Chipotle 2011 Annual Report Download

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2011 Annual Report
and Proxy Statement

Table of contents

  • Page 1
    2011 Annual Report and Proxy Statement

  • Page 2
    ... on our unique food culture based on serving the best tasting food made with ingredients from more sustainable sources and prepared using classic cooking techniques, and our unique people culture based on empowering top-performing employees to reach high standards and developing them into the...

  • Page 3
    ... 30, 2011, the aggregate market value of the registrant's outstanding common equity held by non-affiliates was $5.95 billion, based on the closing price of the registrant's common stock on such date, the last trading day of the registrant's most recently completed second fiscal quarter. For purposes...

  • Page 4
    ... Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 5
    ... who grow or raise the food. We manage our operations and restaurants based on six regions that aggregate into one reportable segment. Financial information about our operations, including our revenues and net income for the years ended December 31, 2011, 2010, and 2009, and our total assets as...

  • Page 6
    ... 300 customers an hour at some locations. The natural flow of our restaurant layout, including the floor plan and the design of our serving line, are designed to make the food ordering process intuitive and, we believe, more efficient. And we're focused on further improving the speed of service in...

  • Page 7
    ... use classic cooking methods: they marinate and grill meats, hand-cut produce and herbs, make fresh salsa and guacamole, and cook rice in small batches throughout the day. They work in kitchens that more closely resemble those of high-end restaurants than they do a typical fast-food place. Despite...

  • Page 8
    ... day. In addition to the employees serving our customers at each restaurant, we also have a field support system that includes apprentice team leaders, team leaders or area managers, team directors and regional directors. Supply Chain Close Relationships with Suppliers. Maintaining the high levels...

  • Page 9
    .... Our site selection process includes the use of external real estate brokers with expertise in specific markets, taking direction from our internal team of real estate managers. Locations proposed by real estate managers are reviewed on site by a team of operations and development management as...

  • Page 10
    ... and printing orders in the appropriate locations within the restaurant. Additionally, the point-of-sales system is used to authorize, batch and transmit credit card transactions, to record employee time clock information, and to produce a variety of management reports. Select information that is...

  • Page 11
    ... any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by applicable laws and regulations. Increasing our sales and profitability depends substantially on our ability to open new restaurants, which is subject...

  • Page 12
    ... increased labor costs or difficulties in finding the right employees for our restaurants." Another significant challenge is locating and securing an adequate supply of suitable new restaurant sites. Competition for those sites in our target markets can be intense, and development and leasing costs...

  • Page 13
    ... our development strategy, our marketing and branding strategies, our initiatives to increase the speed at which our crew serves each customer, and expanded use of fax service lines and online ordering, each of which we may not be able to accomplish; initial sales performance of new restaurants...

  • Page 14
    ... and comparable restaurant sales. Our business could be adversely affected by increased labor costs or difficulties in finding the right employees for our restaurants. Labor is a primary component of our operating costs, and we believe good managers and crew are a key part of our success. We devote...

  • Page 15
    ...we react to these problems by changing our menu or other key aspects of the Chipotle experience, we may lose customers who do not accept those changes, and may not be able to attract enough new customers to generate sufficient revenue to make our restaurants profitable. Customers may also shift away...

  • Page 16
    ... operating in the quick-service and fast-casual segments have been a particular focus. For example, the State of California, New York City and a number of other jurisdictions around the U.S. have adopted regulations requiring that chain restaurants include calorie information on their menu boards...

  • Page 17
    ... Our sales may be adversely affected by these products and price competition. Moreover, new companies may enter our markets and target our customers. For example, additional competitive pressures have come more recently from the deli sections and in-store cafés of several major grocery store chains...

  • Page 18
    ... or operating costs than restaurants in existing markets. We may also have difficulty finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of ingredients meeting our quality standards. Sales at restaurants opened in new markets...

  • Page 19
    ...McDonald's Corporation. If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be adversely affected. We currently depend on a limited number...

