CHIPOTLE MEXICAN GRILL INC - Quarter Report: 2022 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 10-Q
______________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-32731
______________________________
CHIPOTLE MEXICAN GRILL, INC.
(Exact name of registrant as specified in its charter)
______________________________
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Delaware | 84-1219301 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
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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
______________________________
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 |
Common stock, par value $0.01 per share | CMG | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
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Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | 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 accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
As of October 24, 2022, there were 27,721,112 shares of the registrant’s common stock, par value of $0.01 per share outstanding.
TABLE OF CONTENTS
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| PART I |
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Item 1. | 1 | |
| 1 | |
| Condensed Consolidated Statements of Income and Comprehensive Income | 2 |
| 3 | |
| 4 | |
| 5 | |
| Note 1 - Basis of Presentation and Update to Accounting Policies | 5 |
| 5 | |
| 5 | |
| 6 | |
| 8 | |
| 9 | |
| 9 | |
| 10 | |
| 10 | |
| 11 | |
| 11 | |
| 11 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
Item 3. | 18 | |
Item 4. | 18 | |
| PART II |
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Item 1. | 19 | |
Item 1A. | 19 | |
Item 2. | 19 | |
Item 3 | 19 | |
Item 4 | 19 | |
Item 5 | 20 | |
Item 6. | 21 | |
| 22 |
PART I
ITEM 1. FINANCIAL STATEMENTS
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
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| September 30, |
| December 31, | ||
| 2022 |
| 2021 | ||
| (unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents | $ | 366,623 |
| $ | 815,374 |
Accounts receivable, net |
| 71,276 |
|
| 99,599 |
Inventory |
| 33,752 |
|
| 32,826 |
Prepaid expenses and other current assets |
| 76,439 |
|
| 78,756 |
Income tax receivable |
| 112,064 |
|
| 94,064 |
Investments |
| 417,278 |
|
| 260,945 |
Total current assets |
| 1,077,432 |
|
| 1,381,564 |
Leasehold improvements, property and equipment, net |
| 1,871,623 |
|
| 1,769,278 |
Long-term investments |
| 442,620 |
|
| 274,311 |
Restricted cash |
| 30,974 |
|
| 30,856 |
Operating lease assets |
| 3,309,051 |
|
| 3,118,294 |
Other assets |
| 63,798 |
|
| 56,716 |
Goodwill |
| 21,939 |
|
| 21,939 |
Total assets | $ | 6,817,437 |
| $ | 6,652,958 |
Liabilities and shareholders' equity |
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Current liabilities: |
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Accounts payable | $ | 167,842 |
| $ | 163,161 |
Accrued payroll and benefits |
| 128,495 |
|
| 162,405 |
Accrued liabilities |
| 156,455 |
|
| 173,052 |
Unearned revenue |
| 133,118 |
|
| 156,351 |
Current operating lease liabilities |
| 231,947 |
|
| 218,713 |
Total current liabilities |
| 817,857 |
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| 873,682 |
Commitments and contingencies (Note 10) |
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Long-term operating lease liabilities |
| 3,497,221 |
|
| 3,301,601 |
Deferred income tax liabilities |
| 133,255 |
|
| 141,765 |
Other liabilities |
| 41,723 |
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| 38,536 |
Total liabilities |
| 4,490,056 |
|
| 4,355,584 |
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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| - |
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 |
| 373 |
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| 371 |
Additional paid-in capital |
| 1,807,938 |
|
| 1,729,312 |
Treasury stock, at cost, 9,555 and 9,052 common shares as of September 30, 2022 and December 31, 2021, respectively |
| (4,076,555) |
|
| (3,356,102) |
Accumulated other comprehensive loss |
| (8,896) |
|
| (5,354) |
Retained earnings |
| 4,604,521 |
|
| 3,929,147 |
Total shareholders' equity |
| 2,327,381 |
|
| 2,297,374 |
Total liabilities and shareholders' equity | $ | 6,817,437 |
| $ | 6,652,958 |
See accompanying notes to condensed consolidated financial statements.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
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| Three months ended |
| Nine months ended | ||||||||
| September 30, |
| September 30, | ||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Food and beverage revenue | $ | 2,202,336 |
| $ | 1,932,409 |
| $ | 6,394,094 |
| $ | 5,517,764 |
