Memo and Recommendation –

The analysis and recommendation must be written in the form of a business memorandum from theEquity Research team (you) to the Portfolio Manager (me) and must include each of the followingcomponents.Balance Sheet Analysis (base company): Chipotle is the base company and Potbelly is the peer compnayAnalyze three items on the balance sheet (or balance sheet-based financial ratios; see the list onpage 4) for your base company for the last two years and discuss whether the company’sperformance related to these items appear to be improving, deteriorating, or remaining stable.Justify your answer. Do not choose three items that measure the same thing.current ratio, and quick ratio are all measures of the liquidity of the firm (using CA and CL). If you choosethese three for your BS ratios, your memo will be redundant.Balance Sheet-based ratios:- Asset turnover- AR turnover- Inventory turnover- Debt-to-equity ratio- Net working capital- Current ratio- Quick ratio 7/28/24, 8:30 PM
cmg-20231231x10k
Table of Contents
CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Income tax receivable
Investments
Total current assets
Leasehold improvements, property and equipment, net
Long-term investments
Restricted cash
Operating lease assets
Other assets
Goodwill
$
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
$
Accrued payroll and benefits
Accrued liabilities
Unearned revenue
Current operating lease liabilities
Total current liabilities
Commitments and contingencies (Note 11)
Long-term operating lease liabilities
Deferred income tax liabilities
Other liabilities
Total liabilities
Shareholders’ equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December
31, 2023 and December 31, 2022, respectively
Common stock, $0.01 par value, 230,000 shares authorized, 37,483 and 37,320 shares issued as
of December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Treasury stock, at cost, 10,057 and 9,693 common shares as of December 31, 2023 and
December 31, 2022, respectively
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
$
Total liabilities and shareholders’ equity
560,609
115,535
39,309
117,462
52,960
734,838
1,620,713
2,170,038
564,488
25,554
3,578,548
63,082
21,939
8,044,362
$
197,646
227,537
147,688
209,680
248,074
1,030,625
$
$
384,000
106,880
35,668
86,412
47,741
515,136
1,175,837
1,951,147
388,055
24,966
3,302,402
63,158
21,939
6,927,504
184,566
170,456
147,539
183,071
236,248
921,880
3,803,551
89,109
58,870
4,982,155
3,495,162
98,623
43,816
4,559,481
–
–
375
1,956,160
373
1,829,304
(4,944,656)
(6,657)
6,056,985
3,062,207
8,044,362 $
(4,282,014)
(7,888)
4,828,248
2,368,023
6,927,504
See accompanying notes to consolidated financial statements.
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Table of Contents
CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
Food and beverage revenue
$
Delivery service revenue
Total revenue
Restaurant operating costs (exclusive of depreciation and amortization shown
separately below):
Food, beverage and packaging
Labor
Occupancy
Other operating costs
General and administrative expenses
Depreciation and amortization
Pre-opening costs
Impairment, closure costs, and asset disposals
Total operating expenses
Income from operations
Interest and other income, net
Income before income taxes
Provision for income taxes
$
Net income
Earnings per share:
$
Basic
$
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Other comprehensive income/(loss), net of income taxes:
Foreign currency translation adjustments
$
$
Comprehensive income
Year ended December 31,
2023
2022
9,804,124 $
8,558,001 $
67,525
76,651
9,871,649
8,634,652
2021
7,457,169
89,892
7,547,061
2,912,564
2,440,982
503,264
1,428,747
633,584
319,394
36,931
38,370
8,313,836
1,557,813
62,693
1,620,506
(391,769)
1,228,737 $
2,602,245
2,197,958
460,425
1,311,905
564,191
286,826
29,560
21,139
7,474,249
1,160,403
21,128
1,181,531
(282,430)
899,101 $
2,308,631
1,917,761
416,606
1,197,054
606,854
254,657
21,264
19,291
6,742,118
804,943
7,820
812,763
(159,779)
652,984
44.59
44.34
32.28
32.04
23.21
22.90
$
$
27,555
27,710
1,231
1,229,968
$
$
$
$
27,851
28,062
28,132
28,511
(2,534)
896,567 $
(1,125)
651,859
See accompanying notes to consolidated financial statements.
