CMG 8-K
Chipotle Mexican Grill Inc (CMG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
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(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (
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:
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¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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 25, 2022, we issued a press release announcing earnings and other financial results for our fiscal quarter ended September 30, 2022, and that management would review these results in a conference call at 4:30 pm Eastern time on October 25, 2022.
Item 8.01 Other Events.
On October 25, 2022, we announced that our Board of Directors has authorized repurchases of common stock with a total aggregate purchase price of $200 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
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Exhibit Number |
| Exhibit Description |
99.1 |
| Chipotle Mexican Grill, Inc. Press Release, dated October 25, 2022 |
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.
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| Chipotle Mexican Grill, Inc. | |
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October 25, 2022 | By: | /s/ John R. Hartung |
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| Name: John R. Hartung |
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| Title: Chief Financial Officer |
Exhibit 99.1
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EARNINGS RELEASE |
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PR Contact: Laurie Schalow |
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(949) 524-4035 |
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IR Contact: Cindy Olsen, CFA |
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(949) 524-4205 |
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Cindy.O[email protected] |
Chipotle ANNOUNCES Third QUARTER 2022 RESULTS
operating income increases 40.3% and COMPARABLE restaurant SALES increase 7.6% as margins expand
NEWPORT BEACH, Calf. – October 25, 2022 – Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2022.
Third quarter highlights, year over year:
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Total revenue increased 13.7% to $2.2 billion |
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Comparable restaurant sales increased 7.6% |
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In-restaurant sales increased 22.1%, while digital sales1 represented 37.2% of food and beverage revenue |
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Operating margin was 15.1%, an increase from 12.3% |
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Restaurant level operating margin was 25.3% 2, an increase of 180 basis points |
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Diluted earnings per share was $9.20, a 28.1% increase from $7.18. Adjusted diluted earnings per share, which excluded a $0.31 after-tax impact from expenses related to an employee separation, impairment of certain corporate and restaurant assets, corporate restructuring, and expenses related to the 2018 performance share COVID-19 related modification, was $9.51, a 35.5% increase from $7.02 2 |
"Our performance in the third quarter confirms our brand and value proposition remain strong, even during a challenging economic environment” said Brian Niccol, Chairman and CEO, Chipotle. "With consumer discretionary spending tightening, we are focused on running great restaurants and delivering excellent customer and employee experiences."
Results for the three months ended September 30, 2022:
Total revenue in the third quarter was $2.2 billion, an increase of 13.7% compared to the third quarter of 2021. The increase in total revenue was driven by a 7.6% increase in comparable restaurant sales and new restaurant openings. Our in-restaurant sales increased 22.1% in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, while digital sales represented 37.2% of total food and beverage revenue.
We opened 43 new restaurants during the third quarter with 38 locations including a Chipotlane. These formats continue to perform very 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 29.8% of total revenue, a decrease of 50 basis points compared to the third quarter of 2021. The benefit of menu price increases were partially offset by inflation across the menu primarily due to higher costs for dairy, packaging, tortillas and avocados.
Restaurant level operating margin was 25.3%, an increase from 23.5% in the third quarter of 2021. The increase was primarily due to the benefit of sales leverage and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by higher food costs and increases in hourly wages.
1 Refer to definition of digital sales below. We updated the definition of digital sales in the first quarter of 2022 to include revenue deferrals related to Chipotle Rewards. We made this change to allow for a reconciliation to total food and beverage revenue as we now present In-restaurant sales.
2 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 $140.9 million on a GAAP basis, or $135.6 million2 on a non-GAAP basis, excluding $3.5 million of employee separation costs, $1 million related to corporate restructuring, and $0.8 million for a COVID-19 related modification to our 2018 performance shares made in December 2020. GAAP and non-GAAP general and administrative expenses for the third quarter of 2022 also include $114.9 million of underlying general and administrative expenses, and $21.4 million of non-cash stock compensation.