Delivery service revenue |
| 17,839 |
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| 19,906 |
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| 59,959 |
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| 68,664 |
Total revenue |
| 2,220,175 |
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| 1,952,315 |
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| 6,454,053 |
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| 5,586,428 |
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): |
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Food, beverage and packaging |
| 662,540 |
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| 591,332 |
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| 1,963,394 |
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| 1,688,481 |
Labor |
| 557,178 |
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| 502,757 |
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| 1,639,044 |
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| 1,400,932 |
Occupancy |
| 115,826 |
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| 104,223 |
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| 341,777 |
|
| 309,422 |
Other operating costs |
| 322,085 |
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| 294,650 |
|
| 970,261 |
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| 876,602 |
General and administrative expenses |
| 140,896 |
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| 145,930 |
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| 429,118 |
|
| 447,077 |
Depreciation and amortization |
| 71,416 |
|
| 63,191 |
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| 212,814 |
|
| 188,395 |
Pre-opening costs |
| 7,618 |
|
| 5,894 |
|
| 18,219 |
|
| 14,280 |
Impairment, closure costs, and asset disposals |
| 6,363 |
|
| 4,658 |
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| 15,354 |
|
| 14,592 |
Total operating expenses |
| 1,883,922 |
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| 1,712,635 |
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| 5,589,981 |
|
| 4,939,781 |
Income from operations |
| 336,253 |
|
| 239,680 |
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| 864,072 |
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| 646,647 |
Interest and other income (expense), net |
| 3,712 |
|
| (126) |
|
| 14,071 |
|
| (1,443) |
Income before income taxes |
| 339,965 |
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| 239,554 |
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| 878,143 |
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| 645,204 |
Provision for income taxes |
| (82,827) |
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| (35,120) |
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| (202,769) |
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| (125,695) |
Net income | $ | 257,138 |
| $ | 204,434 |
| $ | 675,374 |
| $ | 519,509 |
Earnings per share: |
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Basic | $ | 9.26 |
| $ | 7.26 |
| $ | 24.20 |
| $ | 18.46 |
Diluted | $ | 9.20 |
| $ | 7.18 |
| $ | 24.02 |
| $ | 18.22 |
Weighted-average common shares outstanding: |
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Basic |
| 27,773 |
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| 28,150 |
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| 27,907 |
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| 28,137 |
Diluted |
| 27,956 |
|
| 28,475 |
|
| 28,116 |
|
| 28,520 |
Other comprehensive income (loss), net of income taxes: |
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Foreign currency translation adjustments | $ | (2,257) |
| $ | (956) |
| $ | (3,542) |
| $ | (914) |
Comprehensive income | $ | 254,881 |
| $ | 203,478 |
| $ | 671,832 |
| $ | 518,595 |
See accompanying notes to condensed consolidated financial statements.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
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| Common Stock |
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| Treasury Stock |
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| Shares |
| Amount |
| Additional |
| Shares |
| Amount |
| Retained |
| Accumulated Other Comprehensive Income (Loss) |
| Total | ||||||
Balance, December 31, 2020 | 36,704 |
| $ | 367 |
| $ | 1,549,909 |
| 8,703 |
| $ | (2,802,075) |
| $ | 3,276,163 |
| $ | (4,229) |
| $ | 2,020,135 |
Stock-based compensation | - |
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| - |
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| 55,960 |
| - |
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| - |
|
| - |
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| - |
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| 55,960 |
Stock plan transactions and other | 232 |