  • Page 20
    ... lose customers and our sales may deteriorate. Our failure to manage our growth effectively could harm our business and operating results. Our plans call for a significant number of new restaurants. Our existing restaurant management systems, financial and management controls and information systems...

  • Page 21
    ..., our Chief Financial Officer, have also served with us for several years and much of our growth has occurred under their direction as well. We believe our executive officers have created an employee culture, food culture and business strategy at our company that has been critical to our success and...

  • Page 22
    ...or the introduction of new menu items; the timing of new restaurant openings and related revenues and expenses; operating costs at newly opened restaurants, which are often materially greater during the first several months of operation; labor availability and wages of restaurant management and crew...

  • Page 23
    ... that may make the acquisition of control of us without the approval of our board of directors more difficult, including provisions relating to the nomination, election and removal of directors, the structure of the board of directors and limitations on actions by our shareholders. In addition...

  • Page 24
    ... the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other. Of our restaurants in operation as of December 31, 2011, we had 232 freestanding units, 758 end-cap locations, 200 in-line locations and 40 other. The average restaurant size is about 2,565 square...

  • Page 25
    ... including the review and retention of work authorization documents, are in compliance with applicable law. However, the termination of large numbers of employees in a short period of time does disrupt our operations and results in a temporary increase in labor costs as we train new employees. It is...

  • Page 26
    ... on our financial position, results of operations, liquidity or capital resources. However, a significant increase in the number of these claims, or one or more successful claims under which we incur greater liabilities than we currently anticipate, could materially and adversely affect our business...

  • Page 27
    ... share range of high and low sales prices for shares of our common stock for the quarterly periods indicated, as reported by the New York Stock Exchange ("NYSE"). Our common stock trades under the symbol "CMG." High Low 2010 First Quarter ...Second Quarter ...Third Quarter ...Fourth Quarter ...2011...

  • Page 28
    ... before or after the date hereof and irrespective of any general incorporation language in any such filing. Annual Report COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Chipotle Mexican Grill, Inc, the S&P 500 Index, the S&P Restaurants Index, and S&P SmallCap 600 Restaurants $700 $600 $500...

  • Page 29
    ...future period (in thousands, except per share data). 2011 2010 For the years ended December 31, 2009 2008 2007 Statement of Income: Total revenue ...$ Food, beverage and packaging costs ...Labor costs ...Occupancy costs ...Other operating costs ...General and administrative expenses ...Depreciation...

  • Page 30
    ... average development costs for new restaurants from about $850,000 in 2009 to about $800,000 in 2011. We anticipate average development costs for new restaurants to be opened in 2012 to be similar to 2011. Sales Growth. Average restaurant sales were $2.013 million as of December 31, 2011, increasing...

  • Page 31
    ...we open more restaurants and hire more employees, our restaurant operating costs and depreciation and amortization increase. Revenue For the years ended December 31 2011 2010 2009 (dollars in millions) % increase 2011 over 2010 % increase 2010 over 2009 Revenue ...$ 2,269.5 Average restaurant sales...

  • Page 32
    ...453.6 $ 24.7% 385.1 25.4% 19.7% 17.8% Labor costs as a percentage of revenue decreased in 2011 due primarily to the benefit of higher average restaurant sales, including the impact of menu price increases, partially offset by increased average wage rates due to normal wage inflation, as well as...

  • Page 33
    ... benefit of higher average restaurant sales on a partially fixed-cost base, partially offset by increased credit card fees resulting from a higher percentage of customers using credit cards, as well as increased purchases of kitchen supplies. General and Administrative Expenses % For the years ended...

  • Page 34
    ... tax rate increased primarily due to a one-time benefit recognized in 2009 for prior period meals and entertainment deductions. Quarterly Financial Data/Seasonality The following table presents consolidated statement of income data for each of the eight quarters in the period ended December 31, 2011...

  • Page 35
    .... For new restaurants to be opened in 2012 we anticipate average development costs to be similar to 2011. Contractual Obligations Our contractual obligations as of December 31, 2011 were as follows: Payments Due by Period Total 1 year 2-3 years (in thousands) 4-5 years After 5 years Annual Report...

