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CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
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Chipotle Mexican Grill, Inc.

Notes to Financial Statements

(in thousands, except share and per share data)

1.     Description of Business and Summary of Significant Accounting Policies

        Chipotle Mexican Grill, Inc. (the Company), a Delaware corporation, develops and operates fast-casual, fresh Mexican food restaurants in 22 states throughout the United States. At December 31, 2002, 2003 and 2004, the Company operated 227, 298, and 401 restaurants, respectively, and had five, seven, and eight restaurants, respectively, operated by franchisees. McDonald's Corporation (McDonald's) is the majority owner of the Company (approximately 92%).

        The Company manages its operations based on five regions and has aggregated its operations to one reportable segment.

Initial Public Offering and Unaudited Pro Forma Balance Sheet and Earnings Per Common Share

        In connection with the proposed initial public offering, all Series B convertible preferred stock, Series C and Series D junior convertible preferred stock and common stock issued and outstanding as of the date of this offering will be reclassified as class B common stock (the Reclassification), a new class of stock generally having ten votes per share. Class A common stock, also a new class of stock, will be issued and sold to investors in connection with the initial public offering. The class A common stock will have one vote per share. All other provisions of the class A and class B common stock will be substantially the same. At the completion of the proposed offering, McDonald's will own about 88% of the combined voting power of the Company's outstanding common stock and 69% of the economic interest of the Company. The accompanying consolidated financial statements and notes to the consolidated financial statements do not reflect the effect of the one for three reverse common stock split that is part of the Reclassification.

        The pro forma balance sheet as of September 30, 2005 and the pro forma earnings per share for the year ended December 31, 2004 and the nine months ended September 30, 2005 reflect the reclassification of all of the Company's outstanding common stock and all shares of its outstanding preferred stock into 26,280,680 shares of class B common stock in connection with this offering and the conversion of stock appreciation rights into common stock options. The effect of the sale of class A common stock shares has been excluded.

Unaudited Interim Financial Statements

        The interim financial statements of the Company for the nine months ended September 30, 2004 and 2005 included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting of normal recurring adjustments necessary to present fairly the financial position of the Company as of September 30, 2005 and the results of its operations and its cash flows for the nine months ended September 30, 2004 and 2005. The interim results of operations for the nine months ended September 30, 2005 are not necessarily indicative of the results that may be achieved for the full year.


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