The GAAP effective income tax rate was 24.4% for the third quarter, which increased from 14.7% in the third quarter of 2021, primarily due to a decrease in tax benefits related to option exercises and equity vesting, and to a lesser extent a larger return to provision tax benefit recorded in the third quarter of 2021 as compared to the third quarter of 2022.
Net income for the third quarter was $257.1 million, or $9.20 per diluted share, an increase from $204.4 million, or $7.18 per diluted share, in the third quarter of 2021. Excluding the after-tax impact of expenses related to employee separation costs, impairment of certain corporate and restaurant assets, corporate restructuring, and expenses related to the 2018 performance share modification, adjusted net income was $265.8 million2 and adjusted diluted earnings per share was $9.512.
During the third quarter, our Board of Directors approved the investment of up to an additional $200 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $412.8 million was available as of September 30, 2022. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $106.9 million of stock at an average price per share of $1,437.87 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 2022, management is anticipating the following:
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Fourth quarter comparable restaurant sales growth in the mid to high-single digits |
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Between 235 to 250 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes construction, permit and material supply delays don’t worsen |
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An estimated underlying effective full year tax rate between 25% and 27% before discrete items |
For 2023, management is anticipating the following:
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255 to 285 new restaurant openings |
Definitions
The following definitions apply to these terms as used throughout this release:
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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. |
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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. |
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Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue. |
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Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales includes revenue deferrals associated with Chipotle Rewards. |
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In-restaurant sales represent food and beverage revenue generated on-premise. In-restaurant sales includes revenue deferrals associated with Chipotle Rewards. |
2 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.
Conference Call Details
Chipotle will host a conference call on Tuesday, October 25, 2022, at 4:30 PM Eastern time to discuss third quarter 2022 financial results as well as provide a business update for the fourth quarter 2022.
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: 8800833. 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.
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 nearly 3,100 restaurants as of September 30, 2022, 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. Chipotle is ranked on the Fortune 500 and is recognized on the 2022 list for Fortune’s Most Admired Companies. With over 100,000 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 25, 2022, conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements under “Outlook” about our goals for number of future Chipotle restaurants, restaurants with Chipotlanes and rate of expansion, future comparable restaurant sales growth, future estimated tax rates, future cash flow, and future long-term prospects. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “potential”, “intend”, “project”, “encouraged”, “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: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic, the resurgence of COVID-19 infections, the circulation of novel variants of COVID-19 and its ultimate impact on our business, including supply chain disruptions and difficulties in acquiring restaurant equipment, impact on guest traffic, restaurant sales and operating costs and the ability of our third-party suppliers and business partners to fulfill their responsibilities and commitments; increasing wage inflation and the competitive labor market, 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, avocados and packaging); 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 related to our acceptance of electronic payments or electronic processing of confidential customer or employee information, including through our digital app; 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 availability of suitable new restaurant sites and the availability of construction materials and contractors; increases in ingredient and other operating costs due to 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 the increase in inflation, fear of possible recession and higher gas prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our increased focus on our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions related to food safety incidents and potential class action litigation regarding employment 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.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
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Three months ended September 30, |
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2022 |
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2021 |
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Food and beverage revenue |
$ |
2,202,336 |
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99.2 |
% |
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$ |
1,932,409 |
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99.0 |
% |
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Delivery service revenue |
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17,839 |
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0.8 |
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19,906 |
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1.0 |
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Total revenue |
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2,220,175 |
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100.0 |
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1,952,315 |
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100.0 |
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Restaurant operating costs (exclusive of depreciation and amortization shown separately below): |
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Food, beverage and packaging |
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662,540 |
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29.8 |
