Good afternoon, and welcome to the Chipotle Mexican Grill's First Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I'd now like to introduce the Chipotle Director of Investor Relations, Alex Spong. You may begin.

Hello, everyone, and welcome to our conference today. By now, you should have the access to our earnings announcement released this afternoon for the first quarter 2012. 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 sales increases, the impact of menu price increases, trends in food costs and other expense items, effective tax rates and our unit economics 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-K as updated in our subsequent Form 10-Qs for discussion of these risks. Our discussion today will also include non-GAAP financial measures, a reconciliation of which can be found on the presentations page of the Investor Relations section of our website. I'd like to remind everyone that we've adopted a self-imposed quiet period, restricting communications with investors during that period. This 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 second quarter, it will begin on June 1 and continue through our second quarter release in July. 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. With that, I will now turn the call over to Steve.

Thank you, Alex. We're pleased to see our momentum from 2011 carry into the first quarter of 2012. Coming out of the recession, we have now seen 7 consecutive quarters of double-digit same-store sales growth, posting a comp sales increase of 12.7% in the first quarter on revenue of $640.6 million, an increase of 25.8% from the first quarter of 2011, adding up to earnings per share of $1.97 for the quarter. More importantly, I'm pleased that we continue to perform well by remaining focused on only those things that are the major drivers of our business, our unique food culture and our unique people culture. During the quarter, we made another significant leap in educating our customers about our commitment to serving great food made with better ingredients from more sustainable sources when we ran our 2-minute animated short film, Back to the Start, as a commercial during the Grammy awards. Buying such a large block of time during the Grammys reached a significant number of people with this important message and sparked some very public dialogue about food issues that continued for several days in social media and mainstream media outlets. This year's Grammys telecast surpassed the expected 29 million viewers with 40 million people tuning in. But the spot had a much broader reach and impact than that. Immediately after it aired, the spot prompted 22,000 Tweets and significant reach in social media where it produced more than 33 million impressions on Twitter in the days that followed the Grammys. According to the popular sharing platform, AddThis, which tracks the frequency with which people are looking at or sharing things in social media, our commercial was unique in that as soon as people saw it, they felt like seeing it again and wanted to share it with…

Thanks, Steve. Like Steve, I'm pleased with our results for the first quarter and I'm very proud of our terrific restaurant teams, whose hard work and dedication has led to this success. Our people culture continues to be a key driver of our business and I'm delighted with how we have developed such an extraordinary and powerful culture so quickly. As a reminder, before we created the Restaurateur program, the vast majority of our managers came from the outside and our crew people were seldom promoted to accelerated management positions. So the crew has little reason to be optimistic about their future, which meant that they were not as happy, energized or excited as they could have been and they have less of a sense of ownership over the guest expense. Today, the opposite is true. 98% of our managers come from crew. So our crew members know that they are the future leaders of the company and for this reason, they have a huge sense of ownership and they're excited, driven, optimistic and happy and the best of them quickly move into manager positions where they lead their teams to understand and take part in our special culture. Because of this, Chipotle is able to attract and hire a much stronger crew than ever before and they are fast becoming managers and ultimately, restaurateurs. These top performers know how to hire the very best crew. They know how to lead these people to become a strong team and they know that doing this is the surest way to create an amazing dining experience for our guests. But the powerful effect of these excellent leaders does not stop at the restaurant. These great leaders are quickly moving into field leadership positions as well. More of our field leaders now come…

