Chipotle Mexican Grill, Inc. Announces Third Quarter 2009 Results

--Comparable restaurant sales increased 2.7%

Chipotle Mexican Grill, Inc. (NYSE: CMG and CMG.B) today reported financial results for its third quarter ended September 30, 2009.

Highlights for the third quarter of 2009 as compared to the third quarter of 2008 include:

-- Revenue increased 13.8% to $387.6 million

-- Comparable restaurant sales increased 2.7%

-- Restaurant level operating margin was 25.5%, an increase of 410 basis points

-- Net income was $34.5 million, an increase of 76.9%

-- Diluted earnings per share was $1.08, an increase of 83.1%

Highlights for the nine months ended September 30, 2009 as compared to the prior year period include:

-- Revenue increased 14.6% to $1.13 billion

-- Comparable restaurant sales increased 2.2%

-- Restaurant level operating margin was 25.1%, an increase of 340 basis points

-- Net income was $95.2 million, an increase of 55.6%

-- Diluted earnings per share was $2.96, an increase of 60.9%

"Our performance continues to be driven by our efficient business model, and our emphasis on doing just a few things, but always working hard to do them better. This approach to running our business enables us to continue to deliver impressive financial performance to our shareholders even in this challenging environment," said Founder, Chairman, and Co-CEO, Steve Ells.

Third quarter 2009 results

Revenue for the third quarter of 2009 increased 13.8% to $387.6 million from $340.5 million in the third quarter of 2008. This growth in revenue was attributable to new restaurants not in the comparable base and a 2.7% increase in comparable restaurant sales in the third quarter. Comparable restaurant sales growth was due to the impact of menu price increases partially offset by a decline in customer visits. Chipotle opened 26 new restaurants during the third quarter of 2009 and operated 911 restaurants as of the end of the quarter.

Restaurant level operating margins increased to 25.5% in the third quarter of 2009 from 21.4% in the third quarter of 2008, primarily due to menu price increases and labor efficiencies, partially offset by the impact of lower transaction volumes and increased occupancy costs.

General and administrative expenses were $24.6 million in the third quarter of 2009, or 6.3% of revenue, compared to $22.6 million in the third quarter of 2008, or 6.6% of revenue. The decrease as a percentage of revenue resulted from menu price increases, thoughtful management of expenses and an all manager conference held during the third quarter of 2008, partially offset by higher performance based bonus accruals in 2009.

Net income for the third quarter of 2009 was $34.5 million, or $1.08 per diluted share, compared to $19.5 million, or $0.59 per diluted share in the third quarter of 2008.

Results for the nine months ended September 30, 2009

Revenue for the nine months ended September 30, 2009 increased 14.6% to $1,130.9 million from $986.6 million in the prior year period. This growth in revenue was attributable to new restaurants not in the comparable base and a 2.2% increase in comparable restaurant sales. Comparable restaurant sales growth was due to the impact of menu price increases partially offset by a decline in customer visits. Chipotle opened 76 new restaurants during the nine months ended September 30, 2009.

Restaurant level operating margins increased to 25.1% in the period, versus 21.7% in the nine months ended September 30, 2008 primarily due to menu price increases, labor efficiencies and a decrease in marketing and promotional spend, partially offset by the impact of lower transaction volumes and increased occupancy costs.

General and administrative expenses were $74.1 million for nine months ended September 30, 2009, or 6.5% of revenue, compared to $64.9 million, or 6.6% of revenue, for the prior year period. General and administrative expenses decreased as a percentage of revenue primarily due to the impact of menu price increases and thoughtful management of expenses, partially offset by higher performance-based bonus accruals and stock-based compensation expense for 2009.

Net income for the nine months ended September 30, 2009 was $95.2 million, or $2.96 per diluted share, compared to $61.2 million, or $1.84 per diluted share in the prior year period.

"What pleases me most about our results for the first nine months is that most of this success is the result of the hard work of our restaurant managers and crew, who by their increasingly efficient operation of our restaurants have allowed Chipotle to achieve some of the best margins in the restaurant industry, while creating exceptional restaurant experiences for our guests," said Monty Moran, Co-CEO.

Outlook

For 2009, management expects the following:

-- Full year comparable restaurant increases in the low single digits

-- 120-130 new restaurant openings

-- An effective tax rate of 38.1%

-- Diluted weighted average common shares outstanding of approximately 32.2 million

For 2010, management expects the following:

-- 120-130 new restaurant openings

-- Flat comparable restaurant sales

-- An effective tax rate of approximately 38.5%

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.

