Print Page  |  Close Window

SEC Filings

CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
Entire Document
 << Previous Page | Next Page >>

1.     Description of Business and Summary of Significant Accounting Policies (Continued)

Income Taxes

        The Company is not a separate taxable entity for federal and certain state income tax purposes and its results of operations are included in the consolidated federal and state income tax returns of McDonald's. The provision for income taxes is calculated on a separate return basis. The Company recognizes deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting basis and the tax basis of its assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. When it is more likely than not that a portion or all of a deferred tax asset will not be realized in the future, the Company provides a corresponding valuation allowance against the deferred tax asset.

Equity-Based Compensation Plan

        Prior to January 1, 2005, the Company accounted for its equity-based compensation plan using the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). Prior to January 1, 2005, no compensation expense was recognized on stock option grants as the exercise price equaled the fair value at the date of grant. Accordingly, share-based compensation was included as a pro forma disclosure in the financial statement footnotes.

        Effective January 1, 2005, the Company early adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment (SFAS 123(R)), using the modified-prospective transition method. Under this transition method, compensation cost in 2005 includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested as of January 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and (2) all share-based payments granted subsequent to January 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated.

        The following table illustrates the effect on net income (loss) as if the fair-value-based method had been applied to all outstanding and unvested awards in each period.

  Years ended December 31
Net income (loss), as reported   $ (17,289 ) $ (7,714 ) $ 6,126  
Stock-based employee compensation expense     (166 )   (434 )   (527 )
Pro forma net income (loss)   $ (17,455 ) $ (8,148 ) $ 5,599  
Earnings (loss) per share:                    
Basic, as reported   $ (0.44 ) $ (0.17 ) $ 0.08  
Basic, pro forma   $ (0.44 ) $ (0.17 ) $ 0.07  
Diluted, as reported   $ (0.44 ) $ (0.17 ) $ 0.08  
Diluted, pro forma   $ (0.44 ) $ (0.17 ) $ 0.07  

        Total compensation recognized on stock options during the nine months ended September 30, 2005 was $260 ($157 after tax) (unaudited). Compensation expense is recognized over the vesting period and is included in general and administrative expenses in the consolidated statement of operations. At September 30, 2005, there was $114 (unaudited) of total unrecognized compensation cost related to non-vested stock options that is expected to be recognized over the remaining seven-month vesting period.


 << Previous Page | Next Page >>