Good afternoon, and welcome to the Chipotle Mexican Grill Fourth Quarter 2011 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce Chipotle's Director of Investor Relations, Alex Spong. You may begin your conference.

Thank you. Hello, everyone, and welcome to our call today. By now you should have access to our earnings announcement released this afternoon for the fourth quarter and full year 2011. It may also be found on our website at chipotle.com in the Investor Relations section. Before we begin our presentation, I will remind everyone that parts of our discussion today will include forward-looking statements as defined in the Securities laws. These forward-looking statements will include projections of the number of restaurants we intend to open, comp restaurant sale increases, food cost trends, margins, effective tax rates, return on investment, investment costs, capital expenditures and shareholder returns, as well as other statements of our expectations and plans. These statements are based on information available to us today, and we are not assuming any obligation to update them. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We refer you to the risk factors in our annual report on Form 10-Q and Form 10-K as updated in our subsequent 10-Qs, for discussion of these risks. Our discussion today will also include non-GAAP financial measures, the reconciliation of which can be found on the presentation page of the Investor Relations section of our website. I'd like to remind everyone that we have adopted a self-imposed quiet period, restricting communications with investors during that period. The quiet period begins on the first day of the last month of each fiscal quarter and continues until the next earnings conference call. For the first quarter, it will begin on March 1 and continue to our first quarter release in April. On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer; Monty Moran, Co-Chief Executive Officer; and Jack Hartung, Chief Financial Officer. And with that, I'll turn the call over to Steve.

I'm pleased with our fourth quarter results and our performance throughout 2011. In a year where we saw only modest improvement in the economy, along with pressure from rising commodity costs, we were able to grow our revenue 23.7% to $596.7 million during the fourth quarter and 23.6% to $2.27 billion for the year. We posted same-store sales growth of 11.1% during the quarter and 11.2% for the full year. And our restaurant-level margins were 26.1% for the quarter and 26% for the full year, among the highest in the industry. Our performance is a direct result of our continued focus on just a few things: strengthening our food culture, which is aimed at finding the very best ingredients we can; our ongoing quest for more sustainable sources for all of our ingredients that we use; and our commitment to preparing food in our restaurants using classic cooking techniques; and our people culture, which is stronger than ever, as our top-performing employees continue to develop into inspiring future leaders of our company. While our primary focus is on building the Chipotle brand in the U.S., we're making small investments now in what we believe will become potential growth opportunities in the future. To this end, we plan to open a second ShopHouse restaurant in Washington D.C. market later this year. ShopHouse Southeast Asian Kitchen is a product of our belief that Chipotle's success has never really been about serving burritos and tacos. But rather, it's due to our commitment to serving the best-tasting food prepared using classic cooking techniques, building restaurant teams of top-performers who are empowered to create a unique and special restaurant experience and designing restaurants that are functional, appealing and that say something about the food we serve. Like Chipotle, ShopHouse embraces all of these ideals. We're…

Thank you, Steve. Maintaining such a strong focus on the things that are most important to Chipotle's success requires great discipline. And we're glad to see that by maintaining this focus, we continue to produce strong results. By continuing to improve the critical areas of our business, particularly our food culture and our people culture, we are raising our standards to new levels all the time. The quality of our food is the best that it has ever been, as is the quality of our people. For example, the quality of the restaurant experiences we are seeing during our Restaurateur interviews today is far better than ever before. This group of extraordinary leaders continues to raise the bar in every facet of our operations: better customer service, faster throughput, cleaner restaurants and crews of empowered top-performers that give us great confidence that our future leaders are already among us. As our managers aspire to become Restaurateurs, they know that the key ingredient is a team of all top-performers. And more today than ever, both our GMs and our field leaders know that while building a strong team takes a lot of effort, it need not take a lot of time. And as they work towards quickly building stronger teams, they are raising their standards both in terms of whom they hire, as well as who they allow to remain on their team. They've also raised their expectations about how quickly they can elevate a team of high-performers to the Restaurateur level. During 2011, we added 102 new Restaurateurs, and we now have more than 240 Restaurateurs overseeing nearly 40% of our restaurants, including their home restaurant and other restaurants that they mentor. And if you include field leaders who have come through the Restaurateur program, in other words, those that…