  • Page 36
    ... 20 years with several five-year extensions, for free-standing restaurants. Our leases generally require us to pay a proportionate share of real estate taxes, insurance, common charges and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds...

  • Page 37
    ... rates, foreign demand, weather, seasonality, production, availability and other factors outside our control. We work closely with our suppliers and use a mix of forward pricing protocols under which we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing...

  • Page 38
    ... of the dollar value of goods purchased by us is effectively at spot prices. Generally our pricing protocols with suppliers can remain in effect for periods ranging from one to 18 months, depending on the outlook for prices of the particular ingredient. In several cases, we have minimum purchase...

  • Page 39
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheet as of December 31, 2011 and 2010 ...Consolidated Statement of Income for the years ended December 31, 2011, 2010 and 2009 ...Consolidated Statement of Shareholders' Equity and...

  • Page 40
    ... the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Chipotle Mexican Grill, Inc.'s internal control over financial reporting as...

  • Page 41
    CHIPOTLE MEXICAN GRILL, INC. CONSOLIDATED BALANCE SHEET (in thousands, except per share data) December 31 2011 2010 Assets Current assets: Cash and cash equivalents ...Accounts receivable, net of allowance for doubtful accounts of $208 and $102 as of December 31, 2011 and 2010, respectively ......

  • Page 42
    CHIPOTLE MEXICAN GRILL, INC. CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share data) 2011 Years ended December 31 2010 2009 Revenue ...Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Food, beverage and packaging ...Labor ...Occupancy ...

  • Page 43
    ...60 Stock option exercises ...535 Excess tax benefit on stockbased compensation ...Acquisition of treasury stock ...Comprehensive income: Net income ...Foreign currency translation adjustment ...Total comprehensive income ...Balance, December 31, 2009 ...Stock-based compensation ...Stock option and...

  • Page 44
    ... ...74,938 Deferred income tax provision ...11,319 Increase in valuation allowance ...616 Loss on disposal of assets ...5,806 Bad debt allowance ...239 Stock-based compensation expense ...41,382 Excess tax benefit on stock-based compensation ...(38,786) Other ...2,501 Changes in operating assets and...

  • Page 45
    ...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 throughout the United States. The Company also has two restaurants in Toronto, Canada and two...

  • Page 46
    ... Company's investments for the years ended December 31, 2011, 2010 and 2009. Leasehold Improvements, Property and Equipment Leasehold improvements, property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and construction of a restaurant are...

  • Page 47
    ..., benefits and travel for the training and opening teams, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business. Insurance Liability The Company maintains various insurance policies including workers' compensation, employee health, general...

  • Page 48
    ... The Company's international operations generally use the local currency as the functional currency. Assets and liabilities are translated at exchange rates in effect as of the balance sheet date. Income and expense accounts are translated at the average monthly exchange rates during the year...

  • Page 49
    ... impact on the Company's consolidated financial position or results of operations. In June 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2011-05, "Presentation of Comprehensive Income." ASU 2011-05 eliminates the option to report other comprehensive income and its components...

  • Page 50
    ...141 Annual Report Valuation allowance ...Total provision for income taxes ...$ 134,760 $ 110,080 $ 77,380 The effective tax rate differs from the statutory tax rates as follows: 2011 Years ended December 31 2010 2009 Statutory U.S. federal income tax rate ...State income tax, net of related...

  • Page 51
    ...Gift card liability ...Capitalized transaction costs ...Stock-based compensation and other employee benefits ...Foreign net operating loss carry-forwards ...Valuation allowance ...Total long-term deferred income tax asset ...Net long-term deferred income tax liability ...Current deferred income tax...

  • Page 52
    ... of publicly announced share repurchase programs. In the year ended 2010, the Company repurchased 67 shares for a total cost of $10,717. 5. Stock Based Compensation The Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the "2011 Incentive Plan") was approved at the Company's annual meeting of...

