our international expansion through franchise restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions and supply shortages; 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 actual or rumored food safety concerns or other negative publicity, decreased consumer spending (including as a result of higher inflation, mass layoffs, fear of possible recession and higher energy prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions and potentially class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims or other matters; and other risk factors described from time to time in our SEC reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.
1 Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Three months ended September 30, | | | | | | | | | | 2023 | | | | 2022 | | | | | Food and beverage revenue | $ | 2,456,039 | 99.4 | % | $ | 2,202,336 | 99.2 | % | | Delivery service revenue | | 15,909 | 0.6 | | | 17,839 | 0.8 | | | Total revenue | | 2,471,948 | 100.0 | | | 2,220,175 | 100.0 | | | Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | | | | | | | | | | Food, beverage and packaging | | 734,186 | 29.7 | | | 662,540 | 29.8 | | | Labor | | 616,282 | 24.9 | | | 557,178 | 25.1 | | | Occupancy | | 126,269 | 5.1 | | | 115,826 | 5.2 | | | Other operating costs | | 345,368 | 14.0 | | | 322,085 | 14.5 | | | General and administrative expenses | | 159,501 | 6.5 | | | 140,896 | 6.3 | | | Depreciation and amortization | | 78,546 | 3.2 | | | 71,416 | 3.2 | | | Pre-opening costs | | 9,605 | 0.4 | | | 7,618 | 0.3 | | | Impairment, closure costs, and asset disposals | | 7,241 | 0.3 | | | 6,363 | 0.3 | | | Total operating expenses | | 2,076,998 | 84.0 | | | 1,883,922 | 84.9 | | | Income from operations | | 394,950 | 16.0 | | | 336,253 | 15.1 | | | Interest and other income, net | | 18,392 | 0.7 | | | 3,712 | 0.2 | | | Income before income taxes | | 413,342 | 16.7 | | | 339,965 | 15.3 | | | Provision for income taxes | | (100,125) | (4.1) | | | (82,827) | (3.7) | | | Net income | $ | 313,217 | 12.7 | % | $ | 257,138 | 11.6 | % | | Earnings per share: | | | | | | | | | | Basic | $ | 11.37 | | | $ | 9.26 | | | | Diluted | $ | 11.32 | | | $ | 9.20 | | | | Weighted-average common shares outstanding: | | | | | | | | | | Basic | | 27,550 | | | | 27,773 | | | | Diluted | | 27,681 | | | | 27,956 | | |
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | Nine months ended September 30, | | | | | | | | | | 2023 | | | | 2022 | | | | | Food and beverage revenue | $ | 7,304,557 | 99.3 | % | $ | 6,394,094 | 99.1 | % | | Delivery service revenue | | 50,772 | 0.7 | | | 59,959 | 0.9 | | | Total revenue | | 7,355,329 | 100.0 | | | 6,454,053 | 100.0 | | | Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | | | | | | | | | | Food, beverage and packaging | | 2,165,409 | 29.4 | | | 1,963,394 | 30.4 | | | Labor | | 1,811,754 | 24.6 | | | 1,639,044 | 25.4 | | | Occupancy | | 372,097 | 5.1 | | | 341,777 | 5.3 | | | Other operating costs | | 1,058,281 | 14.4 | | | 970,261 | 15.0 | | | General and administrative expenses | | 464,337 | 6.3 | | | 429,118 | 6.6 | | | Depreciation and amortization | | 233,902 | 3.2 | | | 212,814 | 3.3 | | | Pre-opening costs | | 23,341 | 0.3 | | | 18,219 | 0.3 | | | Impairment, closure costs, and asset disposals | | 31,842 | 0.4 | | | 15,354 | 0.2 | | | Total operating expenses | | 6,160,963 | 83.8 | | | 5,589,981 | 86.6 | | | Income from operations | | 1,194,366 | 16.2 | | | 864,072 | 13.4 | | | Interest and other income, net | | 43,787 | 0.6 | | | 14,071 | 0.2 | | | Income before income taxes | | 1,238,153 | 16.8 | | | 878,143 | 13.6 | | | Provision for income taxes | | (291,502) | (4.0) | | | (202,769) | (3.1) | | | Net income | $ | 946,651 | 12.9 | % | $ | 675,374 | 10.5 | % | | Earnings per share: | | | | | | | | | | Basic | $ | 34.31 | | | $ | 24.20 | | | | Diluted | $ | 34.13 | | | $ | 24.02 | | | | Weighted-average common shares outstanding: | | | | | | | | | | Basic | | 27,593 | | | | 27,907 | | | | Diluted | | 27,739 | | | | 28,116 | | |