|
| 2 |
|
| 632 |
| - |
|
| - |
|
| - |
|
| - |
|
| 634 |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 74 |
|
| (106,036) |
|
| - |
|
| - |
|
| (106,036) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 127,101 |
|
| - |
|
| 127,101 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (263) |
|
| (263) |
Balance, March 31, 2021 | 36,936 |
| $ | 369 |
| $ | 1,606,501 |
| 8,777 |
| $ | (2,908,111) |
| $ | 3,403,264 |
| $ | (4,492) |
| $ | 2,097,531 |
Stock-based compensation | - |
|
| - |
|
| 47,670 |
| - |
|
| - |
|
| - |
|
| - |
|
| 47,670 |
Stock plan transactions and other | 52 |
|
| 1 |
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| 24 |
| - |
|
| - |
|
| - |
|
| - |
|
| 25 |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 113 |
|
| (159,347) |
|
| - |
|
| - |
|
| (159,347) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 187,974 |
|
| - |
|
| 187,974 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| 305 |
|
| 305 |
Balance, June 30, 2021 | 36,988 |
| $ | 370 |
| $ | 1,654,195 |
| 8,890 |
| $ | (3,067,458) |
| $ | 3,591,238 |
| $ | (4,187) |
| $ | 2,174,158 |
Stock-based compensation | - |
|
| - |
|
| 36,693 |
| - |
|
| - |
|
| - |
|
| - |
|
| 36,693 |
Stock plan transactions and other | 114 |
|
| 1 |
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| (82) |
| - |
|
| - |
|
| - |
|
| - |
|
| (81) |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 57 |
|
| (103,340) |
|
| - |
|
| - |
|
| (103,340) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 204,434 |
|
| - |
|
| 204,434 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (956) |
|
| (956) |
Balance, September 30, 2021 | 37,102 |
| $ | 371 |
| $ | 1,690,806 |
| 8,947 |
| $ | (3,170,798) |
| $ | 3,795,672 |
| $ | (5,143) |
| $ | 2,310,908 |
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Balance, December 31, 2021 | 37,132 |
| $ | 371 |
| $ | 1,729,312 |
| 9,052 |
| $ | (3,356,102) |
| $ | 3,929,147 |
| $ | (5,354) |
| $ | 2,297,374 |
Stock-based compensation | - |
|
| - |
|
| 24,077 |
| - |
|
| - |
|
| - |
|
| - |
|
| 24,077 |
Stock plan transactions and other | 134 |
|
| 2 |
|
| (61) |
| - |
|
| - |
|
| - |
|
| - |
|
| (59) |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 230 |
|
| (345,921) |
|
| - |
|
| - |
|
| (345,921) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 158,294 |
|
| - |
|
| 158,294 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| 195 |
|
| 195 |
Balance, March 31, 2022 | 37,266 |
| $ | 373 |
| $ | 1,753,328 |
| 9,282 |
| $ | (3,702,023) |
| $ | 4,087,441 |
| $ | (5,159) |
| $ | 2,133,960 |
Stock-based compensation | - |
|
| - |
|
| 29,142 |
| - |
|
| - |
|
| - |
|
| - |
|
| 29,142 |
Stock plan transactions and other | 18 |
|
| - |
|
| (167) |
| - |
|
| - |
|
| - |
|
| - |
|
| (167) |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 198 |
|
| (267,198) |
|
| - |
|
| - |
|
| (267,198) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 259,942 |
|
| - |
|
| 259,942 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (1,480) |
|
| (1,480) |
Balance, June 30, 2022 | 37,284 |
| $ | 373 |
| $ | 1,782,303 |
| 9,480 |
| $ | (3,969,221) |
| $ | 4,347,383 |
| $ | (6,639) |
| $ | 2,154,199 |
Stock-based compensation | - |
|
| - |
|
| 25,587 |
| - |
|
| - |
|
| - |
|
| - |
|
| 25,587 |
Stock plan transactions and other | 22 |
|
| - |
|
| 48 |
| - |
|
| - |
|
| - |
|
| - |
|
| 48 |
Acquisition of treasury stock | - |
|
| - |
|
| - |
| 75 |
|
| (107,334) |
|
| - |
|
| - |
|
| (107,334) |
Net income | - |
|
| - |
|
| - |
| - |
|
| - |
|
| 257,138 |
|
| - |
|
| 257,138 |
Other comprehensive income (loss), net of income tax | - |
|
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (2,257) |
|
| (2,257) |
Balance, September 30, 2022 | 37,306 |
| $ | 373 |
| $ | 1,807,938 |
| 9,555 |
| $ | (4,076,555) |
| $ | 4,604,521 |
| $ | (8,896) |
| $ | 2,327,381 |
See accompanying notes to condensed consolidated financial statements.
CHIPOTLE MEXICAN GRILL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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| Nine months ended | ||||
| September 30, | ||||
| 2022 |
| 2021 | ||
Operating activities |
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Net income | $ | 675,374 |
| $ | 519,509 |
Adjustments to reconcile net income to net cash provided by operating activities: |
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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: |
|
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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 |
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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 |
|
|
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|
|
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 |