Thanks, Monty. We're extremely proud of the results that our restaurant teams delivered during the fourth quarter and for the entire year in 2011. Our managers continue to delight our customers by hiring top-performing crew, empowering them to make each customers dining experience truly special. Our financial results continue to be driven by a focus on strengthening our food culture, our people culture and our business model. And while we're pleased with these financial results, we're even more pleased with the strong position we are in as we look to the future, both in 2012 and beyond. We're proud to report our sixth consecutive quarter of double-digit comps since the economy began to recover, with a comp of 11.1% in the quarter. And our average restaurant sales now exceed $2 million for the first time. Sales in the fourth quarter increased 23.7% to $596.7 million, driven by new restaurant openings and the 11.1% comp increase. The comp was driven mostly from increased traffic while higher menu prices added about 4.9%. For the year, sales increased 23.6% to $2.27 billion, and the comp for the full year was 11.2%. Menu price increases helped the full-year comp by 2.9%. And as we mentioned on our last earnings call, we still haven't seen any noticeable resistance to the summer's price increase, either on an average check or in transaction trends. Our comps held up well in the fourth quarter despite a tougher comparison to Q4 of 2010, when we had a comp of 12.6%. The unusually mild weather in December compared to winter storms in 2010 added about 1% to our Q4 sales comp. January sales comp started out quite strong as the mild weather continued into the first few weeks of 2012. And now that more normal winter weather has arrived in…

[Operator Instructions] Our first question today comes from David Tarantino with Robert W Baird. David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division: Jack, I just wanted to clarify a couple of points you made on the recent comp trends and just get your thoughts on what's driving that trend. So first of all, on the comment about trends sort of settling in once you got past the weather, if you could maybe clarify what you meant by that, and is it still sort of running in that sort of low double-digit range even when you factor out the weather? And then secondly, the comp trend has stayed very strong despite very difficult comparisons. And I was just curious to know your thoughts on whether you think some of that's being driven by some of the internal factors like marketing and throughput or if you think the consumer environment is starting to look a little bit better.

Okay. Yes, David, on the comps, this is always a choppy time of year to look at the trends and sort through what's happening because you're trying to sort through winter weather, either mild or extreme this year than compared to last year. And so when we do that and we start to see kind of normal winter weather this year compared to relatively normal winter weather last year, it does look like our trends are returning back to very strong kind of in that very low double-digit range. So for example, if you took the 1% that we got out of the fourth quarter would be right at about a 10% or a 10.1% or so. And that's more in line with what it looks like the underlying trends are. Now, in terms of our comp trends remaining strong, they have remained strong. We think the comparisons are going to get tougher, David, because we're still, right now, comparing against just one year of double-digit comp and we've got 2 more quarters to do that. So if you go back to a couple of years, to 2010, in the first quarter of 2010, we were -- we had a comp of about 4%. Second quarter, it was a little over 8%. And so we're kind of looking at it as those are relatively easy comparisons because it's not 2 years of double-digit comps. So we think that as we get out into the second half of the year, that's where we'll see whether we can find over 2 years of double-digit comps. We have a nice history of doing that for 10 years before the recession, and we just don't know how things will look in the second half of the year and we also compare it to the price increase in the second half of the year. In terms of are we seeing anything specific in our comps from marketing or throughput? I would say no. There's nothing noticeable that we're seeing that's directly attributable to throughput or marketing. We think that marketing is definitely helping our cause. We definitely think that it's allowing people to discover why Chipotle is special, why our food and how we source our food is different than any other restaurant company. We think that the loyalty is likely to increase as a result of our marketing efforts. But in terms of seeing a change in our comp trend line from marketing or throughput, we're not seeing that yet.

We'll hear next from Michael Kelter of Goldman Sachs.

I have 2 questions. The first one, on the productivity gains that you guys have been referencing, are you seeing an increase in traffic at the stores in which productivity gains are significant? Or people just shifting back from the shoulder periods to peak lunch? Or is it -- are you seeing anything that leads you to believe this is now going to drive up traffic at those particular stores? And then on a separate kind of unrelated note, on the marketing, the customer card and some of the other stuff that you guys are doing and investments you're making, do you see any of them as being meaningful in 2012, or at this point, just kind of rotating around different things you're doing, tweaking things, playing with things, however, nothing is really going to move the needle? Or are you getting really confident about anything in particular?