Conference Call

Chipotle will host a conference call to discuss third quarter 2009 financial results today at 4:30 PM Eastern Time. Hosting the call will be Steve Ells, Founder, Chairman and Co-Chief Executive Officer, Monty Moran, Co-Chief Executive Officer, and Jack Hartung, Chief Financial Officer. The conference call can be accessed live over the phone by dialing 1-888-211-9963 or 1-913-312-0382 for international callers. 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 4347835. The replay will be available until October 29, 2009. The call will be webcast live from the Company's Web site at Chipotle.com under the Investor Relations section. An archived webcast will be available approximately one hour after the end of the call.

About Chipotle

Steve Ells, Founder, Chairman and Co-Chief Executive Officer, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through our vision of Food with Integrity, Chipotle is seeking better food 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 around 900 restaurants. For more information, visit 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, the number of restaurants we intend to open, our expected effective tax rate, and expected number of shares outstanding are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate", "believe", "could", "should", "estimate", "expect", "intend", "may", "predict", "project", "target", and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; 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; changes in consumer preferences, general economic conditions or consumer discretionary spending; changes in the availability and costs of food; risks relating to our expansion into new markets; the risk of food-borne illnesses and other health concerns about our food products; 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; risks related to our implementation of a new marketing strategy; 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 separation from McDonald's and 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 chipotle.com.

Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
                                              Three months ended September 30,
                                              2009               2008
Revenue                                       $387,581  100.0%   $ 340,543  100.0%
Restaurant operating costs:
Food, beverage and packaging                  119,473   30.8     112,412    33.0
Labor                                         96,419    24.9     89,534     26.3
Occupancy                                     28,677    7.4      24,483     7.2
Other operating costs                         44,118    11.4     41,379     12.2
General and administrative expenses           24,555    6.3      22,645     6.6
Depreciation and amortization                 15,451    4.0      13,769     4.0
Pre-opening costs                             2,535     0.7      2,884      0.8
Loss on disposal of assets                    1,544     0.4      2,379      0.7
                                              332,772   85.9     309,485    90.9
Income from operations                        54,809    14.1     31,058     9.1
Interest and other income                     132       0.0      931        0.3
Interest and other expense                    (74)      0.0      (78)       0.0
Income before income taxes                    54,867    14.2     31,911     9.4
Provision for income taxes                    (20,403)  (5.3)    (12,434)   (3.7)
Net income                                    $34,464   8.9%     $19,477    5.7%
Earnings per share:
Basic                                         $1.09              $0.59
Diluted                                       $1.08              $0.59
Weighted average common shares outstanding:
Basic                                         31,625             32,862
Diluted                                       31,949             33,170

Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
                                              Nine months ended September 30,
                                              2009                 2008
Revenue                                       $1,130,873  100.0%   $ 986,624  100.0%
Restaurant operating costs:
Food, beverage and packaging                  349,564     30.9     321,003    32.5
Labor                                         285,375     25.2     259,222    26.3
Occupancy                                     83,801      7.4      69,720     7.1
Other operating costs                         128,626     11.4     122,649    12.4
General and administrative expenses           74,071      6.5      64,889     6.6
Depreciation and amortization                 45,368      4.0      38,646     3.9
Pre-opening costs                             5,996       0.5      9,118      0.9
Loss on disposal of assets                    4,752       0.4      5,212      0.5
                                              977,553     86.4     890,459    90.3
Income from operations                        153,320     13.6     96,165     9.7
Interest and other income                     623         0.1      3,199      0.3
Interest and other expense                    (333)       0.0      (227)      0.0
Income before income taxes                    153,610     13.6     99,137     10.0
Provision for income taxes                    (58,361)    (5.2)    (37,908)   (3.8)
Net income                                    $95,249     8.4%     $ 61,229   6.2%
Earnings per share:
Basic                                         $2.99                $1.86
Diluted                                       $2.96                $1.84
Weighted average common shares outstanding:
Basic                                         31,827               32,842
Diluted                                       32,168               33,261