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Potbelly Corporation and Subsidiaries
Consolidated Balance Sheets
(amounts in thousands, except par value data)
December 31,
2023
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net of allowances of $26 and $16 as of December 31, 2023 and December 25, 2022, respectively
Inventories
$
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use assets for operating leases
Indefinite-lived intangible assets
Goodwill
Restricted cash
Deferred expenses, net and other assets
Total assets
Liabilities and equity
Current liabilities
Accounts payable
Accrued expenses
Short-term operating lease liabilities
33,788
7,960
3,516
7,828
December 25,
2022
$
15,619
6,420
3,990
4,501
53,092
30,530
45,087
144,390
3,404
2,056
749
3,681
44,477
160,891
3,404
2,222
—
3,647
$
252,460
$
245,171
$
9,927
35,377
24,525
1,250
$
10,718
30,826
27,395
—
Current portion of long-term debt
Total current liabilities
71,078
68,939
Long-term debt
Long-term operating lease liabilities
Other long-term liabilities
19,168
142,050
6,070
8,550
160,968
2,441
Total liabilities
238,367
240,898
389
2,219
462,583
(116,701)
(333,797)
384
2,566
455,831
(115,388)
(338,916)
14,693
(600)
4,477
(204)
14,093
4,273
Commitments and contingencies (Note 14)
Equity
Common stock, $0.01 par value—authorized 200,000 shares; outstanding 29,364 and 28,819 shares as of December 31,
2023 and December 25, 2022, respectively
Warrants
Additional paid-in-capital
Treasury stock, held at cost, 10,077 and 9,924 shares as of December 31, 2023, and December 25, 2022, respectively
Accumulated deficit
Total stockholders’ equity
Non-controlling interest
Total equity
$
Total liabilities and equity
252,460
$
245,171
See accompanying notes to the consolidated financial statements.
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Potbelly Corporation and Subsidiaries
Consolidated Statements of Operations
(amounts and shares in thousands, except per share data)
Fiscal Year
2023
Revenues
Sandwich shop sales, net
Franchise royalties, fees and rental income
Total revenues
$
$
447,901
4,072
$
377,283
2,769
451,973
380,052
133,726
143,744
51,885
84,363
5,741
48,496
12,138
115
(2,142)
3,338
481,403
10,006
129,151
142,095
54,536
74,916
694
37,741
11,890
—
—
4,754
455,777
(3,804)
105,035
127,099
53,821
63,514
313
31,724
15,909
—
—
5,125
402,540
(22,488)
$
3,281
239
6,486
909
5,577
458
5,119
$
1,349
(10,191)
5,038
327
4,711
366
4,345 $
963
—
(23,451)
172
(23,623)
161
(23,784)
$
$
0.18
0.17
$
$
0.15
0.15
(0.86)
(0.86)
Interest expense, net
Loss/(gain) on extinguishment of debt
Income (loss) before income taxes
Income tax expense
Net income (loss)
Net income attributable to non-controlling interest
Net income (loss) per common share attributable to common stockholders:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
482,246
9,163
2021
491,409
Expenses
Sandwich shop operating expenses, excluding depreciation
Food, beverage and packaging costs
Labor and related expenses
Occupancy expenses
Other operating expenses
Franchise support, rent and marketing expenses
General and administrative expenses
Depreciation expense
Pre-opening costs
Gain on Franchise Growth Acceleration Initiative activities
Impairment, loss on disposal of property and equipment and shop closures
Total expenses
Income (loss) from operations
Net income (loss) attributable to Potbelly Corporation
2022
29,201
30,088
$
$
28,625
29,065
27,640
27,640
See accompanying notes to the consolidated financial statements.
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