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591,332 |
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30.3 |
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Labor |
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557,178 |
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25.1 |
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502,757 |
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25.8 |
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Occupancy |
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115,826 |
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5.2 |
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104,223 |
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5.3 |
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Other operating costs |
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322,085 |
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14.5 |
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294,650 |
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15.1 |
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General and administrative expenses |
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140,896 |
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6.3 |
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145,930 |
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7.5 |
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Depreciation and amortization |
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71,416 |
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3.2 |
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63,191 |
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3.2 |
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Pre-opening costs |
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7,618 |
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0.3 |
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5,894 |
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0.3 |
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Impairment, closure costs, and asset disposals |
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6,363 |
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0.3 |
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4,658 |
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0.2 |
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Total operating expenses |
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1,883,922 |
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84.9 |
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1,712,635 |
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87.7 |
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Income from operations |
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336,253 |
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15.1 |
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239,680 |
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12.3 |
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Interest and other income (expense), net |
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3,712 |
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0.2 |
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(126) |
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- |
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Income before income taxes |
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339,965 |
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15.3 |
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239,554 |
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12.3 |
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Provision for income taxes |
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(82,827) |
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(3.7) |
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(35,120) |
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(1.8) |
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Net income |
$ |
257,138 |
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11.6 |
% |
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$ |
204,434 |
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10.5 |
% |
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Earnings per share: |
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Basic |
$ |
9.26 |
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$ |
7.26 |
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Diluted |
$ |
9.20 |
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$ |
7.18 |
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Weighted-average common shares outstanding: |
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Basic |
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27,773 |
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28,150 |
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Diluted |
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27,956 |
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28,475 |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
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Nine months ended September 30, |
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2022 |
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2021 |
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Food and beverage revenue |
$ |
6,394,094 |
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99.1 |
% |
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$ |
5,517,764 |
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98.8 |
% |
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Delivery service revenue |
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59,959 |
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0.9 |
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68,664 |
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1.2 |
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Total revenue |
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6,454,053 |
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100.0 |
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5,586,428 |
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100.0 |
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Restaurant operating costs (exclusive of depreciation and amortization shown separately below): |
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Food, beverage and packaging |
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1,963,394 |
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30.4 |
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1,688,481 |
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30.2 |
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Labor |
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1,639,044 |
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25.4 |