  • Page 53
    ...December 31, 2011, 111 of the outstanding non-vested stock awards were subject to both service and performance conditions. The quantity of shares that ultimately vest is determined based on the cumulative cash flow from operations reached during the three year period ending on September 30, 2013. If...

  • Page 54
    ...and $538 for the years ended December 31, 2011, 2010 and 2009, respectively. In February 2012, the Company began offering an employee stock purchase plan ("ESPP"), which was approved at the Company's annual meeting of shareholders on May 25, 2011. Under the ESPP, 250 shares of common stock have been...

  • Page 55
    ... liability was $3,662 as of December 31, 2011. The future minimum lease payments for each of the next five years and thereafter for deemed landlord financing obligations are as follows: Annual Report 2012 ...2013 ...2014 ...2015 ...2016 ...Thereafter ...Total minimum lease payments ...Less...

  • Page 56
    ...share: 2011 Year ended December 31 2010 2009 Annual Report Net income ...Shares: Weighted average number of common shares outstanding ...Dilutive stock options and SOSARs ...Dilutive non-vested stock awards ...Diluted weighted-average number of common shares outstanding ...Basic earnings per share...

  • Page 57
    ... the review and retention of work authorization documents, are in compliance with applicable law. However, the termination of large numbers of employees in a short period of time does disrupt restaurant operations and results in a temporary increase in labor costs as new employees are trained. It...

  • Page 58
    11. Quarterly Financial Data (Unaudited) Summarized unaudited quarterly financial data: March 31 June 30 2011 September 30 December 31 Revenue ...Operating income ...Net income ...Basic earnings per share ...Diluted earnings per share ... $ $ $ $ $ 509,384 74,821 46,382 1.49 1.46 March 31 $ $ $ $...

  • Page 59
    ... the design and operation of our disclosure controls and procedures. Based on the foregoing, our co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. Changes in Internal...

  • Page 60
    ... Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board...

  • Page 61
    ... the number of shares issuable dependent on our level of performance. The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options and SOSARs only. (2) Includes 3,357,000 shares remaining available under the Chipotle Mexican Grill, Inc. 2011 Stock...

  • Page 62
    ...13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from the definitive proxy statement for our 2012 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2011. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES...

  • Page 63
    ... to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. 3. Exhibits The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report. Annual Report 61

  • Page 64
    ..., the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHIPOTLE MEXICAN GRILL, INC. By: Name: Title: /s/ JOHN R. HARTUNG John R. Hartung Chief Financial Officer Date: February 10, 2012 KNOW ALL PERSONS BY THESE PRESENTS, that each...

  • Page 65
    ..., 2006 among Chipotle Mexican Grill, Inc., McDonald's Corporation and certain shareholders.(11) Separation Agreement dated September 7, 2006 between Chipotle Mexican Grill, Inc. and McDonald's Corporation.(12) Board Pay Policies.(13) Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan...

  • Page 66
    ... 19, 2009 (File No. 001-32731). (10) Incorporated by reference to Chipotle Mexican Grill, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2011 (File No. 001-32731). (11) Incorporated by reference to Chipotle Mexican Grill, Inc.'s Annual Report on Form...

  • Page 67
    ... invited to attend the annual meeting of shareholders of Chipotle Mexican Grill, Inc., which will be held on May 31, 2012 at 8:00 a.m. local time at The Westin Denver Downtown, 1672 Lawrence Street, Denver, Colorado. Details of the business to be conducted at the annual meeting are given in the...

  • Page 68
    ...by the Board of Directors as the close of business on April 2, 2012. Shareholders of record at that time are entitled to vote at the meeting. By order of the Board of Directors /s/ Monty Moran Co-Chief Executive Officer, Secretary and Director April 9, 2012 Proxy Statement Please execute your vote...

