Press Release

Chipotle Mexican Grill, Inc. Announces Second Quarter 2012 Results

DENVER--(BUSINESS WIRE)--Jul. 19, 2012-- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2012.

Highlights for the second quarter of 2012 as compared to the second quarter of 2011 include:

Revenue increased 20.9% to $690.9 million
Comparable restaurant sales increased 8.0%
Restaurant level operating margin was 29.2%, an increase of 340 basis points
Net income was $81.7 million, an increase of 61.2%
Diluted earnings per share was $2.56, an increase of 61.0%

Highlights for the six months ended June 30, 2012 as compared to the prior year include:

Revenue increased 23.2% to $1.33 billion
Comparable restaurant sales increased 10.2%
Restaurant level operating margin was 28.3%, an increase of 280 basis points
Net income was $144.3 million, an increase of 48.8%
Diluted earnings per share was $4.53, an increase of 48.0%

"We are pleased that our continued focus on improving the quality and taste of our food, along with strengthening our people culture, has lead to a better dining experience for our customers, and ultimately better financial results for our shareholders,” said Steve Ells, Founder, Chairman and Co-CEO of Chipotle.

Second quarter 2012 results

Revenue for the quarter was $690.9 million, up 20.9% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 8.0% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by the impact of menu price increases, most of which were taken in 2011, as well as from increased traffic.

During the quarter we opened 55 new restaurants, including our first restaurant in Paris, France, bringing the total restaurant count to 1,316.

Restaurant level operating margin was 29.2% in the quarter, an increase of 340 basis points from the prior year period. The increase was primarily driven by leverage from higher average restaurant sales and lower marketing expenses.

G&A costs were 6.1% of revenue, down 120 basis points from the prior year period. The decrease as a percent of revenue was driven by favorable sales leverage, lower employee bonus accruals, and lower legal expenses, partially offset by an increase in non-cash stock-based compensation expense.

Net income for the second quarter of 2012 was $81.7 million, or $2.56 per diluted share, compared to $50.7 million, or $1.59 per diluted share, in the second quarter of 2011.

Results for the six months ended June 30, 2012

Revenue for the first six months of 2012 was $1.33 billion, up 23.2% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 10.2% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic as well as the impact from menu price increases, most of which were taken in 2011.

During the first six months of the year, we opened 87 new Chipotle restaurants, bringing the total restaurant count to 1,316.

Restaurant level operating margin was 28.3% for the first six months, an increase of 280 basis points from the prior year period. The increase was primarily driven by the impact of leverage from higher restaurant sales and from lower marketing costs.

G&A costs for the first six months of 2012 were 6.9% of revenue, or flat to prior year primarily due to leverage from higher sales as well as a lower bonus accrual, offset by higher stock based compensation expense.

Net income for the first six months of 2012 was $144.3 million, or $4.53 per diluted share, compared to $97.0 million, or $3.06 per diluted share, in the first six months of 2011.

"While I’m pleased with the financial results in the quarter, I’m even more delighted that we are developing more restaurateurs than ever before, and our restaurant teams are the strongest they have ever been. We know that having strong leaders in our restaurants, who are hiring and empowering top performers to deliver high standards and an extraordinary dining experience, will lead to more loyal Chipotle customers, and greater shareholder value,” commented Co-CEO Monty Moran.

Outlook

For 2012, management expects the following:

155-165 new restaurant openings
Mid-single digit comparable restaurant sales growth for the full year
An effective tax rate of approximately 39.0%

Definitions

The following definitions apply to these terms as used throughout this release:

Comparable restaurant sales increases represent the change in period-over-period sales for the comparable restaurant base. A restaurant becomes comparable in its 13^th full calendar month of operation.

Average restaurant sales refers to the average trailing 12-month sales for 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 the second quarter 2012 financial results today at 4:30 PM Eastern Time. The conference call can be accessed live over the phone by dialing 1-866-431-5320 or for international callers by dialing 1-719-325-2197. A replay will be available one hour after the call and can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for international callers; the password is 7427674. The replay will be available until July 26, 2012. The call will be webcast live from the Company's website at chipotle.com under the investor relations section. An archived webcast will be available 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 over 1,300 restaurants. For more information, visit chipotle.com.

