Chipotle 2008 Annual Report Download - page 34

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the expenses associated with opening new restaurants and their operating inefficiencies in the months
immediately following opening. In addition, unanticipated events also impact our results. Accordingly, results for
a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.
Liquidity and Capital Resources
Our primary liquidity and capital requirements are for new restaurant construction, working capital and
general corporate needs. We have a cash and short-term investment balance of $188.0 million that we expect to
utilize, along with cash flow from operations, to provide capital to support the growth of our business (primarily
through opening restaurants), to repurchase up to an additional $70.0 million of our class B common stock
subject to market conditions, to continue to maintain our existing restaurants and for general corporate purposes.
We believe that cash from operations, together with our cash balance, will be enough to meet ongoing capital
expenditures, working capital requirements and other cash needs over at least the next 24 months.
We haven’t required significant working capital because customers pay using cash or credit cards and
because our operations do not require significant receivables, nor do they require significant inventories due, in
part, to our use of various fresh ingredients. In addition, we generally have the right to pay for the purchase of
food, beverage and supplies some time after the receipt of those items, generally within ten days, thereby
reducing the need for incremental working capital to support our growth.
In February 2009, we entered into an unsecured revolving credit facility with Bank of America, N.A. with
an initial principal amount of $25 million and an additional $25 million accordion feature. Borrowings under the
credit facility will bear interest at a rate set, at our option, at either (i) a rate equal to an adjusted LIBOR rate plus
a margin ranging from 0.75% to 2.0% depending on a lease-adjusted leverage ratio, or (ii) a daily rate equal to
(a) the highest of the federal funds rate plus 0.5%, the bank’s published prime rate, and one-month LIBOR plus
1.0%, plus (b) a margin ranging from 0.0% to 1.0% depending on a lease-adjusted leverage ratio. The facility
requires that we pay a commitment fee on the unused balance ranging from 0.25% to 0.5%, based on the lease-
adjusted leverage ratio. Availability of borrowings under the facility requires that we be in compliance with
specified covenants including a maximum lease-adjusted leverage ratio and a minimum fixed charge coverage
ratio. The facility expires in February 2014, but can be terminated or decreased at our option prior to expiration.
We intend to use the credit facility, if at all, for letters of credit we issue in the normal course of business and
normal short-term working capital needs.
While operations continue to provide cash, our primary use of cash is in new restaurant development. As we
expand into more urban areas, our average costs to open new restaurants will increase due to more significant
reconstruction work that often needs to be done on those sites. Our total capital expenditures for 2008 were
$152.1 million, and we expect to incur capital expenditures of about $140 million in 2009, of which $120 million
relates to our construction of new restaurants and the remainder primarily relates to restaurant reinvestments. In
2008, we spent on average about $916,000 in development and construction costs per restaurant, with end-caps
costing about $774,000, in-lines costing about $965,000, free-standing costing about $1.2 million and urban
costing about $1.6 million (in each case, reduced for landlord reimbursements). The average development and
construction costs per restaurant increased from $880,000 in 2007 due to opening a larger portion of our
restaurants in urban locations being partially offset by a decline in the percentage of free-standing restaurant
openings and decreasing our average restaurant size. In 2009, we expect average development and construction
costs to remain about the same overall as 2008.
32
Annual Report