Well, thanks, Monty. We're very proud of the results we achieved in the first quarter and while the quarter provides an encouraging snapshot of our recent financial trends, what's more important is what's driving these results, the continued strengthening of our food culture, our people culture and our business model. Our top-performing crews and managers are delighting our customers by providing great customer service while serving great tasting food made from premium ingredients, leading to customers wanting to visit Chipotle more often. It's encouraging to see these efforts lead to attractive financial results in the quarter, and it gives us even greater optimism about what lies ahead. We're pleased to report the 7th consecutive quarter of double-digit sales comps since the economy began to recover with a comp of 12.7%. These strong comps, along with new restaurant openings drove a sales increase of 25.8% to $640.6 million in the quarter. The comp was driven mostly from increased traffic, while higher menu prices added about 4.9%. In March, we raised prices in our Pacific region by about 4.5% to reflect the higher cost of doing business in the region and to help narrow the pricing gap with other U.S. markets. This price increase was completed in March and because it laps a similar increase in the Pacific region at about the same time last year, it will have no additive effect to our comps going forward. While we continue to believe we have pricing power, we do not have plans for any additional menu price increases during 2012 to offset expected food inflation. Our business model is strong and we're not compelled to take short-term price increases to drive quarterly results. And instead, we're focused on driving greater customer loyalty and strong transaction trends. Our comps held up well in the…

[Operator Instructions] We'll now take our first question from David Palmer with UBS.

I wanted to ask a question about throughput. Would you mind just discussing a little bit about what you are communicating down the line in terms of beginning to get the focus on throughput? And what specific changes might be being made in prep, ordering, and the payment that -- sort of the tricks of the trade that might be going on that are helping you with the throughput?

Really, what we've done is tried to focus only on those things which tend to have the greatest impact on throughput, and those are the 4 things that I've mentioned a number of times before which are the "mise en place" or having everything in its place before their shift begins or before the peak hour begins, having what we call "aces in their places", in other words making sure that absolutely everyone in every position is ready to serve the guest and that we have the best person in each position during peak hours, so that we're not training folks during that time and also having an expediter in place during all kinds of peak hour. That's the person who stands between the person that rolls the burrito and the person who -- the cashier. And so that person is the one who takes care of all the little requests like is it for here or to go, puts it in the bag, gets the drink or taking care of any other requests of the customer so that the cashier, which is typically the slowest part of our throughput, can focus completely on the task of cashing someone out. And then finally, we want to always have a linebacker position in place during peak hours, and that's -- usually it's the General Manager or a Service Manager or an apprentice, but that person is someone who stands behind the line and makes sure that all of the pans are full of food, that all the food looks perfect, that the line is clean and that all of the people working on the line have all the tools and implements that they need to do their job perfectly without looking away from the guest. So a big part of the…

And then one quick follow-up is that in this last quarter, do you have a sort of rough estimate as to how much throughput might have helped your sales directly if -- do you have a sense of literally how many more orders per hour you pushed through such that you helped the comp? And as you get into the peak months coming up, it looks like your sales go up 10%, 12% versus the type of months that you have in the March quarter and the coming quarters. Is it going to be even a bigger lift or how should we think about that?

Well, I'll answer backwards because the second answer is quicker than the first. Yes, the first quarter is seasonally our slowest quarter from a sales standpoint, so we do believe that in the next quarter, the second quarter and, in fact, the third quarter as well, throughput is even more important then than it is now. But to answer your first question, I'd like to caution you not to too closely link an increase in comps -- increase of comp sales with an increase in throughput. Seasonally, the first quarter is one of our slowest in sales, and so typically, during our peak lunch hour in the first quarter, we average about 100 transactions. But the first quarter this year, we were about 5 transactions faster than we were last year during that peak hour. We're very proud of that. But we don't see a particular effect on short-term costs from the throughput initiative yet. But we believe it is an important part of great customer experience and that over time, it will encourage more visits as customers have more confidence that they can visit a Chipotle, get through the line more quickly and have more time to enjoy their meal. So again, in these next several months, the speed of service will be more and more important, but we can't tell you that when we increase the speed of service, that automatically yields an increase in comp sales. That's something that, we believe over time, will improve as a result of great throughput, but it's not an immediate reaction. If people want to come to Chipotle more often, we want to do all we can to reward that decision with an incredible guest experience, and a large part of that incredible guest experience is great throughput. So we believe that over time, it will lead to an increased comp, but that's not something that we can tell you that we've seen just yet.

And we'll now go to Matthew DiFrisco with Lazard.

This is Phan Le in for Matt DiFrisco. I just had a quick question about the gap between the growth in average weekly sales and the comp. It seems to be widening a little bit this quarter compared to the past last few quarters and I understand that the new stores are doing just as well as they had in the past. So I'm just wondering what the discrepancy is there, if you can provide a little color, I'd appreciate that.

