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SEC Filings

S-1/A
CHIPOTLE MEXICAN GRILL INC filed this Form S-1/A on 12/23/2005
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8.     Related-Party Transactions

        The Company enters into short-term agreements with McDonald's to provide the Company with temporary capital. The Company has a line of credit with McDonald's, which was for $20,000 as of December 31, 2004 and for $30,000 as of September 30, 2005. The line of credit bears interest at the prime rate plus 100 basis points (6.25% and 7.50% at December 31, 2004 and September 30, 2005, respectively). The weighted-average interest rate was 5.75%, 5.00% and 5.00% for the years ended December 31, 2002, 2003 and 2004, respectively. Interest is added to the outstanding principal monthly. The line of credit is due on demand and expires June 30, 2006. For the years ended December 31, 2002, 2003 and 2004, interest expense was $98, $15 and $191, respectively. For the nine months ended September 30, 2005, interest expense was $629 (unaudited). At December 31, 2003 and September 30, 2005, the Company had $10,138 and $4,638 (unaudited), respectively, outstanding under the line of credit. No amount was outstanding at December 31, 2004.

        The Company invests its excess cash under short-term agreements with McDonald's. The agreement in place at December 31, 2004 provided for interest at the 30-day Commercial Paper rate plus 50 basis points (2.66% at December 31, 2004), was due on demand and expired April 14, 2005. Interest was added to the principal monthly. For the years ended December 31, 2002, 2003 and 2004, interest income was $440, $244, and $205, respectively. As of December 31, 2004 the Company had $732 deposited under this arrangement.

        The consolidated statement of operations reflects charges from McDonald's of $3,047, $4,917 and $7,711 for the years ended December 31, 2002, 2003 and 2004, respectively, and $7,274 (unaudited) for the nine months ended September 30, 2005. These charges primarily related to reimbursements of payroll and related expenses for certain McDonald's employees that perform services for the Company, insurance coverage, software maintenance agreements and non-income based taxes. The charges are specifically identifiable to the Company.

        The Company leases office and restaurant space from McDonald's and its affiliates. Rent expense was $95, $243 and $306 for such leases for the years ended December 31, 2002, 2003 and 2004, respectively, and $318 (unaudited) for the nine months ended September 30, 2005.

9.     Leases

        The Company generally operates its restaurants in leased premises. Lease terms for traditional shopping center or building leases generally include combined initial and option terms of 20-25 years. Ground leases generally include combined initial and option terms of 30-50 years. Typically the lease includes escalation terms every five years including fixed rent escalations, escalations based on inflation indexes, and fair market value adjustments. Certain leases contain contingent rental provisions based upon the sales of the underlying restaurants. The leases generally provide for the payment of common area maintenance, property taxes, insurance and various other use and occupancy costs by the Company. In addition, the Company is the lessee under non-cancelable leases covering certain offices and vehicles.

F-19


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