  • Page 69
    ... related to the annual meeting of shareholders of Chipotle Mexican Grill, Inc. to be held on Thursday, May 31, 2012, beginning at 8:00 a.m. at The Westin Denver Downtown, 1672 Lawrence Street, Denver, Colorado. This proxy statement was prepared under the direction of Chipotle's Board of Directors...

  • Page 70
    ...by following the procedures outlined in this proxy statement. The method by which you vote will not limit your right to vote in person at the annual meeting. If you receive hard copy materials and sign and return your proxy card without specifying choices, your shares will be voted as recommended by...

  • Page 71
    ... shareholder proposal (if properly presented at the meeting) each require the affirmative vote of a majority of the votes cast at the annual meeting in order to be approved. Because these votes are advisory, they will not be binding on the Board or Chipotle. However, the Board will review the voting...

  • Page 72
    ...the executive officers listed in the Summary Compensation Table appearing later in this proxy statement; each of our directors; and all of our current executive officers and directors as a group. The number of shares beneficially owned by each shareholder is determined under SEC rules and generally...

  • Page 73
    ... reported on the 13G filed by Prudential. (5) Based solely on a report on Schedule 13G/A filed on February 13, 2012. Shares beneficially owned by T. Rowe Price Associates, Inc. (Price Associates) are owned by various individual and institutional investors which Price Associates serves as investment...

  • Page 74
    ... at this year's annual meeting of shareholders. The current term of office of our Class II directors will end at the annual meeting in 2013 and the term of our Class III directors will end at the annual meeting in 2014. Steve Ells and Patrick J. Flynn are currently serving as Class I directors and...

  • Page 75
    ...Class I directors whose terms expire at the 2012 annual meeting of shareholders and who are nominees for terms expiring at the 2015 annual meeting Director Since Age Steve Ells ... Mr. Ells founded Chipotle in 1993. He is Co46 Chief Executive Officer and was appointed Chairman of the Board in 2005...

  • Page 76
    ..., served in various capacities at Syntex Corporation, a pharmaceutical company. Mr. Flanzraich's executive experience has helped him develop outstanding skills in leading and managing strong teams of employees, and in oversight of the growth and financing of businesses in a rapidlyevolving market...

  • Page 77
    ...with McDonald's included responsibility for managing a large and diverse employee workforce similar in many ways to Chipotle's, and also gave him a detailed knowledge of restaurant operations, site selection and related matters. He also has developed strong financial acumen through his experience at...

  • Page 78
    ... III directors whose terms expire at the 2014 annual meeting of shareholders (cont'd) Age Director Since Montgomery F. (Monty) Moran ... Mr. Moran is our Co-Chief Executive Officer. He 45 was appointed to this position on January 1, 2009, after serving as President and Chief Operating Officer...

  • Page 79
    ... Board of Directors which sets forth the committee's role and responsibilities and provides for an annual evaluation of its performance. The charters of all three standing committees are available on the Investors page of our corporate website at www.chipotle.com under the Corporate Governance link...

  • Page 80
    ... by the Board to administer our 2011 Stock Incentive Plan and to make awards under the plan, including as described below under "Executive Officers and Compensation-Compensation Discussion and Analysis-Components of Compensation-Long-Term Incentives." The committee has in some years, including 2011...

  • Page 81
    ...units representing shares of our common stock, based on the closing price of the stock on the grant date, which is the date of our annual shareholders meeting each year. Each director who is not an employee of Chipotle also receives a $2,000 cash payment for each meeting of the Board of Directors he...

  • Page 82
    ... Board meetings during any sessions conducted as executive sessions without employee members of management being present, and also consults with the Chairman, the Co-Chief Executive Officers and the Chief Financial Officer on business issues and with the Nominating and Corporate Governance Committee...

  • Page 83
    ... executive session limited to non-employee Board members at each regularly-scheduled Board meeting during 2012, and independent directors may schedule additional sessions in their discretion. At regularly-scheduled meetings of the Audit Committee, Compensation Committee, and Nominating and Corporate...

