Chipotle 2009 Annual Report Download - page 52

In 2005, the Company granted 153 shares of non-vested common stock with a grant date fair value of
$19.50 per share (a related party contemporaneous valuation) which vested evenly over three years. The fair
value of shares vested during the years ended December 31, 2008 and 2007 was $5,124 and $3,053, respectively.
The following table reflects the average assumptions utilized in the Black-Scholes option-pricing model to
value stock options and SARs awards granted for each year:
2009 2008 2007
Risk-free interest rate ................................................... 1.5% 3.1% 4.7%
Expected life (years) .................................................... 4.2 4.8 5.0
Expected dividend yield ................................................. 0.0% 0.0% 0.0%
Volatility ............................................................. 42% 35% 35%
Weighted-average Black-Scholes fair value per share at date of grant ............. $18.85 $29.01 $24.80
The risk-free interest rate is based upon U.S. Treasury rates for instruments with similar terms. For the 2008
and 2007 stock option and SAR awards, the expected life was derived utilizing the short-cut method allowed for
a vanilla option grant in which the expected life is assumed to be the average of the vesting period and the
contractual life of the option. For the 2009 awards, the expected life was estimated utilizing Company-specific
historical data. Prior to the 2009 awards, the Company had very limited historical share option exercise
experience that did not represent a sufficiently large sample to provide a reasonable basis for an estimate of
expected life due to limited grants prior to its initial public offering in 2006. In 2009, with an additional year of
historical exercise experience, the Company felt it had adequate information to be used for the expected life
calculation. The volatility assumptions were derived from the Company’s actual and implied volatilities and
historical volatilities of competitors whose shares are traded in the public markets and are adjusted to reflect
anticipated behavior specific to the Company. Competitor data has been included in the consideration for the
volatility assumption as the Company’s own volatility data was limited. During these periods the Company has
not paid dividends to date and does not plan to pay dividends in the near future.
7. 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, 2009, 2008 and 2007, Company matching contributions totaled approximately
$1,462, $1,402 and $1,234, respectively.
The Company 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,
unfunded 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, 2009 and 2008 were $3,020 and
$1,790, 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, 2009, 2008
and 2007, the Company made deferred compensation matches of $131, $252 and $137 respectively, to the
Deferred Plan. As the Deferred Plan is unfunded, the Company is responsible for the earnings and losses. The
total expense (income) recognized under the Deferred Plan including the matching contributions was $538,
$(176) and $165 for the years ended December 31, 2009, 2008 and 2007, respectively.
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Annual Report