Well, I'm not sure what your calculation is for that. We're not seeing anything that's disturbing in our trends. What you've got is you've got 2 opposing forces, you've got comps that are driving our average volumes up and then you've got all the new stores that are coming that shift from non-comp into the comp base. And frankly, looking at about a $50,000 or so increase from quarter-to-quarter while we're adding new restaurants into the comp base, we think we're getting exactly the right increase in our average unit volume than we should. So we're not seeing anything underlying that's not supporting that both our new stores are opening up strong. They come into the base and they have a dilutive effect, but that's always happened. But it's being more than offset by the comps, so nothing -- there's nothing I can tell you that's disturbing in the underlying trends.

Okay, great. And then I jumped on the call a little bit late, so I'm not sure if you touched on pricing at all. I know that in your last call, you had mentioned that you don't anticipate to take as much pricing in 2011 as you do with this year.

Yes, we don't -- yes, we did mention it on the call. We don't have any plans for any further menu price increases. We did take a localized increase just in the Pacific region. That's more a function of that's a very high-priced market for us, high-cost market to do business. The menu prices there have been lagging. It kind of -- really they've been lower than they should be forever, and so we did raise prices last month. That's not going to have a continuing positive effect on the comp because it came on -- that price increase happened about the same time that we took an increase last year, so they kind of offset each other. But we don't have any plans for any future menu price increases in 2012, not right now.

And we'll now go to Alvin Concepcion with Citi.

Just wanted to see if you could give us a sense of the weather benefit to comps, if there was one?

Yes, there definitely was one. January, February were terrific, from a weather standpoint. Lots of people decided they want to come out and visit Chipotle. Hard to get a really firm handle, but to the best that we can tell, it probably added somewhere between 100 to perhaps as much as 200 basis points to the comp during the quarter.

Okay. And have you seen a change in the underlying sales trends in April?

No. What I would say is if you factor out weather and factor out the leap day, what we're seeing in April so far is kind of a continuing of the underlying sales trends. So kind of, to the best of our ability, factor out weather, factor out the leap day, and then it seems like April is just picking up where the underlying trends in the first quarter left off.

Great. And then just a follow-up on food costs. You maintained your outlook on the inflation. Is it fair to say you still think food cost will be up 150 to 160 basis points throughout the year, is that still the case?

Yes, that's a fair amount. I mean right now, we think that over the next 2 quarters, it's going to be mid single-digit inflation. We think that the -- that if things go as planned, that in the fourth quarter we'll level off a little bit. So I think when you take that mid single-digit inflation and convert that into impact on food cost, I think you are looking at somewhere between 100 to 150 basis points of higher food cost over the next couple of quarters.

And we'll now go to Karen Holthouse with Credit Suisse. Karen Holthouse - Crédit Suisse AG, Research Division: I just got a quick question with the move and development to maybe some more new construction units. Is there anything we should be thinking about when modeling that in terms of differences in square footages or bill to costs or average unit volumes in the new units?

Well, no, no. I think that you'll see that those are largely consistent. I mean, the square footage of units is largely driven by that which we find in the field because we're leasing our space. But generally, we'll continue to do what we've done in the last many years, which is favor smaller restaurants when we can find them, but always just look at what we think will make for a great Chipotle restaurant. So no, no particular change there. Karen Holthouse - Crédit Suisse AG, Research Division: Great. And then one quick housekeeping question. Did you give a number for food inflation in the quarter on the call?

Yes, we just reiterate it. We think it's going to be still in that mid single-digit range. Karen Holthouse - Crédit Suisse AG, Research Division: For the first quarter?

Oh, during the first quarter. Well, sort of. I mean, what we talked about is we did a comparison to last year, but more importantly from the fourth quarter to the first quarter, we had the same food cost. So we didn't see any net effects of food inflation so far in 2012 and that's I think the most -- the best way I think to look at it is kind of sequentially from the fourth quarter. If you look at the fact that we had a -- we've got a run rate of about 5% menu price increase and our food costs went up by 20 basis points, you could just back into the fact that we have like a, call it a 6% or 7% in that kind of ballpark inflation year-over-year. But more importantly, looking at it sequentially, didn't get hit in the first quarter. We do think that the mid single-digit inflation going forward will kick in and we think it'll hit over the next 2 quarters.