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1,400,932 |
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25.1 |
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Occupancy |
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341,777 |
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5.3 |
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309,422 |
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5.5 |
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Other operating costs |
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970,261 |
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15.0 |
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876,602 |
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15.7 |
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General and administrative expenses |
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429,118 |
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6.6 |
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447,077 |
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8.0 |
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Depreciation and amortization |
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212,814 |
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3.3 |
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188,395 |
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3.4 |
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Pre-opening costs |
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18,219 |
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0.3 |
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14,280 |
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0.3 |
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Impairment, closure costs, and asset disposals |
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15,354 |
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0.2 |
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14,592 |
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0.3 |
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Total operating expenses |
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5,589,981 |
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86.6 |
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4,939,781 |
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88.4 |
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Income from operations |
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864,072 |
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13.4 |
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646,647 |
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11.6 |
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Interest and other income (expense), net |
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14,071 |
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0.2 |
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(1,443) |
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(0.0) |
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Income before income taxes |
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878,143 |
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13.6 |
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645,204 |
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11.5 |
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Provision for income taxes |
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(202,769) |
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(3.1) |
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(125,695) |
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(2.3) |
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Net income |
$ |
675,374 |
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10.5 |
% |
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$ |
519,509 |
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9.3 |
% |
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Earnings per share: |
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Basic |
$ |
24.20 |
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$ |
18.46 |
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Diluted |
$ |
24.02 |
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$ |
18.22 |
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Weighted-average common shares outstanding: |
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Basic |
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27,907 |
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28,137 |
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Diluted |
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28,116 |
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28,520 |
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CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
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September 30, |
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December 31, |
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2022 |
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2021 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
366,623 |
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$ |
815,374 |
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Accounts receivable, net |
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71,276 |
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99,599 |
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Inventory |
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33,752 |
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32,826 |
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Prepaid expenses and other current assets |
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76,439 |
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78,756 |
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Income tax receivable |
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112,064 |
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94,064 |
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Investments |
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417,278 |
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260,945 |
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Total current assets |
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1,077,432 |
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1,381,564 |
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Leasehold improvements, property and equipment, net |
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1,871,623 |
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1,769,278 |
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Long-term investments |
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442,620 |