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| | |||
|---|---|---|---|
| | |||
| | December 31, | ||
| | 2022 | ||
| | |||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | 602,307 | $ | 384,000 |
| Accounts receivable, net | 71,122 | 106,880 | |
| Inventory | 40,177 | 35,668 | |
| Prepaid expenses and other current assets | 104,038 | 86,412 | |
| Income tax receivable | - | 47,741 | |
| Investments | 851,699 | 515,136 | |
| Total current assets | 1,669,343 | 1,175,837 | |
| Leasehold improvements, property and equipment, net | 2,093,011 | 1,951,147 | |
| Long-term investments | 473,247 | 388,055 | |
| Restricted cash | 25,315 | 24,966 | |
| Operating lease assets | 3,555,808 | 3,302,402 | |
| Other assets | 72,830 | 63,158 | |
| Goodwill | 21,939 | 21,939 | |
| Total assets | 7,911,493 | $ | 6,927,504 |
| Liabilities and shareholders' equity | |||
| Current liabilities: | |||
| Accounts payable | 207,541 | $ | 184,566 |
| Accrued payroll and benefits | 155,015 | 170,456 | |
| Accrued liabilities | 151,148 | 147,539 | |
| Unearned revenue | 156,320 | 183,071 | |
| Current operating lease liabilities | 244,994 | 236,248 | |
| Income tax payable | 172,689 | - | |
| Total current liabilities | 1,087,707 | 921,880 | |
| Long-term operating lease liabilities | 3,773,087 | 3,495,162 | |
| Deferred income tax liabilities | 111,089 | 98,623 | |
| Other liabilities | 53,296 | 43,816 | |
| Total liabilities | 5,025,179 | 4,559,481 | |
| Shareholders' equity: | |||
| Preferred stock, 0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2023 and December 31, 2022, respectively | - | - | |
| Common stock, 0.01 par value, 230,000 shares authorized, 37,467 and 37,320 shares issued as of September 30, 2023 and December 31, 2022, respectively | 375 | 373 | |
| Additional paid-in capital | 1,917,868 | 1,829,304 | |
| Treasury stock, at cost, 9,982 and 9,693 common shares as of September 30, 2023 and December 31, 2022, respectively | (4,798,748) | (4,282,014) | |
| Accumulated other comprehensive loss | (8,080) | (7,888) | |
| Retained earnings | 5,774,899 | 4,828,248 | |
| Total shareholders' equity | 2,886,314 | 2,368,023 | |
| Total liabilities and shareholders' equity | 7,911,493 | $ | 6,927,504 |
All values are in US Dollars.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Nine months ended | | | | | | September 30, | | | | | | 2023 | | 2022 | | | Operating activities | | | | | | Net income | $ | 946,651 | $ | 675,374 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Depreciation and amortization | | 233,902 | | 212,814 | | Deferred income tax provision | | 12,465 | | (8,567) | | Impairment, closure costs, and asset disposals | | 30,536 | | 15,127 | | Provision for credit losses | | 565 | | (969) | | Stock-based compensation expense | | 86,557 | | 77,371 | | Other | | (17,272) | | (13,045) | | Changes in operating assets and liabilities: | | | | | | Accounts receivable | | 33,666 | | 22,891 | | Inventory | | (4,508) | | (1,056) | | Prepaid expenses and other current assets | | (23,494) | | (3,169) | | Operating lease assets | | 185,056 | | 171,464 | | Other assets | | (6,939) | | (1,537) | | Accounts payable | | 4,886 | | 10,774 | | Accrued payroll and benefits | | (14,902) | | (32,861) | | Accrued liabilities | | 1,882 | | (16,562) | | Unearned revenue | | (21,190) | | (18,141) | | Income tax payable/receivable | | 220,427 | | (18,070) | | Operating lease liabilities | | (156,180) | | (153,200) | | Other long-term liabilities | | 5,910 | | 2,968 | | Net cash provided by operating activities | | 1,518,018 | | 921,606 | | Investing activities | | | | | | Purchases of leasehold improvements, property and equipment | | (388,801) | | (335,518) | | Purchases of investments | | (845,981) | | (513,813) | | Maturities of investments | | 440,788 | | 202,997 | | Net cash used in investing activities | | (793,994) | | (646,334) | | Financing activities | | | | | | Acquisition of treasury stock | | (437,305) | | (629,775) | | Tax withholding on