Chipotle 2006 Annual Report Download - page 20

Our quarterly operating results may fluctuate significantly and could fall below the expectations of
securities analysts and investors due to various factors.
Our quarterly operating results may fluctuate significantly because of various factors, including:
• the impact of inclement weather, natural disasters and other calamities, such as the snow storms in
2006 and 2007 and hurricanes Katrina and Rita in 2005;
• 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;
• profitability of our restaurants, especially in new markets;
• changes in comparable restaurant sales and customer visits, including as a result of the introduction of
new menu items;
• variations in general economic conditions, including those relating to changes in gasoline prices;
• negative publicity about the ingredients we use or the occurrence of food-borne illnesses or other
problems at our restaurants;
• changes in consumer preferences and discretionary spending;
• increases in infrastructure costs; and
• fluctuations in supply prices.
Seasonal factors also cause our operating results to fluctuate from quarter to quarter. Our restaurant sales are
typically lower during the winter months and the holiday season and during periods of inclement weather
(because fewer people are eating out) and higher during the spring, summer and fall months (for the opposite
reason). Our revenue will also vary as a result of the number of trading days, that is, the number of days in a
quarter when a restaurant is open.
As a result of these factors, results for any one quarter are not necessarily indicative of results to be expected
for any other quarter or for any year. Average restaurant sales or comparable restaurant sales in any particular
future period may decrease. In the future, operating results may fall below the expectations of securities analysts
and investors, which could cause our stock prices to fall. We believe the market prices of our class A and class B
common stock reflect high market expectations for our future operating results, and as a result, if we fail to meet
market expectations for our operating results in the future, any resulting decline in the price of our common stock
could be significant.
Restrictions and indemnities in connection with the tax treatment of McDonald’s exchange offer could
adversely affect us.
We understand that the exchange offer McDonald’s completed in October 2006 to dispose of its interest in
us should generally be tax-free to McDonald’s and its shareholders. Current U.S. tax law generally creates a
presumption that a tax-free exchange of the type used by McDonald’s would be taxable to McDonald’s, but not
to its shareholders, if we or our shareholders were to engage in a transaction that would result in a 50% or greater
change by vote or by value in our stock ownership during the four-year period beginning two years before the
date of the exchange, unless it is established that the exchange and the transaction are not part of a plan or series
of related transactions to effect such a change in ownership. As a consequence of the foregoing, in the separation
agreement we entered into with McDonald’s in connection with the separation, we have:
• undertaken to maintain our current business as an active business for a period of two years following
the separation;
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