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274,311 |
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Restricted cash |
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30,974 |
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30,856 |
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Operating lease assets |
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3,309,051 |
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3,118,294 |
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Other assets |
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63,798 |
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|
56,716 |
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Goodwill |
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21,939 |
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21,939 |
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Total assets |
$ |
6,817,437 |
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$ |
6,652,958 |
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Liabilities and shareholders' equity |
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Current liabilities: |
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Accounts payable |
$ |
167,842 |
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$ |
163,161 |
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Accrued payroll and benefits |
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128,495 |
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162,405 |
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Accrued liabilities |
|
156,455 |
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173,052 |
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Unearned revenue |
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133,118 |
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|
156,351 |
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Current operating lease liabilities |
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231,947 |
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218,713 |
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Total current liabilities |
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817,857 |
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873,682 |
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Long-term operating lease liabilities |
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3,497,221 |
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3,301,601 |
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Deferred income tax liabilities |
|
133,255 |
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|
141,765 |
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Other liabilities |
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41,723 |
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|
38,536 |
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Total liabilities |
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4,490,056 |
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4,355,584 |
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Shareholders' equity: |
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Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2022 and December 31, 2021, respectively |
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- |
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- |
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Common stock, $0.01 par value, 230,000 shares authorized, 37,306 and 37,132 shares issued as of September 30, 2022 and December 31, 2021, respectively |
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373 |
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|
371 |
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Additional paid-in capital |
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1,807,938 |
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|
1,729,312 |
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Treasury stock, at cost, 9,555 and 9,052 common shares as of September 30, 2022 and December 31, 2021, respectively |
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(4,076,555) |
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(3,356,102) |
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Accumulated other comprehensive loss |
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(8,896) |
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(5,354) |
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Retained earnings |
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4,604,521 |
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3,929,147 |
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Total shareholders' equity |
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2,327,381 |
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2,297,374 |
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Total liabilities and shareholders' equity |
$ |
6,817,437 |
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$ |
6,652,958 |
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Nine months ended |
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September 30, |
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|
|
2022 |
|
2021 |
||
|
Operating activities |
|
|
|
|
|
|
Net income |
$ |
675,374 |
|
$ |
519,509 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
212,814 |
|
|
188,395 |
|
Deferred income tax provision |
|
(8,567) |
|
|
(1,024) |
|
Impairment, closure costs, and asset disposals |
|
15,127 |
|
|
12,483 |
|
Provision for credit losses |
|
(969) |
|
|
733 |
|
Stock-based compensation expense |
|
77,371 |
|
|
138,741 |
|
Other |
|
(13,045) |
|
|
2,534 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
22,891 |
|
|
21,882 |
|
Inventory |
|
(1,056) |
|
|
(1,996) |
|
Prepaid expenses and other current assets |
|
(3,169) |
|
|
(19,343) |
|
Operating lease assets |
|
171,464 |
|
|
151,628 |
|
Other assets |
|
(1,537) |
|
|
1,901 |
|
Accounts payable |
|
10,774 |
|
|
28,712 |
|
Accrued payroll and benefits |
|
(32,861) |
|
|
(13,193) |
|
Accrued liabilities |
|
(16,562) |
|
|
(7,407) |
|
Unearned revenue |
|
(18,141) |
|
|
(2,978) |
|
Income tax payable/receivable |
|
(18,070) |
|
|
(35,850) |
|
Operating lease liabilities |
|
(153,200) |
|
|
(141,540) |
|
Other long-term liabilities |
|
2,968 |
|
|
474 |
|
Net cash provided by operating activities |
|
921,606 |
|
|
843,661 |
|
Investing activities |
|
|
|
|
|
|
Purchases of leasehold improvements, property and equipment |
|
(335,518) |
|
|
(320,569) |
|
Purchases of investments |
|
(513,813) |
|
|
(288,899) |
|
Maturities of investments |
|
202,997 |
|
|
243,441 |
|
Proceeds from sale of equipment |
|
- |
|
|
2,885 |
|
Net cash used in investing activities |
|
(646,334) |
|
|
(363,142) |
|
Financing activities |
|
|
|
|
|
|
Acquisition of treasury stock |
|
(629,775) |
|
|
(300,733) |
|