And we'll now take Michael Kelter with Goldman Sachs.

I wanted to ask about the 2 incremental potential growth opportunities. One question on Europe and one on ShopHouse. Maybe I'll first touch on the Europe question. You mentioned you're implementing the throughput initiatives that you'd been running through in the U.S. in the U.K., and I guess I didn't realize that they would be necessary that your store volumes were so good that it was relevant to do that. So maybe you could talk about what the sales demand or AUVs are at the current 2 U.K. locations? And if the demand is that strong, I understand 3 more for the rest of the year, but how quickly might that ramp up once you get past 2012?

Well, so let me speak to the necessity of throughput and why now is a good time to emphasize that. It's interesting to watch a lot of new customers in a brand-new market of a brand-new country try Chipotle for the first time. There is a learning curve, and to emphasize throughput at a time when people don't really understand the menu and understand the service format, I think makes it very confusing. And so we deliberately want to allow people to go at their own pace within reason, of course. But as we see more and more regular customers in our London restaurants and as people are starting to understand the system and become very comfortable with it, we started to talk about throughput with our crews. And our managers have done a very, very good job at slowly building up the speed, and this is something that the customers really appreciate. They understand that Chipotle is more convenient now and that they have time to sit down and actually enjoy their meal because the service part of it is faster and of course, one of the benefits that we see from doing that is an increase in sales. It's interesting that we've noticed the exact same thing at ShopHouse in Washington, D.C. deliberately not emphasizing throughput when we opened up because it's, again, completely different menu offerings. Now a lot of our customers recognize the service format. They recognize that it's very similar to Chipotle, but since there's a difference in ingredients and a lot of questions about the different flavors and different spice levels and things like this, it was slower. But we've noticed more and more regular customers and have started to emphasize this idea of throughput and how to provide service to the customers, and we've seen increased sales in that restaurant also.

So in those U.K. restaurants, what are the rough AUVs and what might the growth trajectory -- unit growth trajectory look like as you go past 2012?

Michael, just on the balance and I'll turn it back to over to Steve. We haven't communicated what those are but just to give you a rough idea, in terms of transactions, they're similar to what new restaurants would be in the U.S., perhaps a touch higher in terms of transactions. And keep in mind, I think the original question was kind of why throughput, are the volumes really that high. Throughput isn't just about flying as many people through the line as you can. Better throughput, our teams work better together, the food is better, the customer experience is better. When you have 5 people in line and when our teams are ready to deliver great throughput, those 5 people are going to get terrific customer service and it's just as important, we believe, if there's 5 people in line versus if there's 40 people in line, and so that's why we wanted to get this kind of into the D&A in Europe early, but that will give you an idea, at least from a transaction standpoint, where we are in the U.K. But we've not communicated actual volumes yet. I'll let Steve -- what was your other question that you wanted...

Well, just generally about the pace of growth and the future in Europe, what the unit growth trajectory would look like. I would imagine that even though we're early in '12, you've already got some real estate in your mind for 2013. I mean, what's the pace of growth that you plan to pursue?

I wouldn't even call it a pace yet, Michael. I mean, it's still allowing people in London to discover Chipotle, making sure our team continues to grow. And so we're going to have a few restaurants here and there, but I wouldn't really call it a pace yet. There are still lots and lots and lots of people within the trade areas we're already in that just don't even know that we're there or don't really know what Chipotle is all about, and so we want to be patient and let that happen. And so it's going to be a similar just kind of a restaurant here, restaurant there approach for a while.

And then lastly, just wanted to follow up. As I mentioned, I had a question on ShopHouse. You were excited enough about it to announce further builds last time you had a quarterly call. Maybe you could talk about how the sales of the initial location have progressed now that the initial opening halo's worn off?