Mike, I'll the try to answer the throughput question. I mean, Jack pointed out that it's hard to sort of label the throughput has been that we can attribute much of the comp trends to the throughput at this point or the change in throughput. We have seen some encouraging signs. We brought our focus back to this a quarter or 2 ago and in the second -- in the fourth quarter of 2011 versus the previous year's fourth quarter. We saw very encouraging results, particularly December, where we saw that our throughput was faster in December than the previous December and even quicker than it was during our best work in 2007. So that's nice to see. And it was -- our throughput in December was the fastest we've ever had. And so far, we don't see any -- that, that's falling off in January, which is terrific. We think that we're going to continue to be able to do that. It's really all just getting ready for game time, which is sort of April, May, June, July, when seasonality dictates that we have a lot more people come into our restaurants. And that's really what we're doing, is making sure that our teams are aware of exactly those things they need to do to drive great throughput. They're ready to do it when those lines get really, really long. Because that's the time when we really need lunch -- peak hour lunch and peak hour dinner to be able to contribute their fair share to our underlying comp. The percentage of our comp that is attributable to our peak lunch hour in December also increased over the previous month and also increased over where it was the fourth quarter the year before. So that was another nice thing we saw that we were able to get the lunch hour to contribute sort of more of its fair share to comps. So that was something that also encourages us. Again, we want to be careful. We're optimistic. We feel very good about it. It seems like our reemphasis on this important initiative is leading to some really great results. But again, game time is April, May, June, July when the traffic really returns and that's when we really judge, grade ourselves on how effectively we've sort of improved on this really important initiative. So we're optimistic for now. We've seen some clear benefits. But will we be able to pull those off when it gets real, real busy? We believe we will, but that remains to be seen. The second question, maybe you can repeat that one...

So Michael, I think that we've done some things that have really have really made an impact marketing-wise. And if you think about our marketing, we really want to deepen our relationships, develop a deep relationship with our customers. And what I mean by that is really allowing them to understand what differentiates Chipotle and what makes it special. And I think over the years, we've learned that, that quick sort of advertising blitz about the facts of Food With Integrity don't accomplish that. But over the past year or so, we've developed things like the Farm Team, the Cultivate event in Chicago, the video Back to the Start, which really all are designed to develop a relationship, an emotional relationship, with our customers. And it's working. We get great response. Our research indicates that we're really connecting with our customers and they're finding reasons to appreciate Chipotle more beyond just great tasting food and value and convenience. And it's these things, it's marketing this way that I think is more sustainable long term. It's not about a marketing blitz or limited time offer that might provide a blip or move the needle, as you say, in a jerky way. Rather, it's something that's calculating and sustainable. And I think, again, really means something to customers, especially our customers.

Our next question will come from Paul Westra with Cowen and Company.

I just had a follow-up question on the marketing spend. Jack, I think you said 1.75% for this year and '12. What was it for the full year of '11? And obviously, given Steve's comments, it sounds like you're getting a good return on that investment. Is that a number that should creep up or down looking up beyond 2012?

Paul, it was lower in 2011. It was in the 1.4% to 1.5% range. And so we've been underspending the last couple years and we've really kind of changed almost everything about our marketing and we feel really good about the steps we've taken. We feel really good about this film that Steve talked about and the more people that see it, the more people are really connecting with that film in a special way. This Cultivate event, which we had in Chicago last year, we plan to do another event or 2 like that next year, are totally different things. They've never been done before by Chipotle. We're not aware that anything has been done like these by any companies in the past. And so, as we're finding our way on finding successes, connecting with customers with these efforts, we now are feeling like we want to do more of them. So I would say we've underspent the last couple of years, and we want to return back to the kind of the 1.75%. We don't have any expectations of needing to go past 1.5% to fully invest in the marketing activities that we're thinking about right now.

Great. And then one more question. I'm curious of your guys' perspective especially with your unique people skills, what do you think the impact of the Healthcare Reform Act, if it is implemented in its current line in '13? Have you looked at that? Would that affect you as a company or maybe how it will affect you differently than maybe the industry?

