Chipotle 2006 Annual Report Download - page 60

Chipotle Mexican Grill, Inc.
Notes to Consolidated Financial Statements—(Continued)
(dollar and share amounts in thousands, unless otherwise specified)
shares of common stock outstanding during each period. Potentially dilutive securities include potential common
shares related to stock options and non-vested stock. Diluted EPS considers the impact of potentially dilutive
securities except in periods in which there is a loss because the inclusion of the potential common shares would
have an anti-dilutive effect. No options to purchase shares of common stock were excluded from the calculation of
diluted earnings per share because there were no anti-dilutive options.
The following table sets forth the computations of basic and dilutive earnings per share:
Year ended December 31,
2006 2005 2004
Net income ........................................................ $41,423 $37,696 $ 6,126
Shares:
Weighted average number of common shares outstanding ................... 32,051 26,281 25,454
Dilutive stock options ................................................ 319 67 66
Dilutive non-vested stock ............................................. 95 26 —
Diluted weighted average number of common shares outstanding ............. 32,465 26,374 25,520
Basic earnings per share .............................................. $ 1.29 $ 1.43 $ 0.24
Diluted earnings per share ............................................ $ 1.28 $ 1.43 $ 0.24
13. Commitments and Contingencies
Purchase Obligations
The Company enters into various purchase obligations in the ordinary course of business. Those that are
binding primarily relate to amounts owed under contractor and subcontractor agreements and orders submitted
for equipment for restaurants under construction.
Accrued Loss Contingency
In August 2004, the merchant bank that processes the Company’s credit and debit card transactions
informed the Company it may have been the victim of a possible theft of credit and debit card data. Together
with two forensic auditing firms, the Company investigated the alleged theft and reviewed its information
systems and information security procedures. The Company also reported the problem to federal law
enforcement authorities and has been cooperating in their investigation. While to date the Company has not
discovered conclusive evidence that a theft occurred, the Company has upgraded its information security
systems, including remediating the specific problems identified during the forensic audits. During 2004, the
Company recorded a reserve for the potential exposure for losses and fines of $4,000. Through December 31,
2006, the Company utilized $2,788 of the reserve to cover fines and losses. As the situation develops and more
information becomes available, the amount of the reserve may increase or decrease accordingly.
Litigation
In the normal course of business, the Company is subject to proceedings, lawsuits and other claims. Such
matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the
Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with
respect to these matters as of December 31, 2006. These matters could affect the operating results of any one
quarter when resolved in future periods. However, management believes after final disposition, any monetary
liability or financial impact to the Company beyond that provided for at the end of the year would not be material
to the Company’s annual consolidated financial statements.
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