  • Page 84
    ... increase in the number of directors). Policies and Procedures for Review and Approval of Transactions with Related Persons We recognize that transactions in which our executive officers, directors or principal shareholders, or family members or other associates of our executive officers, directors...

  • Page 85
    ... challenges. The Co-Chief Executive Officers' in-depth understanding of these matters and levels of involvement in the day-to-day management of Chipotle allow them to promptly identify and raise key risks to the Board, call special meetings of the Board when necessary to address critical issues, and...

  • Page 86
    ... Committee, the Board of Directors, or Chipotle. However, the Compensation Committee and Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. We have committed to holding say on pay votes at each year's annual meeting...

  • Page 87
    ...for a subscription to an Ernst & Young online service used for accounting research purposes. The Board of Directors unanimously recommends a vote FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2012. 19

  • Page 88
    ... LLP their independence. Based on the review and discussions described above, the Audit Committee recommended to our Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the SEC. The Audit...

  • Page 89
    ... six months prior to commencement of the services. The committee periodically reviews a schedule of fees paid and payable to the independent auditor by type of covered service being performed or expected to be provided. Our Chief Financial Officer is also required to report to the committee any non...

  • Page 90
    ... of this proposal should not prevent any director elected prior to the annual meeting held in 2013 from completing the term for which such director was elected. Supporting Statement This resolution was submitted by the Illinois State Board of Investment. The Harvard Law School Shareholder Rights...

  • Page 91
    ...In the case of Chipotle, there are a number of factors that make us unique. From our vision to change the way the world thinks about and eats fast food, to our unique corporate strategy based on top-performing employees who are promoted from within our company serving freshly-prepared food from high...

  • Page 92
    ...top level leadership, allowing the Board and management to remain focused on building long-term value for years to come. The proponent also asserts that "having directors stand for elections annually makes directors more accountable to shareholders." Having a classified Board does not mean our Board...

  • Page 93
    ...related to Chipotle, including the performance of the Board. Because of our Board's commitment to increasing long-term shareholder value, as evidenced by our performance for as long as we've been a public company, and in view of the proponent's arguments in support of its proposal, which are at best...

  • Page 94
    ... executive officers. Executive Summary To make decisions regarding the compensation of our executive officers, the Compensation Committee of our Board of Directors considers company performance. Determinations of base salaries and long-term incentive awards for 2011 were made early in the year and...

  • Page 95
    ... review of our performance, the committee also reviews each executive officer's individual circumstances, including tally sheet information reflecting the cash and equity-based compensation paid to each executive officer in each year since the officer started work with us (or since 1998 in the case...

  • Page 96
    ... peer group used for these purposes is comprised of all publicly-traded companies in the Global Industry Classification Standard, or GICS, restaurant industry with annual revenues greater than $600 million, excluding McDonald's Corporation due to its substantially greater size than us. At the time...

  • Page 97
    ...to compensate our executive officers for services rendered during the year, and also to provide them with income regardless of our stock price performance, which helps avoid incentives to create short-term stock price fluctuations and mitigates the impact of forces beyond our control such as general...

  • Page 98
    .... See "Outstanding Equity Awards at December 31, 2011" below, which reflects the performance share awards to each executive officer. Proxy Statement The committee's policy is generally to make SOSAR grants only on an annual basis, within five business days following our public release of financial...

  • Page 99
    ...committee generally sets the base salaries of, and makes long-term incentive awards to, the executive officers in February of each year. In making these decisions, the committee references our company performance primarily by comparing our sales growth, net income growth and total shareholder return...

  • Page 100
    ... structure results in the AIP rewarding our top performers, consistent with our goal of building shareholder value. To determine the company and team performance factors for each year, during the first quarter of the year the committee approves targeted performance levels for a number of financial...

  • Page 101
    ... 2011, as with past years, the four measures the committee selected to be used in determining the company and team performance factors were income from operations (prior to accrual for AIP payouts), new restaurant average daily sales, comparable restaurant sales increases, and new restaurant weeks...