Yes, Paul, we have looked at it. We haven't spent an extraordinary amount of time on it just because there's enough uncertainty. Hopefully some of which will be resolved this year. It would have a meaningful impact on us. It would have an impact on, we believe, every restaurant company, including us. And so, we're not prepared to talk about the specific dollar amounts, but it would mean taking virtually all of our crew that worked a certain number of hours and offer them insurance. And we, today, have an insurance -- a limited insurance program that we offer our crew. Most of our crew choose not to pick that up. And so we would go from very few of our crew being involved in the voluntary program to us being required to provide insurance to all of our employees. So it would be pretty significant change to our business.

We'll take the next question from Jason West with Deutsche Bank.

Just want to follow up on Monty's comments around some of the HR initiatives and trying to bring more people on board. I mean, should we read anything into that around your ability to hire good people these days and they've had some issues with turnover earlier in 2011. If you could just kind of update us on where you guys are there.

Yes, it's a great question. It's funny, when we were sort of putting together our comments, we all discussed about how maybe someone would think that there was something to read into that, so I'm glad you asked. We did have a higher turnover last year and we hired a lot, lot, lot of people last year. An underlying question that you guys might have is, are you still able to find really good people? And the answer is yes, we are. We found that more and more people are coming our way. We are interviewing more and more people, we're hiring more people, but we're able to be more selective because of the greater number of people coming our way. But when you start to look at the pool of people who come our way and why they come our way, we have not been very strategic about that, historically. People just get to know us and friends tell friends or we put out advertisements on Craigslist or other sort of message boards, both electronic and paper, and people come in. But we haven't been really that strategic about it and we did a little bit of research midyear, towards the end of the year, to find out what the perceptions were of some of these people, people who were looking for jobs in the "quick service" or "fast casual" industry. And what we found is that their perception about what the job at Chipotle was all about was the same for Chipotle as it might be for even quick-serve restaurants, fast food restaurants. In other words, they didn't think that it was that much of a great job. They didn't know what opportunities were available to them. They didn't know much about what kind of culture we have.…

Our next question comes from Joe Buckley with Bank of America Merrill Lynch.

I have 2 questions. Monty, your comments about the expansion and the goal opening 155 to 165 stores in 2012, you mentioned something about over the next several years as well. I guess, I was curious if you're thinking that 2013, 2014 expansion will be in the same absolute number range.

Well, I really wasn't trying to pencil in any number range for that. We'll give that much later in the year. I guess -- first and foremost, I was wanting to express a great deal of confidence in the guidance we've given of 155 to 165 for this year because our real estate pipeline and the quality of the real estate that's in that pipeline is really terrific. And that's, I think, evident in some of the comments Jack made with regard to the strength of our new store openings and the quality of the restaurants that we've been able to open throughout the country, throughout all the regions, proven and developing markets and new markets. So we feel real good about the pipeline of real estate. I think the A Model strategy has given us a lot more flexibility, and frankly, a lot more creativity in the way we look at real estate. So sometimes, for instance, even when we go into a market and looking for A Models -- in other words, going to a market that perhaps is off the beaten path or something we wouldn't have really looked before. We go in there looking for A Models and we find them. And that helps us. But in addition to finding A Models, sometimes, those searches are helping us or leading us to open traditional Chipotles that we may not have earlier considered and the very, very strong openings we're having are showing that, that more aggressive approach is a good approach. And so that gives us a great deal of confidence in opening the stores we're going to open in 2012. And we do think that there's -- we have a high degree of confidence that we'll be able to continue to have a very strong pipeline in future years of restaurants to choose from, even if the amount of new developments remains pretty anemic as it is today, that being about 30% of our new restaurant mix right now. So not trying to tip our hats to what we're going to do really in 2013 or 2014, but we do feel very confident that we're able to get a really strong and fairly numerous real estate portfolio.

Jack, just one more on the food cost inflation for the year, how does this flow, what are you expecting for food cost inflation in the first quarter? And is there a big difference first half versus second half?

