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SEC Filings

CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/05/2005
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liabilities result in a net deferred tax asset, we evaluate the probability of our ability to realize the future benefits indicated by that asset. If it is more likely than not that some portion or all of the deferred tax asset will not be realized, we'll record a valuation allowance related to a deferred tax asset. Our ability to realize that net deferred tax asset generally depends on whether we have enough taxable income of an appropriate character within the carry-forward period permitted by the tax law. Unless we have enough taxable income to offset the deductible amounts and carry forwards, the related tax benefits will expire unused. We evaluate both positive and negative evidence in making a determination as to whether it is more likely than not that all or some portion of the deferred tax asset will not be realized, and we measure deferred items based on enacted tax laws. This evaluation requires us to project our taxable income sufficiently to realize the tax assets. The preparation of the projections requires considerable judgment and is subject to change to reflect future events and changes in tax laws.

    Reserves / Contingencies for Litigation and Other Matters

        We are involved in various claims and legal actions that arise in the ordinary course of business. These actions are subject to many uncertainties, and we cannot predict the outcomes with any degree of certainty. Consequently, we were unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters at December 31, 2004 and at September 30, 2005. Once resolved, however, these actions may affect our operating results and cash flows. In addition, we're involved in claims relating to the possible theft of our customers' credit and debit card data. In 2004, we recorded charges of $4.0 million to establish a reserve for claims seeking reimbursement for purportedly fraudulent credit and debit card charges and the cost of replacing cards and monitoring expenses and fees. At October 31, 2005, the remaining reserve was $1.9 million. As the situation develops and more information becomes available, the amount of the reserve may increase or decrease accordingly. See "Risk Factors—Risks Related to Our Business and Industry—We may have experienced a security breach with respect to certain customer credit and debit card data, and we've incurred and may continue to incur substantial costs as a result of this matter. We may also incur costs resulting from other security risks we may face in connection with our electronic processing and transmission of confidential customer information."

How We Did: Results of Operations

        Our operating results for 2002, 2003 and 2004 and the nine months ended September 30, 2004 and 2005 are expressed as a percentage of total revenue below:

  Year Ended December 31,
  Nine Months Ended September 30,
Restaurant sales   99.6 % 99.5 % 99.5 % 99.6 % 99.6 %
Franchise royalties and fees   0.4   0.5   0.5   0.4   0.4  
  Total revenue   100.0   100.0   100.0   100.0   100.0  

Food, beverage and packaging costs











Labor costs   32.5   29.8   29.6   29.6   28.5  
Occupancy costs   9.1   8.1   7.7   7.6   7.6  
Other operating costs   14.6   13.8   13.7   13.4   13.1  
General and administrative expenses   12.6   10.8   9.5   8.5   8.2  
Depreciation and amortization   5.5   4.8   4.6   4.6   4.5  
Pre-opening costs   0.5   0.5   0.5   0.5   0.3  
Loss on disposal of assets   0.7   1.4   0.4   0.4   0.4  
  Total costs and expenses   108.6   102.5   98.7   97.1   94.9  
Income (loss) from operations   (8.6 ) (2.5 ) 1.3   2.9   5.1  
Interest income   0.2   0.1     0.1    
Interest expense         (0.1 ) (0.1 )
Income (loss) before income taxes   (8.4 ) (2.4 ) 1.3   2.9   5.0  
Benefit for income taxes           2.4  
Net income (loss)   (8.4 )% (2.4 )% 1.3 % 2.9 % 7.4 %


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