This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Chipotle Mexican Grill Inc. (CMG: chart) on February 14, 2008.

Management:

- Investor Relations: Chris Arnold
- Founder, Chairman and Chief Executive Officer: Steve Ells
- President and Chief Operating Officer: Monty Moran
- Chief Finance and Development Officer: Jack Hartung

Key Investors Issues

- Revenues increased 31.5% to $289 million from $219.7 million in 2006.
- Net income increased 61.8% to $17.5 million or 53 cents a share.
- The firm opened 37 new restaurants as compared to 35 last year.

Full Year Highlights:

- Revenue increased 31.9% to $1.1 billion from $822.9 million in 2006, attributable to new restaurants not in the comparable base and a 10.8% increase in comparable restaurant sales.
- Earnings grew 70.5% to $70.6 million or $2.13 a share from $41.4 million or $1.28 per share in the prior year.
- The firm invested a total of $139 million in capital expenditures, which includes $5.6 million for the purchase of eight franchise restaurants early in the year.

Fourth Quarter Highlights

Total revenues increased 31.5% to $289 million from $219.7 million in 2006 as a result of new restaurant openings, including 37 in the quarter, along with an increase in comparables.

- Comparable sales increased 10.6% on top of 10.1% in the prior year mostly driven by increased customer visits, while menu price increases related to the rollout of naturally raised meat contributed about 3.3%.
- This menu price impact is up from the 2.6% in the third quarter, as a result of introducing naturally raised chicken and beef in Phoenix, Tucson and Las Vegas.
- Restaurant operating margins improved 180 basis points in the quarter to 22.1% compared to 20.3% last year, primarily due to labor efficiencies and menu price increases associated with the introduction of naturally raised meat.

Food, beverage and packaging expenses were 31.9% of restaurant sales, the same percentage of last year.

- Cost pressures are expected to remain throughout the course of 2008 due to strong demand for corn, which impacted chicken and beef prices and higher wheat prices will increase the cost of tortillas.
- Labor improved 120 basis points to 26.8% versus 28% last year as the firm continued to benefit from the national labor matrix, along with higher than average restaurant sales, which together drove about 90 basis points of the improvement.
- The balance was driven by lower insurance costs, due to being self insured.
- Occupancy costs were 7.1% of sales the same as last year as economies of scale from higher sales were offset by the higher occupancy cost of new restaurants.

Other operating costs decreased 60 basis points to 12.1%, primarily as a result of reduced promotional costs.

- G&A as a percent of sales was 7.1% compared to 7.6% in the fourth quarter of last year, primarily due to efficiencies from higher sales.
- Interest income was 6.1% with most of that interest earned on tax exempt securities.
- Income from operation increased 77% to $27.5 million, compared to $15.5 million last year and operating margin improved 240 basis points to 9.5%.
- Net income increased by 62% to $17.5 million or 53 cents, up from $10.8 million or 33 cents a share in 2006 on revenue growth.

Organisational Changes:

- The firm changed the regional structure, dividing the country into five operating regions instead of three, and adding three new internally promoted regional directors.
- This new structure will allow the firm to strengthen the oversight of restaurants around the country.
- It will also provide new opportunities for other strong performers to take on new leadership roles.
- The Restaurateur program, initiated two years ago, elevated the status of those restaurants managers who demonstrated the ability to develop and empower their crew.

The results of the program have been great, the food is better, the service is better, turnover is lower and facilities are better maintained than ever before.

- The firm is going to elevate those best area managers to a new position, which will be called team leader.
- These team leaders will earn incentives when they develop restaurateurs and will supervise 12 or more restaurants, which is more than the current average of about 8 restaurants per area manager.
- Turnover rate among managers is around 25%, which is well below the industry average and more than half of these managers have come from crew positions.
- The firm ended the year with 78 restaurateurs, meaning about 11% of restaurants are currently being managed by this elite class of managers.

The Restaurant Economic Model:

- Strong economics at the restaurant level allows to invest in the premium ingredients i.e. efficiencies generate from a focused menu and economies of scale from higher sales in each restaurant, are reinvested into higher cost premium ingredients.
- It funds the vision of changing the way world thinks about any fast food by making these premium ingredients successful and affordable to everyone.
- The model is also critically important because the stronger it becomes, the more value the firm can create as it continues to open new restaurants.