Forward-Looking Statements

Certain statements in this press release, including statements about financial results and shareholder returns, as well as statements under the heading “Outlook” of our expected number of new restaurant openings, comparable restaurant sales increases, and effective tax rate in 2012, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate”, “believe”, “could”, “should”, “estimate”, “expect”, “intend”, “may”, “predict”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified employees; the uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; the performance of new restaurants and their impact on existing restaurant sales; increases in the cost of food ingredients and other key supplies; the risk of food-borne illnesses and other health concerns about our food; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of immigration enforcement activities; risks relating to our expansion into new markets; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages; risks associated with our Food With Integrity strategy, including supply shortages; changes in consumer preferences, general economic conditions or consumer discretionary spending; the effect of competition in the restaurant industry; the effects of continuing economic uncertainty on our business and on our suppliers, landlords and potential developers; the impact of increasing general and administrative expenses due to higher non-cash stock-based compensation expense and other increased expenses; risks relating to litigation; risks relating to our insurance coverage and self-insurance; our dependence on key personnel; security risks associated with the acceptance of electronic payment cards; the uncertainty of our ability to protect our name, logo and other proprietary information or the reputation of our brand; the potential effects of inclement weather; risks related to the tax treatment of our separation from McDonald’s; 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 our Investor Relations page of our Web site at chipotle.com.


Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Income and Comprehensive Income
(in thousands, except per share data)
(unaudited)

	Three months ended June 30,
	2012					2011

Revenue	$	690,932		100.0	%	$	571,561		100.0	%

Restaurant operating costs (Exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		221,517		32.1			188,121		32.9
Labor		159,895		23.1			137,705		24.1
Occupancy		41,758		6.0			36,195		6.3
Other operating costs		66,353		9.6			62,221		10.9
General and administrative expenses		42,295		6.1			41,968		7.3
Depreciation and amortization		20,543		3.0			18,505		3.2
Pre-opening costs		3,306		0.5			1,606		0.3
Loss on disposal of assets		1,475		0.2			1,377		0.2
Total operating expenses		557,142		80.6			487,698		85.3
Income from operations		133,790		19.4			83,863		14.7

Interest and other income (expense), net		377		0.1			(2,006	)	(0.4	)
Income before income taxes		134,167		19.4			81,857		14.3
Provision for income taxes		(52,484	)	(7.6	)		(31,200	)	(5.5	)
Net income	$	81,683		11.8	%	$	50,657		8.9	%

Earnings per share:
Basic	$	2.58				$	1.63
Diluted	$	2.56				$	1.59
Weighted average common shares outstanding:
Basic		31,696					31,167
Diluted		31,951					31,761
Comprehensive income	$	80,625				$	50,764

Chipotle Mexican Grill, Inc. Condensed Consolidated Statement of Income and Comprehensive Income (in thousands, except per share data) (unaudited)

	Six months ended June 30,
	2012					2011

Revenue	$	1,331,535		100.0	%	$	1,080,945		100.0	%

Restaurant operating costs (Exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		428,107		32.2			351,029		32.5
Labor		311,880		23.4			262,993		24.3
Occupancy		82,267		6.2			71,510		6.6
Other operating costs		132,532		10.0			119,606		11.1
General and administrative expenses		91,629		6.9			74,184		6.9
Depreciation and amortization		40,627		3.1			36,999		3.4
Pre-opening costs		5,754		0.4			2,902		0.3
Loss on disposal of assets		2,725		0.2			3,038		0.3
Total operating expenses		1,095,521		82.3			922,261		85.3
Income from operations		236,014		17.7			158,684		14.7

Interest and other income (expense), net		811		0.1			(1,719	)	(0.2	)
Income before income taxes		236,825		17.8			156,965		14.5
Provision for income taxes		(92,478	)	(6.9	)		(59,926	)	(5.5	)
Net income	$	144,347		10.8	%	$	97,039		9.0	%

Earnings per share:
Basic	$	4.57				$	3.12
Diluted	$	4.53				$	3.06
Weighted average common shares outstanding:
Basic		31,553					31,125
Diluted		31,899					31,740
Comprehensive income	$	143,972				$	97,764

Chipotle Mexican Grill, Inc. Condensed Consolidated Balance Sheet (in thousands, except per share data)