Yes, Joe. I don't know that I can give you a precise, reliable answer. But we think that if you start with the 32 2 in the fourth quarter, we think this mid-single-digit inflation that I talked about will happen throughout the year. So if it happens evenly throughout the year, I mean, at the orderly, and it never happens that orderly, mid-single digits is somewhere in that 150, 160 range or so, it might be 40 basis points or so each quarter. That might be one orderly way to do it. And again, it's not likely to be that orderly but that might be one way to think about it. We don't think -- it certainly not going to hit all in the first quarter. We don't think it's all going to be backloaded either. So probably somewhere in between.

We'll go next to Sara Senatore with Sanford Bernstein. Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division: I just wanted to follow up on a couple of the comments you made about the new development. First of all, the fact that these are so high, is that anything to do with where you're developing them? Obviously, I know you seem to be everywhere now in New York City. I guess, the question is, is there any -- is there real variance across geographically or in new versus developing markets in terms of essentially the need and economics? And then I have one more follow-up.

Yes. The answer is that our new store openings are consistently excellent throughout all of our proven markets throughout the entire country. So we don't see weakness in a particular region and strength in a particular region. We're just very happy about how they're opening everywhere. Of course, there is and always has been a significant difference between how we open in the markets that the call proven markets and the markets that we call developing markets. So that remains true today. So there is a significant difference between that. But even in the developing markets, we're very happy with our openings. We're very happy with the comps that we're showing as those stores mature, and we're very happy with our ability to take more risks in those markets with our A Model strategy otherwise to continue to move them towards becoming proven markets themselves. You had a follow-up? Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division: Great, okay. Yes, can you just give me a sense -- you mentioned on throughput, how it will be, really, kind of the rubber will hit the road in spring. Can you give a sense, I think in the past, we've heard you say average transactions in your peak hours something like 110. Can you just give me a sense of how that might vary between the really peak months, April through July, and then what will come through with winter?

Yes, I mean, it softens in winter so that our average -- our peak hour transactions are sort of more in the 100 range during the winter months. And during the summer months, it's historically gotten up sort of more in that 110 to 115 range. So that gives you an idea of what the differences in terms of the peak hour averages. And obviously, with this coming spring and summer season, we hope to set some new records in those areas because of our new emphasis on this and our excellent restaurant teams.

We'll hear next from Jeffrey Bernstein with Barclays Capital.

First just, Jack, just a clarification and then I have a separate question. But on the commodity basket in the last quarter, there was some confusion in terms of the laddering of the commodity inflation through the year and I think you just made a very telling and clarifying comment. But just to make certain, I mean, at the end of this year, in kind of that 32 2 range, I know you guys don't think about it year-over-year, but rather sequentially through the year. Might understand then that, perhaps, in the first quarter, if everything was orderly, which obviously usually isn't, but we should assume like 40 basis point increase each quarter so that we would push into the mid-32s and the high-32s and the low- to mid-33s sequentially as they move through the 4 quarters? And does that take into account that fact that -- it sounds like you've seen perhaps some recent easing in the commodity inflation basket? And I have a follow up.

Yes, we have seen some easing, Jeff. But the easing has been like in the produce and dairy items, we've seen easing seasonality because of avocados. But when we look ahead, we think that's going to be offset by inflation, higher cost in mostly our meats, beef in particular, as well as with our rice and our beans. And so overall, we think that the easing's going to be more than offset. We think that, that's going to have, by the end of next year, it'll have the kind of that mid-single-digit inflation impact, and I think you're thinking about it right that there would be a piece of inflation in the first quarter, another piece additive in the second and another piece in the third. So by the time you get to that fourth quarter, we would expect somewhere in that mid-single-digit inflation on top of the 32.2% that we saw in the fourth quarter. That will be a reasonable way to think about it if, in fact, it is orderly.

Of course. Which is not likely, I guess. And then separately on the sales-driving initiatives, I'm just wondering if you could give any kind of update specific to the menu board, whether it be pushing to a protein beyond your core, whether it be shrimp or otherwise, or whether there's any update on thoughts around breakfast as you've had success and on the airport tests. Just wondering if we think about the expansion of the menu board behind its current state.