Yes, well, so sales have continued to grow and I think that it's fair to say that the sales are very similar to the Chipotle that's across the street. In fact, I would say that the unit economic model, in general, is substantially similar to that of Chipotle, in general. So that gives us enough confidence to say that we want to open one more and there's a lot of excitement about the concept. There's a lot of excitement about the food, and so we'll be opening the second restaurant in a contiguous trade area in the late fall, early winter.

We'll now go to Sharon Zackfia with William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: I wanted to talk a bit about employee turnover and just get an update on where you are on that. I know you had some issues last year when the investigations were in full swing. Are you back to more normalized turnover? And if you could just talk about employee recruitment, if you're back to kind of a normal cadence and ease in terms of getting new employees?

And what's the last part of it, Sharon? Sharon Zackfia - William Blair & Company L.L.C., Research Division: Recruitment of team members, if it's back to as easy as it was before ICE?

Yes. Okay. All right. Well in terms of turnover, our General Manager turnover is stabilized and at a level that we find quite reasonable. The crew turnover, which was in sort of that 100% range a couple of years ago at the low and spiked up to sort of the mid-100, has now moderated such that it's not down to 100% yet, but it's better than it was. So crew turnover is okay. It's not down to the lows that we saw a couple of years ago before the entire immigration hiccup happened. So that sends a little bit of a sort of a shutter through the system that I think that had an effect for a while. And then now we are, with our recruitment efforts, they are going really, really well. I would say there's a few things going on. When we first implemented E-Verify nationwide, we were concerned that it was going to diminish the amount of applicants in our restaurants. And that happened in some places, but overall, our managers and crew around the country have expressed to me that they have found throughout the entire time that they've still been -- by and large, they've still been able to find really, really great candidates. In some cases, they've had to look at more people to get the top performers that they're looking for. But only a part of that is externally imposed. A lot of that is internally imposed in the sense that we have had a greater and greater focus on hiring only top performers, but we've also had a greater and greater focus on trying to define what a top performer is, and our teams in the field are getting really masterful at knowing what that looks like and so they become pickier…

And we'll now go to Bart Glenn with D.A. Davidson. Bart Glenn - D.A. Davidson & Co., Research Division: Just had one quick question. As it relates to ShopHouse, I was just curious what are going to be the primary constraints to ramping up the pace of unit growth if it gets to the point where you are ready to do so?

Well I mean, by design, ShopHouse operates in a very similar way to Chipotle. It's got the same make-line, it's got the same-size kitchen, it's got the same amounts of offerings. I mean, they're very, very similar. We would look at real estate, I think, the same way. We would look at building size the same way. We think of building cost the same way. We think of staffing the same way, a similar crew size. We think of purchasing a distribution in a very similar way. So there's a lot of ability to leverage a system that's already in place. What kinds of little things here and there that might pop up, I can't really imagine are going to be a huge impediment. But it really was designed to be kind of the same thing as Chipotle. In fact, when thinking about the reason to do a different kind of cuisine, it's that you look at what has made Chipotle successful and we think it's really our focus on the kinds of ingredients that we source, classic cooking techniques, an interactive service model and these are the things that make us successful, not necessarily our burritos and tacos. So any kind of cuisine can fit into this model. So I think we're very bullish that when and if the time comes that we want to accelerate this, we can do that.

We'll now go to Jeffrey Bernstein with Barclays.

Just 2 questions. First, kind of a follow-up on the unit growth side of things, at least at the core Chipotle U.S. business. I'm just wondering, it sounds like you said that the pipeline is looking better from a real estate perspective which is a net positive. I'm just wondering now as you think about growth this year, I think you said you could do the 160 and you're fairly comfortable with that. And I know in the past, you've talked about that the team could do -- your existing team could do north of 200, so I'm just wondering some of that prior questions in terms of impediments, is it the kind of managers and leadership or is it just finding the right locations or getting them up to your specs or whatnot. I'm just wondering, if the pipeline's stronger might we see or could we see an acceleration not only the absolute numbers, but perhaps the percentage or whether if you could just talk about penetration and whether you have a rule of thumb where certain markets are already saturated or some key metrics to support the penetration, kind of the cadence of potential acceleration in growth?