	June 30, 2012			December 31, 2011

Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	404,797		$	401,243
Accounts receivable, net of allowance for doubtful accounts of $369 and $208 as of June 30, 2012 and December 31, 2011, respectively		10,351			8,389
Inventory		10,504			8,913
Current deferred tax asset		7,310			6,238
Prepaid expenses and other current assets		28,298			21,404
Income tax receivable		34,446			--
Investments		124,736			55,005
Total current assets		620,442			501,192
Leasehold improvements, property and equipment, net		804,655			751,951
Long term investments		169,177			128,241
Other assets		32,196			21,985
Goodwill		21,939			21,939
Total assets	$	1,648,409		$	1,425,308
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	55,960		$	46,382
Accrued payroll and benefits		56,199			60,241
Accrued liabilities		37,812			46,456
Current portion of deemed landlord financing		138			133
Income tax payable		--			4,241
Total current liabilities		150,109			157,453
Deferred rent		154,726			143,284
Deemed landlord financing		3,459			3,529
Deferred income tax liability		63,794			64,381
Other liabilities		15,096			12,435
Total liabilities		387,184			381,082
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2012 and December 31, 2011		—			—
Common stock, $0.01 par value, 230,000 shares authorized, 34,896 and 34,357 shares issued as of June 30, 2012 and December 31, 2011, respectively		349			344
Additional paid-in capital		789,271			676,652
Treasury stock, at cost, 3,208 and 3,105 common shares at June 30, 2012 and December 31, 2011, respectively		(344,023	)		(304,426	)
Accumulated other comprehensive income (loss)		(178	)		197
Retained earnings		815,806			671,459
Total shareholders' equity		1,261,225			1,044,226
Total liabilities and shareholders' equity	$	1,648,409		$	1,425,308

Chipotle Mexican Grill, Inc. Condensed Consolidated Statement of Cash Flows (unaudited) (in thousands)

	Six months ended June 30,
	2012			2011

Operating activities
Net income	$	144,347		$	97,039
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,627			36,999
Deferred income tax provision (benefit)		(1,659	)		8,701
Loss on disposal of assets		2,725			3,038
Bad debt allowance		185			3
Stock-based compensation		37,677			21,978
Excess tax benefit on stock-based compensation		(73,652	)		(29,673	)

Other		207			2,479
Changes in operating assets and liabilities:
Accounts receivable		(2,147	)		(524	)
Inventory		(1,593	)		(1,347	)
Prepaid expenses and other current assets		(6,893	)		(15,260	)
Other assets		(10,213	)		64
Accounts payable		4,899			6,369
Accrued liabilities		(12,705	)		(12,203	)
Income tax payable/receivable		34,964			47,067
Deferred rent		11,446			7,919
Other long-term liabilities		2,660			2,067
Net cash provided by operating activities		170,875			174,716

Investing activities
Purchases of leasehold improvements, property and equipment		(90,332	)		(57,681	)
Acquisition of interests in equity method investment		-			(586	)
Purchase of investments		(110,870	)		(89,702	)
Maturities of investments		-			90,007
Net cash used in investing activities		(201,202	)		(57,962	)

Financing activities
Acquisition of treasury stock		(39,597	)		(22,484	)
Proceeds from option exercises		167			457
Excess tax benefit on stock-based compensation		73,652			29,673
Payments on deemed landlord financing		(65	)		(58	)
Net cash used in financing activities		34,157			7,588

Effect of exchange rate changes on cash and cash equivalents		(276	)		621
Net change in cash and cash equivalents		3,554			124,963
Cash and cash equivalents at beginning of period		401,243			224,838
Cash and cash equivalents at end of period	$	404,797			349,801

Supplemental disclosures of cash flow information
Increase in purchases of leasehold improvements, property, and equipment accrued in accounts payable	$	4,687		$	180

Chipotle Mexican Grill, Inc. Supplemental Financial and Other Data (dollars in thousands)
(unaudited)

	For the three months ended
	June 30,	Mar. 31,	Dec. 31,	Sept. 30,	June 30,
	2012	2012	2011	2011	2011
Number of restaurants opened	55	32	67	32	39
Restaurant relocations or closures	(1)	--	--	--	(3)
Number of restaurants at end of period	1,316	1,262	1,230	1,163	1,131
Average restaurant sales	$2,106	$2,072	$2,013	$1,973	$1,927
Comparable restaurant sales increases	8.0%	12.7%	11.1%	11.3%	10.0%

Source: Chipotle Mexican Grill, Inc.

Chipotle Mexican Grill, Inc.
Investor Relations:
Alex Spong, 303-222-2552

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