  • Page 102
    ... sales and new restaurant average daily sales. Performance on these measures was strong enough to greatly offset our performance just below target on new restaurant weeks of operation. As a result, 2011 AIP bonuses throughout the company were based on a company performance factor at the capped level...

  • Page 103
    to net income growth, and our above-average total shareholder return as compared to the peer group, in each case for the time periods and based on the methodology as described above under- "Assessment of Company Performance." Evaluation of each officer's individual performance involved a subjective ...

  • Page 104
    ...make. COMPENSATION COMMITTEE REPORT The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation...

  • Page 105
    ... at the time he joined us in January 2009, which vested in January 2012, based on the closing price of our common stock on the date of grant. (3) Amounts under Option Awards represent the grant date fair value under FASB Topic 718 of SOSARs awarded in the relevant year. See Note 5 to our financial...

  • Page 106
    ...financial statements for the year ended December 31, 2011, which are included in our Annual Report on Form 10-K filed with the SEC on February 10, 2012, for descriptions of the methodologies and assumptions we use to value SOSAR and performance share awards pursuant to FASB Topic 718. The grant date...

  • Page 107
    ...achievement of stated levels of cumulative cash flow from operations prior to the fourth and fifth fiscal year-ends following the award date, with vesting to occur no sooner than February 11, 2013 and 2014 (with half of each Performance SOSAR subject to each such time-based vesting date). Vesting of...

  • Page 108
    ... the closing price of our common stock on the date of exercise exceeded the base price of the SOSARs. NON-QUALIFIED DEFERRED COMPENSATION FOR 2011 Our Supplemental Deferred Investment Plan permits eligible management employees who elect to participate in the plan, including our executive officers...

  • Page 109
    ... of the earnings are "above market" as defined in SEC rules. (4) These amounts include amounts previously reported in the Summary Compensation Table as Salary or All Other Compensation for years prior to 2011 (ignoring for purposes of this footnote any investment losses on balances in the plan), in...

  • Page 110
    ... to us, unauthorized use of company information, or commission of a felony involving moral turpitude. (2) Under our 2011 Stock Incentive Plan, "good reason" generally means a reduction in an employee's responsibilities or pay, or a change by more than 30 miles in the location of an employee's job...

  • Page 111
    ... for good reason, in each case as defined in the plan, the award will vest. A change in control would generally be deemed to occur under the plan in the event any person or group acquires shares of our common stock representing greater than 25 percent of the combined voting power of our outstanding...

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    ...to be listed on a national securities exchange. • • Proxy Statement In the event of a change in control under the plan as of December 31, 2011, if SOSARs outstanding on that date were not replaced with replacement awards meeting the criteria specified above, the executive officers would have...

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    ...1934 requires our officers and directors and holders of greater than 10 percent of our outstanding common stock to file initial reports of their ownership of our equity securities and reports of changes in ownership with the SEC. Based solely on a review of the copies of such reports furnished to us...

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    ...in the first two months of 2012. Registration Rights Prior to our initial public offering, certain of our current shareholders, including Steve Ells, our Chairman and Co-Chief Executive Officer, Monty Moran, our Co-Chief Executive Officer and member of our Board of Directors, and Albert S. Baldocchi...

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    ... 10, 2012, unless the date of our 2013 annual meeting is more than 30 days before or after May 31, 2013, in which case the proposal must be received a reasonable time before we begin to print and send our proxy materials. All proposals should be addressed to Chipotle Mexican Grill, Inc., 1401...

  • Page 116
    ... to you, or if you are a holder of record and have received a proxy card, via telephone as explained on the proxy card. We will appreciate your prompt response. By order of the Board of Directors /s/ Monty Moran Co-Chief Executive Officer, Secretary and Director April 9, 2012 Proxy Statement 48

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    ...for the year ended December 31, 2011 (exclusive of exhibits), including our audited financial statements, as well as other reports we file with the SEC, at no cost on the investor relations page of our website at ir.chipotle.com, or by writing to the Corporate Secretary, Chipotle Mexican Grill, Inc...

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