Yes. Well, we've said for a long time that we decide to grow when we have excellent leadership and great General Managers to open new restaurants and when we can find great real estate. I mentioned in my opening comments that we've seen a -- that it looks like there's a slight shift and a slight increase in the amount of sort of new developments that we might be able to lease and build restaurants in over the coming years. And that's a nice thing, it's a good thing. But we aren't ready to talk about how many restaurants we plan to build over the next couple of years. I can tell you that we feel very optimistic that given my conversation today about the amount of restaurateurs and apprentice team leaders that we have growing in a field of their influence and their ability to bring great -- to recruit great people in at the crew level and train them into our future leaders, we feel like that people culture is going to be able to really effectively deliver us a lot of great leadership for our restaurants. And so hopefully, that will be less of an impediment than it would otherwise be. With regards to real estate we've seen, as you've seen from our results over the last year or 2, some really high-quality real estate we've had. We've been able to broaden our portfolio by using the A Model strategy, which has allowed us to effectively take advantage of a lot of remodel opportunities, a lot of off-the-beaten-path locations during a recessionary time. And that A Model strategy is something that not only has been very effective during a recession, but there's no reason why that will not continue to be very effective as we emerge from…

Understood. And then just, Jack, just one clarification. I think it's often times confusing when we talk about commodity inflation, but I think I understand when you're saying that commodity basket's going to be up mid-single digits that's still kind of a forecast for this year. I'm assuming that's year-over-year. And the pricing we know in the first quarter was 5% and it seems like that's going to ease to down to perhaps 1% or so by the fourth quarter. But I'm just having trouble having packaging them all together in terms of how we think about year-over-year the food cost line. So you mentioned it was up 30 bps this quarter, with 5 points of price and a little bit more than that of inflation. On a year-over-year basis, how would you think about the next couple of quarters in terms of as a percentage of sales? You threw out 100 to 150 bps, I wasn't sure if that was specific to year-over-year on that line or whether you were talking sequentially or...

Yes, Jeff, on most of my comments, really all of them were designed -- were talking about sequential. I think when you go year-over-year, lots and lots and lots of things have happened between this year and last year. And so to simplify it, what I'd rather do is talk about where were we in the fourth quarter, where were we in the first quarter. And we had somewhat of stability there. Now what I'd like to do is what do we expect in the summer? And we expect higher cost as we move into the second quarter and the third quarter. It's coming from 3 principal places. We continue to see inflation in beef cost. We will see seasonally higher prices, even though avocado year-over-year will be lower. As you get into the second and third quarters, they're going to be higher than they are in the first quarter because we're going to start buying from California. They will be more expensive. That's why I think it's more relevant to talk about what's it going to cost, what are avocado going to cost in the second quarter and the third quarter compared to what we're paying today, and that's going to be higher. And the third thing is we're doing things like sour cream is going to be more expensive beginning in the second quarter because we're going to move towards getting our dairy to make the sour cream from pasture-raised dairy and that's going to add some expenses. So those 3 things combined, as you move from the first quarter to the second and the third, are going to result in about that mid-single digit higher cost. When you compare to last year, now you're talking about seasonality of avocado, you're talking about the freeze with the produce last year, you're talking about the menu price which starts factoring out, and I think it gets much, much, much more complicated. So I hope that makes sense. And so when we talk about this mid single-digit inflation, it's from where we are today.

Versus 32.2% in the fourth quarter of '11, you're saying it could go up to the high 33% range by the end of this year?

That's right. And because we're talking about the fourth quarter of last year and the first quarter of this year, which had the price increase fully loaded, that price increase is in there and so you don't have to adjust for price increases as you move to the second quarter and third quarter because we don't plan on a price increase. And so what we can talk about now is just commodity inflation. We talk about food with integrity and those things, principally those 3 things, beef, seasonal-affected avocado and our dairy, we think, are going to add somewhere in that mid single-digit range to our food costs.

All right. Thanks, everyone, for joining us. But we have passed over our time, so we appreciate you joining us today. We look forward to speaking with you next quarter.

Thanks, everyone.

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