Chipotle Mexican Grill(CMG) - 2023 Q4 - Annual Report

Financial Position and Assets - Cash and cash equivalents increased to $560.6 million as of December 31, 2023, compared to $384.0 million in 2022[199] - Total current assets rose to $1.62 billion in 2023 from $1.18 billion in 2022[199] - Long-term investments grew to $564.5 million in 2023, up from $388.1 million in 2022[199] - The company holds $1.9 billion in cash, cash equivalents, and investments as of December 31, 2023[182] - Leasehold improvements, property, and equipment increased to $2.17 billion in 2023 from $1.95 billion in 2022[199] - Operating lease assets grew to $3.58 billion in 2023, up from $3.30 billion in 2022[199] - Prepaid expenses and other current assets increased from $86,412 in 2022 to $117,462 in 2023[256] - Leasehold improvements, property and equipment, net increased from $1,951,147 in 2022 to $2,170,038 in 2023[260] - Cash and cash equivalents increased from $1,254,114 in 2022 to $1,652,564 in 2023[269] - Equity method investments decreased from $11,697 in 2022 to $8,896 in 2023[276] Liabilities and Equity - Total liabilities increased to $4.98 billion in 2023 from $4.56 billion in 2022[199] - Shareholders' equity expanded to $3.06 billion in 2023, compared to $2.37 billion in 2022[199] - Retained earnings rose to $6.06 billion in 2023, compared to $4.83 billion in 2022[199] - Accrued payroll and benefits increased from $170,456 in 2022 to $227,537 in 2023[257] - Chipotle Rewards liability, ending balance increased from $38,057 in 2022 to $44,750 in 2023[264] - Deferred compensation obligations totaled $27,178 as of December 31, 2023, with scheduled payments of $5,339 in 2024 and $9,319 thereafter[307][311] Revenue and Profitability - Total revenue for 2023 reached $9.87 billion, a 14.3% increase from $8.63 billion in 2022[201] - Net income for 2023 was $1.23 billion, up 36.7% from $899.1 million in 2022[201] - Diluted earnings per share (EPS) for 2023 was $44.34, a 38.4% increase from $32.04 in 2022[201] - Food and beverage revenue grew to $9.80 billion in 2023, a 14.6% increase from $8.56 billion in 2022[201] - Income before income taxes increased from $1,181,531 in 2022 to $1,620,506 in 2023[280] - Net income for 2023 was $1,228,737, with basic earnings per share of $44.59 and diluted earnings per share of $44.34[318] Expenses and Costs - Labor costs increased to $2.44 billion in 2023, up 11.1% from $2.20 billion in 2022[201] - Depreciation and amortization expenses rose to $319.4 million in 2023, an 11.4% increase from $286.8 million in 2022[201] - Stock-based compensation expense for 2023 was $126.7 million, with approximately 114,000 stock awards subject to performance conditions[193] - Stock-based compensation expense increased to $124.0 million in 2023, up 26.5% from $98.0 million in 2022[206] - Advertising, marketing, and promotional costs totaled $264.085 million in 2023, $250.673 million in 2022, and $222.091 million in 2021[248] - Stock-based compensation expense is recognized on a straight-line basis, with performance-based awards vesting over a three-year performance and service period[250] - Pre-opening costs for restaurants, including rent, wages, and food, are expensed as incurred prior to opening[251] - Operating lease cost for 2023 was $436,313, with total lease payments of $5,743,452 as of December 31, 2023[314][316] Taxes and Tax-Related Items - The effective income tax rate for 2023 was 24.2%, up from 23.9% in 2022, primarily due to a decrease in excess tax benefits related to option exercises and equity vesting[282] - The provision for income taxes in 2023 was $391,769, compared to $282,430 in 2022 and $159,779 in 2021[282] - Gross foreign net operating losses (NOLs) were $149,891 as of December 31, 2023, up from $114,727 in 2022, and can be carried forward indefinitely[285] - Gross state NOLs were $62,492 as of December 31, 2023, down from $73,327 in 2022, and expire over varying intervals[285] - The company had gross valuation allowances against certain foreign deferred tax assets of $160,607 as of December 31, 2023, up from $124,609 in 2022[286] - Interest expense related to uncertain tax positions was $1,541 in 2023, compared to $384 in 2022 and $180 in 2021[287] Stock-Based Compensation and Equity - Stock-based compensation expense for 2023 was $126,686, up from $99,821 in 2022 and $178,703 in 2021[290] - The company had $424,107 authorized for repurchasing shares of common stock as of December 31, 2023, including a $200,000 additional authorization approved in December 2023[292] - The total intrinsic value of SOSARs exercised in 2023 was $142,830, compared to $77,124 in 2022 and $498,399 in 2021[297] - Unrecognized stock-based compensation expense for non-vested PSU stock awards was $69,610 as of December 31, 2023, expected to be recognized over a weighted-average period of 1.9 years[302] - Performance share awards range from 0% to 300% of the target based on growth in comparable restaurant sales and average restaurant margin over a three-year period starting January 1, 2021[305] - The 2018 Performance Share Awards modification resulted in incremental compensation expense of $71,441, with $7,255 recognized in 2022[307] - Employee Stock Purchase Plan (ESPP) allows employees to purchase common stock at 92.5% of the lower fair market value, with 250 shares authorized and 248 available as of December 31, 2023[309] - 401(k) Plan matching contributions totaled $13,821 in 2023, $12,923 in 2022, and $10,527 in 2021[310] Leases and Operating Costs - Operating lease assets and liabilities are recognized at the lease commencement date, with lease liabilities representing the present value of unpaid lease payments[227] - Total lease costs include fixed operating lease costs, variable lease costs, and short-term lease costs, with variable costs based on a percentage of gross sales in excess of specified levels[228] - Operating lease cost for 2023 was $436,313, with total lease payments of $5,743,452 as of December 31, 2023[314][316] Investments and Other Financial Activities - Capitalized internal costs for restaurant acquisition, development, and construction were $15.385 million in 2023, $12.695 million in 2022, and $10.870 million in 2021[223] - The company has a $500,000 revolving credit facility with JPMorgan Chase Bank, bearing interest at SOFR plus 1.475%, with no outstanding borrowings as of December 31, 2023[322] - The company owns 10.2% of Tractor's common stock, with purchases from Tractor totaling $43,555 in 2023[324] - Investment in Vebu Inc. resulted in purchases of $991 in 2023, with the company maintaining significant influence over Vebu[324] Impairment and Asset Valuation - Long-lived assets are reviewed for impairment, with impairment charges representing the excess of an asset's carrying amount over its estimated fair value[253] - Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period[254] Credit and Allowances - The allowance for credit losses increased to $2.74 million in 2023, up 132.4% from $1.18 million in 2022[215] - Revenue recognized from gift card liability balance at the beginning of the year increased from $59,175 in 2022 to $61,389 in 2023[263]