Well, Jeff, as you know, for the last -- we'll be 19 years come July, we've had basically the same menu, and we've had one 10-year period of double-digit same-store sales growth and we're now in another -- a pretty strong period of same-store sales growth, double-digit. And I think one of the reasons that we continue to grow so strongly is because we continue to improve our core offerings, which is what people come for. We have experimented here and there with a new menu item. We've tried soup. We've tried chili. We've tried smaller menu items, single taco, things like this. But it seems that people keep coming back for their chicken burrito or their barbacoa tacos or whatever it is that they've landed on. And the thing that I think keeps people coming back is that we have a commitment to improving the quality of the food, not only the taste of the food, but the impacts on environment and health and animal welfare. And these messages are becoming more and more relevant with people. So I think we've done a very good job staying focused, which makes the food taste better and allows us to have this very, very efficient economic engine, which has allowed us to invest disproportionately back into the quality raw ingredients and our top-performing people. And so I think it's a good system and I don't see that there's any reason to add something like shrimp tacos or roll out breakfast now. In fact, maybe something like that could even be detrimental to the model. Although that being said, now and again, we experiment with stuff.

We'll hear next from John Glass with Morgan Stanley.

If I could just quickly revisit first the throughput question. I think, Monty, you said you're now having more comps coming from the peak hour than nonpeak, but you never quantified that. So at the prior peak in '07, was that, therefore, 100% of your comp or virtually all of it coming from that? And what is it reduced to and what do you think you can get it back to as a proportion of your total comp growth in this spring, let's say.

No, no. Yes, if I said that, I did not mean to say it. So let me clarify it. When we look at our comp, you can break it down to every single hour of our business. From the time we open to the time we close, you can look at how did we do from 11:00 a.m. to noon this year compared to last year. How we did we do -- well, you could also look at how we did from 3:00 to 4:00 in the afternoon compared to last year. And if you look at every one of those hours and break it up and you take the total, that total is the store's comp transactions. What we do is we look at that and break it down and just kind of find out, where is the comp coming from? We've never had the time where 100% of the comp difference came from just the peak lunch hour. That's not what happens. I mean, it typically is moving from one part of the day to another. Over in fact, during 2010 and '11, we found that a lot of our comps came from the off-hours, the sort of what we call shoulder hours that aren't the peak lunch, that aren't the peak dinner, but where people are either knowing that we have a long line at lunch and choosing to come later in the afternoon. Or just more people are coming to our restaurants generally and we're able to serve them then quite easily because the lines aren't that long. In terms of measuring throughput, one thing we like to look at is how much of a contribution to our overall comp can we accomplish during the peak lunch hour when lines are very, very long and where…

And then the question was really how much more can you quantify the increase in the lunch comp or contribution of the total comp coming from that peak hour versus prior. How much did it improve?

Well, we really hesitant to go there because we're talking about a very short period of time and it's very much a moving target. So I'd rather not get into the actual details of those numbers until we have the season under our belt and then I can start discussing with you guys what we're seeing in terms of numbers month over month.

And then just one final question. At what stage do you begin to put people in Europe and the U.K., for example, that aren't in the restaurants? Are you at the stage when you might start putting someone in advance to scout locations or source food? How much investment, do you think, over the next, say, 2 years do you plan there?

Well, we already have someone on the ground devoted to development. Rex Jones, who was our development Director before Bob Blessing took over as Chief Development Officer, is now on the ground there in Europe and has been involved since the first lease that we signed there. In terms of sourcing the food, our 2 Restaurateurs are actually doing the sourcing of the ingredients, and in many cases, going directly to farms to meet farmers, develop relationships, much the same way we did with farmers here at Niman Ranch and other places, too. We don't anticipate we need to have anyone on the ground to be in the purchasing department for the next couple of years at least because the supply chain is actually -- it's been relatively easy setting up these supplies. So again, a lot of autonomy on the shoulders of the Restaurateurs, but they're doing a great, great job and we will open up the subsequent restaurants there, having the managers do a lot of this work that the current ones are doing.

And ladies and gentlemen, that does conclude today's question-and-answer session. I'll turn the call back over to management for any additional or closing remarks.

Thanks, everyone, for joining us and we look forward to speaking with you next quarter.

Thank you. Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation.