Chipotle 2008 Annual Report Download - page 51

4. Shareholders’ Equity
The Company’s restated certificate of incorporation authorizes the issuance of an aggregate 230,000 shares
of common stock consisting of 30,000 shares of class B common stock with a $0.01 par value and 200,000 shares
of class A common stock with a $0.01 par value. Prior to the Disposition, each share of class B common stock
was convertible at the option of the shareholder into one share of class A common stock, and each share of class
B common stock generally also converted into one share of class A common stock if a transfer of ownership
occurred. Shares of class B common stock are no longer convertible beginning October 12, 2006. Shares of
class B common stock participate equally in dividends with shares of class A common stock. Shares of class B
and class A common stock generally vote as a single class of common stock. Shares of class B common stock
have ten votes per share whereas class A common stock shares have one vote per share, except that for purposes
of approving a merger or consolidation, a sale of substantially all property or dissolution, each share of both
class A and class B will have only one vote.
During 2008, the Company’s Board of Directors authorized the expenditure of up to $100 million to
repurchase shares of class B common stock. The shares may be purchased from time to time in open market
transactions, subject to market conditions. The Company repurchased 692 shares of its class B common stock for
a total cost of $30,227 during 2008. The 692 shares are being held in treasury stock until such time as they are
reissued or retired, at the discretion of the Board of Directors.
5. Stock Based Compensation
Effective with the Company’s initial public offering the Company adopted the Chipotle Mexican Grill, Inc.
2006 Incentive Plan. An amended and restated plan (the “Plan”) was approved at the Company’s annual meeting
of shareholders on May 21, 2008. Under the Plan, 4,450 shares of class A common stock have been authorized
and reserved for issuances to eligible employees, of which 2,849 represent shares that were authorized for
issuance, but not issued under the Plan at December 31, 2008. The Plan is administered by the Compensation
Committee of the Board of Directors, which has the authority to select the individuals to whom awards will be
granted, to determine the type of awards and when the awards are to be granted, the number of shares to be
covered by each award, the vesting schedule and all other terms and conditions of the awards. The exercise price
for stock awards granted under the Plan cannot be less than fair market value at the date of grant.
Compensation expense on options and stock only stock appreciation rights (“SAR”) is generally recognized
equally over the three year vesting period. Compensation expense related to employees eligible to retire and
retain full rights to the awards is recognized over six months which coincides with the notice period.
Compensation expense on performance shares is generally recognized over the longer of the estimated
performance goal attainment period or time vesting period. Compensation expense is recognized on a straight-
line basis for each separate vesting portion. Stock-based compensation, including options, SARs and stock
awards, was $11,976 ($7,344 net of tax) in 2008, $8,136 ($4,955 net of tax) in 2007 and $5,293 ($3,218 net of
tax) in 2006. During the year ended December 31, 2006, stock-based compensation expense included $1,115
from the acceleration of vesting on 49 options upon the termination of two employees. For the years ended
December 31, 2008, 2007 and 2006, $602, $335 and $100 of stock-based compensation was recognized as
capitalized development and is included in leasehold improvements, property and equipment in the consolidated
balance sheet.
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Annual Report