stock-based compensation awards | | (68,613) | | (92,374) | | Other financing activities | | 546 | | (586) | | Net cash used in financing activities | | (505,372) | | (722,735) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 4 | | (1,170) | | Net change in cash, cash equivalents, and restricted cash | | 218,656 | | (448,633) | | Cash, cash equivalents, and restricted cash at beginning of period | | 408,966 | | 846,230 | | Cash, cash equivalents, and restricted cash at end of period | $ | 627,622 | $ | 397,597 | | Supplemental disclosures of cash flow information | | | | | | Income taxes paid | $ | 54,615 | $ | 227,452 | | Purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities | $ | 81,724 | $ | 58,127 | | Acquisition of treasury stock accrued in accounts payable and accrued liabilities | $ | 15,312 | $ | 5,999 |
CHIPOTLE MEXICAN GRILL, INC.
SUPPLEMENTAL FINANCIAL AND OTHER DATA
(dollars in thousands)
(unaudited)
| | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | For the three months ended | |||||||||
| | Sep. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, | |||||
| | 2023 | 2023 | 2023 | 2022 | 2022 | |||||
| Number of restaurants opened | 62 | 47 | 41 | 100 | 43 | |||||
| Chipotle permanent closures | (1) | - | - | - | (1) | |||||
| Chipotle relocations | (2) | (3) | (4) | (3) | (4) | |||||
| Non-Chipotle permanent closures | (6) | - | - | - | - | |||||
| Number of restaurants at end of period | 3,321 | 3,268 | 3,224 | 3,187 | 3,090 | |||||
| Average restaurant sales | $ | 2,972 | $ | 2,941 | $ | 2,892 | $ | 2,824 | $ | 2,796 |
| Comparable restaurant sales increase | 5.0% | 7.4% | 10.9% | 5.6% | 7.6% |
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following tables provide a reconciliation of non-GAAP financial measures presented in the text above to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Adjusted net income is net income excluding expenses related to restaurant and corporate asset impairment, corporate restructuring, certain legal proceedings, stock-based compensation modification expense, unrealized gains on equity investments, separation costs, and certain other costs. Adjusted general and administrative expense is general and administrative expense excluding corporate restructuring, certain legal proceedings, stock-based compensation modification expense, separation costs, and certain other costs. The adjusted effective income tax rate is the effective income tax rate adjusted to reflect the after tax impact of non-GAAP adjustments. Restaurant Level Operating Margin, a non-GAAP financial measure, is equal to the revenues generated by our restaurants less their direct operating costs which consist of food, beverage and packaging, labor, occupancy and other operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other costs that are essential to conduct our business. Management uses restaurant level operating margin as a measure of restaurant performance. Management believes restaurant level operating margin is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. We present these non-GAAP measures in order to facilitate meaningful evaluation of our operating performance across periods. These adjustments are intended to provide greater transparency of underlying performance and to allow investors to evaluate our business on the same basis as our management, which uses these non-GAAP measures in evaluating the company’s performance. Our adjusted net income, adjusted diluted earnings per share, adjusted general and administrative expenses, adjusted effective income tax rate and restaurant level operating margin measures may not be comparable to other companies’ adjusted measures. These adjustments are not necessarily indicative of what our actual financial performance would have been during the periods presented and should be viewed in addition to, and not as an alternative to, our results prepared in accordance with GAAP. Further details regarding these adjustments are included in the tables below.