Tax withholding on stock-based compensation awards |
|
(92,374) |
|
|
(63,492) |
|
Other financing activities |
|
(586) |
|
|
(2,342) |
|
Net cash used in financing activities |
|
(722,735) |
|
|
(366,567) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
(1,170) |
|
|
(788) |
|
Net change in cash, cash equivalents, and restricted cash |
|
(448,633) |
|
|
113,164 |
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
846,230 |
|
|
635,836 |
|
Cash, cash equivalents, and restricted cash at end of period |
$ |
397,597 |
|
$ |
749,000 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
Income taxes paid |
$ |
227,452 |
|
$ |
163,069 |
|
Purchases of leasehold improvements, property, and equipment accrued in accounts payable and accrued liabilities |
$ |
58,127 |
|
$ |
65,311 |
|
Acquisition of treasury stock accrued in accounts payable and accrued liabilities |
$ |
5,999 |
|
$ |
4,498 |
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, |
|||||
|
|
|
2022 |
|
2022 |
|
2022 |
|
2021 |
|
2021 |
|||||
|
Number of restaurants opened |
|
|
43 |
|
|
42 |
|
|
51 |
|
|
78 |
|
|
41 |
|
Restaurant closures |
|
|
(1) |
|
|
(1) |
|
|
(1) |
|
|
- |
|
|
- |
|
Restaurant relocations |
|
|
(4) |
|
|
(3) |
|
|
(2) |
|
|
(4) |
|
|
(2) |
|
Number of restaurants at end of period |
|
|
3,090 |
|
|
3,052 |
|
|
3,014 |
|
|
2,966 |
|
|
2,892 |
|
Average restaurant sales |
|
$ |
2,796 |
|
$ |
2,747 |
|
$ |
2,684 |
|
$ |
2,641 |
|
$ |
2,554 |
|
Average restaurant sales, excluding delivery MPD(1) |
|
$ |
2,701 |
|
$ |
2,657 |
|
$ |
2,598 |
|
$ |
2,562 |
|
$ |
2,479 |
|
Comparable restaurant sales increase |
|
|
7.6% |
|
|
10.1% |
|
|
9.0% |
|
|
15.2% |
|
|
15.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Average restaurant sales, excluding delivery menu price differential ("MPD") represents average restaurant sales, as defined above, adjusted to remove the impact of higher menu prices for delivery. This is intended to illustrate our underlying food and beverage sales per restaurant. |
|||||||||||||||
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 asset impairment, corporate restructuring, 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 transformation expenses, 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, |
||||
|
|
2022 |
|
2021 |
||
|
Net income |
$ |
257,138 |
|
$ |
204,434 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
Restaurant costs: |
|
|
|
|
|
|
Operating lease asset impairment and other restaurant costs(1) |
|
698 |
|
|
218 |
|
Duplicate rent expense(2) |
|
- |
|
|
33 |
|
Corporate Restructuring: |
|
|
|
|
|
|
Duplicate rent expense(2) |
|
1,034 |
|
|
1,313 |
|
Employee related restructuring costs(3) |
|
- |
|
|
113 |
|
Stock-based compensation modification expense(4) |
|
768 |
|
|
7,619 |
|
Separation costs(5) |
|
3,538 |
|
|
- |
|
Other adjustments(6) |
|
961 |
|
|
47 |
|
Total non-GAAP adjustments |
$ |
6,999 |
|
$ |
9,343 |
|
Tax effect of non-GAAP adjustments above(7) |
|
1,686 |
|
|
1,462 |
|
Other tax non-GAAP adjustments(8) |
|
- |
|
|
(15,423) |
|
After tax impact of non-GAAP adjustments |
$ |
8,685 |
|
$ |
(4,618) |
|
Adjusted net income |
$ |
265,823 |
|
$ |
199,816 |
|
|
|
|
|
|
|
|
Diluted weighted-average number of common shares outstanding |
|
27,956 |
|
|
28,475 |
|
Diluted earnings per share |
$ |
9.20 |
|
$ |
7.18 |
|
Adjusted diluted earnings per share |
$ |
9.51 |
|
$ |
7.02 |
|
|
|
|
|
|
|
|
(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 and rent expense for closed restaurants announced in June 2018. |
|||||
|
(3) Costs for recruitment, relocation costs, third party and other employee-related costs. |
|||||
|
(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) For the three months ended September 30, 2022, other adjustments consist of impairment charges for certain corporate assets of $961. For the three months ended September 30, 2021, other adjustments consist of consulting fees associated with the calculation of our non-recurring tax benefit. |
|||||
|
(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. |
|||||
|
(8) Primarily relates to the tax benefit from the federal net operating loss generated on our federal income tax return and carried back to prior years. The tax benefit is due to the federal income tax rate differential between the 2021 and 2020 rate of 21% and the 2015-2017 rate of 35%. |
|||||
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted General and Administrative Expenses
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
||||
|
|
September 30, |
||||
|
|
2022 |
|
2021 |
||
|
General and administrative expenses |
$ |
140,896 |
|
$ |
145,930 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
Restructuring expense(1) |
|
(1,034) |
|
|
(1,459) |
|
Stock-based compensation modification expense(2) |
|
(768) |
|
|
(7,619) |
|
Separation costs(3) |
|
(3,538) |
|
|
- |
|
Other adjustments(4) |
|
- |
|
|
(47) |
|
Total non-GAAP adjustments |
$ |
(5,340) |
|
$ |
(9,125) |
|
Adjusted general and administrative expenses |
$ |
135,556 |
|
$ |
136,805 |
|
|
|
|
|
|
|
|
(1) Duplicate rent expense for office and restaurant closures announced in June 2018 due to the corporate restructuring and underperformance of $1,034 and $1,346 for the three months ended September 30, 2022 and 2021, respectively; and employee related restructuring costs of $0 and $113 for the three months ended September 30, 2022 and 2021, respectively. |
|||||
|
(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 consist of incremental compensation costs net of forfeitures of stock-based compensation. |
|||||
|
(4) For the three months ended September 30, 2021, other adjustments consist of consulting fees associated with the calculation of our non-recurring tax benefit. |
|||||
CHIPOTLE MEXICAN GRILL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted Effective Income Tax Rate
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
||||
|
|
September 30, |
||||
|
|
2022 |
|
2021 |
||
|
Effective income tax rate |
24.4 |
% |
|
14.7 |
% |
|
Tax impact of non-GAAP adjustments(1) |
(1.0) |
|
|
5.0 |
|
|
Adjusted effective income tax rate |
23.4 |
% |
|
19.7 |
% |
|
|
|
|
|
|
|
|
(1) 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
Restaurant Level Operating Margin
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
||||||||||
|
|
2022 |
|
Percent of total revenue |
|
2021 |
|
Percent of total revenue |
||||
|
Income from operations |
$ |
336,253 |
|
15.1 |
% |
|
$ |
239,680 |
|
12.3 |
% |
|
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
140,896 |
|
6.3 |
|
|
|
145,930 |
|
7.5 |
|
|
Depreciation and amortization |
|
71,416 |
|
3.2 |
|
|
|
63,191 |
|
3.2 |
|
|
Pre-opening costs |
|
7,618 |
|
0.3 |
|
|
|
5,894 |
|
0.3 |
|
|
Impairment, closure costs, and asset disposals |
|
6,363 |
|
0.3 |
|
|
|
4,658 |
|
0.2 |
|
|
Total non-GAAP Adjustments |
$ |
226,293 |
|
10.2 |
% |
|
$ |
219,673 |
|
11.3 |
% |
|
Restaurant level operating margin |
$ |
562,546 |
|
25.3 |
% |
|
$ |
459,353 |
|
23.5 |
% |