Chipotle 2013 Annual Report Download - page 56

The Company has not paid dividends to date and does not plan to pay dividends in the near future. The risk-free
interest rate is based upon U.S. Treasury rates for instruments with similar terms. The volatility assumption was based
on our historical data and implied volatility, and the expected life assumptions were based on our historical data.
6. Employee Benefit Plans
The Company maintains the Chipotle Mexican Grill 401(k) plan (the “401(k) Plan”). The Company matches
100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed.
Employees become eligible to receive matching contributions after one year of service with the Company. For
the years ended December 31, 2013, 2012, and 2011, Company matching contributions totaled approximately
$2,644, $2,431 and $2,039, respectively.
In 2012, the Company began offering an employee stock purchase plan (“ESPP”). Under the ESPP, 250
shares of common stock have been authorized and reserved for issuances to eligible employees. Employees
become eligible to contribute after one year of service with the Company and may contribute up to 15% of their
base earnings, subject to an annual maximum dollar amount, toward the monthly purchase of the Company’s
common stock. During the year ended 2013 there were 1 shares issued under the ESPP, and during the year
ended 2012 there were 1 shares issued under the ESPP.
The Company also maintains the Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan (the
“Deferred Plan”) which covers eligible employees of the Company. The Deferred Plan is a non-qualified plan
that allows participants to make tax-deferred contributions that cannot be made under the 401(k) Plan because of
Internal Revenue Service limitations. Participants’ earnings on contributions made to the Deferred Plan fluctuate
with the actual earnings and losses of a variety of available investment choices selected by the participant. Total
liabilities under the Deferred Plan as of December 31, 2013 and 2012 were $13,397 and $10,037, respectively,
and are included in other long-term liabilities in the consolidated balance sheet. The Company matches 100% of
the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed once the
401(k) contribution limits are reached. For the years ended December 31, 2013, 2012, and 2011, the Company
made deferred compensation matches of $201, $213 and $179 respectively, to the Deferred Plan.
Prior to the first quarter of 2012, the Deferred Plan was unfunded, with all earnings and losses recorded in general
and administrative expenses in the consolidated statement of income and comprehensive income. The total expense
recognized related to the unfunded portion of the Deferred Plan including the matching contributions was $487 and
$20 for the years ended December 31, 2012, and 2011, respectively. During the first quarter of 2012, the Company
elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is subject to creditor claims
in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes.
Amounts in the rabbi trust are invested in mutual funds, as selected by participants, which are designated as trading
securities and carried at fair value, and are included in other assets in the consolidated balance sheet. Fair value of
mutual funds is measured using Level 1 inputs (quoted prices for identical assets in active markets), and the fair value
of the investments in the rabbi trust was $13,397 and $10,037 as of December 31, 2013 and 2012, respectively. The
Company records trading gains and losses in general and administrative expenses in the consolidated statement of
income and comprehensive income, along with the offsetting amount related to the increase or decrease in deferred
compensation to reflect its exposure of the Deferred Plan liability. The Company recorded $722 and $240 of unrealized
gains on investments held in the rabbi trust during twelve months ended December 31, 2013 and 2012, respectively.
7. 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 30-40 years. The option terms in each of these leases are typically in five-year
increments. Typically, the lease includes rent 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,
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Annual Report