Financial Statement Analysis Chipotle Mexican Grill

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years we see that those as well increased over a steady rate. In 2009 the average sale per location was $1.728, which rose to $2.013 by the end of the 2011 Fiscal Year. The sales jumped by about 117% during that time frame, that coupled with increase in locations makes for constant increase in Net Income.

Depreciation expense has stayed constant over the years as well, hanging out around the $70 mark. This is common because Chipotle does not close, or relocate many locations, keeping there initial investments, along with the profit of using those said investments.

Major Cost Breakdown

When looking at the Major Cost Breakdown, we see that about 40% of the cost is the food and packaging. For Chipotle to keep the quality of the product where it is and run a higher percentage, would mean to increase the cost of the food itself, however the average price is already at around eight dollars. This is substantially higher than the average sale at a McDonald’s or Burger King.

BALANCE SHEET:

Total current assets for FY2011 increased $508.8 (148%) since FY2009. Most notably, cash and cash equivalents increased significantly, $181.7 at a rate of about 183%. That is a remarkable increase over a two-year span, if that continues you can see why we need to jump on the investment of this company. One can also note that the increase in inventory was at about 159%, however is only a 2% portion of the Total Assets.

One substantial bit of information about Chipotle Mexican Grill is the fact that they run their company at a total of $0 in Long-Term and Short-Term debt. This means that they keep themselves from owing debtors as well as paying interest on the loans they carry. This may also be due to the fact that they do not Lease the equipment needed to run the business and each location, rather pay for them upfront, saving on interest, as well as maybe being offered discounts. Many may say that means they are not aggressively expanding to flood the market, but I say they are playing their cards perfectly by choosing each location to ensure proper amount of sales, with an increase of average sales each year. Not outlaying cash but instead accruing the expense would improve one’s cash on hand. However, that does not seem to be of a big concern, as they still have cash to help fund their investments, due to the high increase in stock prices, and stock sales.

Total Shareholder’s equity rose from $703.4 in 2009 to an impressive $1,044.2 by the end of the 2012 Year. This is an increase of about 148%, which seems to be a common increase throughout the company’s balance sheet and income statements.

STATEMENT OF CASH FLOW:

Net Change in Cash and Cash Equivalents went from $131.5 in 2009, then dropped to about $5.3 in 2010, then jumped back up to $176.4 in 2012. This may seem bad, but was due to fluctuations in the Sale Purchase of Stocks, which fluctuated along those years.

Chipotle Mexican Grill’s earnings per share for fiscal years 2009 to 2011 are outlined in the graph below and demonstrate a strong and growing EPS. By consistently growing their number of locations, average sales per location as well as keeping debt to the bare minimum, Chipotle has been able to grow their stock by as much as 170% over a two year time frame. Proper Management training, along with best practices, has kept Chipotle’s head over water, even during a tough economic situation in our country.

RATIO ANALYSIS OF FINANCIAL STATEMENTS:

Debt Management Ratios

When dealing with Chipotle Mexican Grill, and there running of a company debt free, the result would be a debt to income ratio of zero, it is non existent because Chipotle feels they need to run a company without owing others. It has worked for them for many years, and unless something changes dramatically, it will continue to work in their future.

Profitability Ratios

To showcase the earnings and profitability potential of Chipotle Mexican Grill over the last three years, let’s look at the Gross Profit Ratio and Profit Margin Ratio. The GP ratio held steady between .25 and .27 from FY2009 to FY2011. This is indicative that they are now more easily able to cover more expenses from each dollar earned in revenue. The Profit Margin ratio went from about 8.4% in FY2009 to around 9.5% in the 2011 year. This seems to be a consistent range thourght the prior years as well, the good thing is that the percentage is rising, even though it is slowly.

Liquidity Ratios - Current Ratio

Computing Chipotle Mexican Grills current liquidity ratios to provide a measure of how easily the firm met its obligations show an improving trend. They have increased their current ratio from 2.91 in 2009 to 3.18 in 2011, it has stayed pretty consistent over the three year spread.

FINANCES TODAY:

Chipotle Mexican Grill has continued breaking through any borders they come to. They have increased their Total Revenues to $2,731, which is an increase of about 20% from year prior. That seems consistent from what we have seen from the history to the present. It is safe to say that they have a great 20-25% increase on average, and it is shown both in the total revenue as well as the growth of the actual share prices. The Net Income increased as well up to $278 from $215 the year prior. The Profit Margin got a bump as well up to the 10% level.

This year had some items that stood out, one being the Change in Cash and Cash Equivalents. In 2011 there was about $176.4, whereas in 2012 we had a $(78.7), a huge difference. One major factor was the big jump in Sale Purchase Stock that rose at a huge 244% increase. The Other large factor was that there was an increase of about $100 in the form of investments.

These are not something to worry about, because some fluctuation is normal on any companies financials, especially when they are seeing an average of over 20% growth each and every year for the last four years.

FINANCES OF THE FUTURE:

I have run a spreadsheet looking at the possible values of Chipotle Mexican Grill over the next 5 years. Below is my Pro Forma chart at a growth rate of 25%.

Year 2013 2014 2015 2016 2017

Sales $3,087.00 $3,858.75 $4,823.44 $6,029.30 $7,536.62

Variable Costs $2,253.00 $2,353.84 $2,942.30 $3,677.87 $4,597.34

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