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted Net Income and Adjusted Diluted Earnings per Share
(in thousands, except per share amounts)
(unaudited)
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Three months ended | | | | | | September 30, | | | | | | 2023 | | 2022 | | | Net income | $ | 313,217 | $ | 257,138 | | Non-GAAP adjustments: | | | | | | Restaurant costs: | | | | | | Operating lease asset impairment and other restaurant costs(1) | | - | | 698 | | Corporate Restructuring: | | | | | | Duplicate rent expense(2) | | - | | 1,034 | | Employee related and other restructuring costs(3) | | 1,334 | | - | | Stock-based compensation modification expense(4) | | - | | 768 | | Separation costs(5) | | - | | 3,538 | | Other adjustments(6) | | - | | 961 | | Total non-GAAP adjustments | $ | 1,334 | $ | 6,999 | | Tax effect of non-GAAP adjustments above(7) | | (221) | | 1,686 | | After tax impact of non-GAAP adjustments | $ | 1,113 | $ | 8,685 | | Adjusted net income | $ | 314,330 | $ | 265,823 | | | | | | | | Diluted weighted-average number of common shares outstanding | | 27,681 | | 27,956 | | Diluted earnings per share | $ | 11.32 | $ | 9.20 | | Adjusted diluted earnings per share | $ | 11.36 | $ | 9.51 | | | | | | | | (1) Operating lease asset impairment charges and other expenses for restaurants due to closures, relocations, or underperformance. | | | | | | (2) Duplicate rent expense for the corporate headquarter relocation and office consolidation announced in May 2018. | | | | | | (3) Charges for third-party vendors, stock-based compensation, and employee severance related to the May 2023 optimization of our organizational structure. | | | | | | (4) Charges for a COVID-19 related modification made in December 2020 to our 2018 performance shares. | | | | | | (5) Expenses related to an employee separation, which consist of incremental compensation costs net of forfeitures of stock-based compensation. | | | | | | (6) Other adjustments consist of impairment charges for certain corporate assets. | | | | | | (7) Adjustments relate to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates. | | | | |
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted General and Administrative Expenses
(in thousands)
(unaudited)
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Three months ended | | | | | | September 30, | | | | | | 2023 | | 2022 | | | General and administrative expenses | $ | 159,501 | $ | 140,896 | | Non-GAAP adjustments: | | | | | | Restructuring expense(1) | | (1,334) | | (1,034) | | Stock-based compensation modification expense(2) | | - | | (768) | | Separation costs(3) | | - | | (3,538) | | Total non-GAAP adjustments | $ | (1,334) | $ | (5,340) | | Adjusted general and administrative expenses | $ | 158,167 | $ | 135,556 | | | | | | | | (1) For three months ended September 30, 2023, third-party vendor expense, stock-based compensation, and employee severance related to the May 2023 optimization of our organizational structure. For the three months ended September 30, 2022, duplicate rent expense for the corporate headquarter relocation and office consolidation announced in May 2018. | | | | | | (2) Charges for a COVID-19 related modification made in December 2020 to our 2018 performance shares. | | | | | | (3) Expenses related to an employee separation, which consisted of incremental compensation costs net of forfeitures of stock-based compensation. | | | | |
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted Effective Income Tax Rate
(unaudited)
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Three months ended | | | | | | September 30, | | | | | | 2023 | | 2022 | | | Effective income tax rate | 24.2 | % | 24.4 | % | | Tax impact of non-GAAP adjustments(1) | - | | (1.0) | | | Adjusted effective income tax rate | 24.2 | % | 23.4 | % | | | | | | | (1) Adjustments related to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Restaurant Level Operating Margin
(in thousands)
(unaudited)
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | Three months ended September 30, | | | | | | | | | | 2023 | | Percent of total revenue | | 2022 | | Percent of total revenue | | | Income from operations | $ | 394,950 | 16.0 | % | $ | 336,253 | 15.1 | % | | Non-GAAP Adjustments: | | | | | | | | | | General and administrative expenses | | 159,501 | 6.5 | | | 140,896 | 6.3 | | | Depreciation and amortization | | 78,546 | 3.2 | | | 71,416 | 3.2 | | | Pre-opening costs | | 9,605 | 0.4 | | | 7,618 | 0.3 | | | Impairment, closure costs, and asset disposals | | 7,241 | 0.3 | | | 6,363 | 0.3 | | | Total non-GAAP Adjustments | $ | 254,893 | 10.3 | % | $ | 226,293 | 10.2 | % | | Restaurant level operating margin | $ | 649,843 | 26.3 | % | $ | 562,546 | 25.3 | % |