Chipotle Mexican Grill,Inc.
Consolidated Balance Sheet
(in thousands, except per share data)
                                                                      September    December
                                                                      30, 2009     31, 2008
                                                                      (unaudited)
Assets
Current assets:
Cash and cash equivalents                                             $238,446     $88,044
Accounts receivable, net of allowance for doubtful accounts of $366
and $608
as of September 30, 2009 and December 31, 2008, respectively          3,133        3,643
Inventory                                                             5,858        4,789
Current deferred tax asset                                            3,371        2,557
Prepaid expenses                                                      13,358       11,764
Income tax receivable                                                 4,976        285
Available-for-sale securities                                         --           99,990
Total current assets                                                  269,142      211,072
Leasehold improvements, property and equipment, net                   622,026      585,899
Other assets                                                          6,712        6,075
Goodwill                                                              21,939       21,939
Total assets                                                          $919,819     $824,985
Liabilities and shareholders' equity
Current liabilities:
Accounts payable                                                      $32,555      $23,890
Accrued payroll and benefits                                          29,121       24,469
Accrued liabilities                                                   25,371       28,347
Current portion of deemed landlord financing                          89           82
Total current liabilities                                             87,136       76,788
Deferred rent                                                         99,506       87,009
Deemed landlord financing                                             3,810        3,878
Deferred income tax liability                                         41,058       29,863
Other liabilities                                                     6,627        4,857
Total liabilities                                                     238,137      202,395
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no
shares
issued as of September 30, 2009 and December 31, 2008                 --           --
Class A common stock, $0.01 par value, 200,000 shares authorized,
and 15,031
and 14,453 shares issued as of September 30, 2009 and December 31,
2008,
respectively                                                          150          145
Class B common stock, $0.01 par value, 30,000 shares authorized,
18,425
shares issued as of September 30, 2009 and December 31, 2008          184          184
Additional paid-in capital                                            535,660      501,993
Treasury stock, at cost, 1,823 and 692 class B common shares at
September
30, 2009 and December 31, 2008, respectively                          (100,228)    (30,227)
Accumulated other comprehensive loss                                  (21)         (193)
Retained earnings                                                     245,937      150,688
Total shareholders' equity                                            681,682      622,590
Total liabilities and shareholders' equity                            $919,819     $824,985

Chipotle Mexican Grill,Inc.
Consolidated Statement of Cash Flows
(unaudited)
(in thousands)
                                                                   Nine months ended
                                                                   September 30,
                                                                   2009      2008
Operating activities
Net income                                                         $95,249   $61,229
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                                      45,368    38,646
Deferred income tax provision                                      10,381    13,218
Loss on disposal of assets                                         4,752     5,212
Bad debt allowance                                                 (245)     404
Stock-based compensation                                           11,479    8,540
Other                                                              172       (54)
Changes in operating assets and liabilities:
Accounts receivable                                                755       387
Inventory                                                          (1,069)   (1,153)
Prepaid expenses                                                   (1,594)   (3,084)
Other assets                                                       (637)     (569)
Accounts payable                                                   3,230     4,884
Accrued liabilities                                                1,676     (1,678)
Income tax receivable/payable                                      (4,691)   6,340
Deferred rent                                                      12,497    16,929
Other long-term liabilities                                        1,770     1,411
Net cash provided by operating activities                          179,093   150,662
Investing activities
Purchases of leasehold improvements, property and equipment, net   (80,282)  (110,010)
Maturity of available-for-sale securities                          99,990    20,000
Net cash provided by (used in) investing activities                19,708    (90,010)
Financing activities
Proceeds from option exercises                                     11,406    206
Excess tax benefit on stock-based compensation                     10,257    205
Payments on deemed landlord financing                              (61)      (56)
Acquisition of treasury stock                                      (70,001)  --
Net cash provided by (used in) financing activities                (48,399)  355
Net change in cash and cash equivalents                            150,402   61,007
Cash and cash equivalents at beginning of period                   88,044    151,176
Cash and cash equivalents at end of period                         $238,446  $212,183
Supplemental disclosures of cash flow information
Increase/(decrease) in purchases of leasehold
improvements, property and equipment accrued in
accounts payable                                                   $5,435    $(4,485)

Chipotle Mexican Grill, Inc.
Supplemental Financial Data
(dollars in thousands)
(unaudited)
                                         For the three months ended
                                         Sept. 30,  June 30,  Mar. 31,  Dec. 31,  Sept. 30,
                                         2009       2009      2009      2008      2008
Number of restaurants opened             26         24        26        39        20
Restaurant relocations or closures       (1)        --        (1)       --        --
Number of restaurants at end of period   911        886       862       837       798
Average restaurant sales                 $1,736     $1,734    $1,755    $1,763    $1,768
Comparable restaurant sales increases    2.7%       1.7%      2.2%      3.5%      3.1%

SOURCE: Chipotle Mexican Grill, Inc.

Chipotle Mexican Grill, Inc. 
Investor Relations: 
Kate Giha, 614-508-1303 
or 
Media: 
Chris Arnold, 303-222-5912