Chipotle 2013 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... techniques to prepare and serve the best tasting food possible. And our special people culture, which focuses on attracting and building teams of top performers empowered to achieve high standards, allows us to create an extraordinary dining experience for our customers and internally develop our...

  • Page 3
    ... closing price of the registrant's common stock on such date, the last trading day of the registrant's most recently completed second fiscal quarter. For purposes of this calculation, shares of common stock held by each executive officer and director and by holders of more than 5% of the outstanding...

  • Page 4
    ... Statements and Supplementary Data ...Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate...

  • Page 5
    ...the "Company", or "we") operate Chipotle Mexican Grill restaurants, which serve a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients. As of December 31, 2013, we operated 1,572 Chipotle restaurants throughout the United States, as...

  • Page 6
    ... protein option made with braised organic tofu. And if customers can't find something on the menu that's quite what they're after, we encourage them to let us know. If we can make it from the ingredients we have, we'll do it. In preparing our food, we use stoves and grills, pots and pans, cutting...

  • Page 7
    ... than 300 customers an hour at some locations. The natural flow of our restaurant layout, including the floor plan and the design of our serving line, are designed to make the food ordering process intuitive and, we believe, more efficient. And we constantly strive to improve the speed of service in...

  • Page 8
    .... We've tried to increase, where necessary, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility and supply shortages, and we follow industry news, trade issues, weather, exchange rates, foreign demand, crises and other world events that may affect our...

  • Page 9
    ... focus on having teams of top-performing employees prepare food using a variety of fresh ingredients in an open restaurant kitchen to create delicious food, as well as our commitment to "Food With Integrity", which we think adds up to a high quality customer experience in our restaurants. We believe...

  • Page 10
    ... than the food we serve at Chipotle. In order to see how our model works when we use different ingredients and a different style of food, we opened our first ShopHouse Southeast Asian Kitchen during 2011 and we opened five additional ShopHouse restaurants during 2013. ShopHouse serves a menu that...

  • Page 11
    ... number of restaurants we expect to open in 2014, our expected comparable restaurant sales results during 2014, our expectations for food cost inflation and food costs as a percentage of revenue in 2014, statements about potential menu price increases in 2014, projections of restaurant development...

  • Page 12
    ... date of this report as a result of new information, future events or other developments, except as required by applicable laws and regulations. Risks Related to our Growth Strategy and Future Expansion Our sales and profit growth could be adversely affected if comparable restaurant sales increases...

  • Page 13
    ... trading day following our second quarter 2012 earnings release. Any future deceleration in or failure to meet market expectations for our comparable restaurant sales increases would likely result in another significant decline in the price of our common stock. Increasing our sales and profitability...

  • Page 14
    ... ramp-up period typically lasting 24 months or more, during which they generated sales and income below the levels at which we expect them to normalize. This is in part due to the time it takes to build a customer base in a new area, higher fixed costs relating to increased labor and other start-up...

  • Page 15
    ... and operating results. As described elsewhere in this report, our plans call for a significant number of new restaurants. Our existing restaurant management systems, financial and management controls, information systems and personnel may be inadequate to support our expansion. Managing our growth...

  • Page 16
    ...brand. Our business could be adversely affected by increased labor costs or difficulties in finding the right employees for our restaurants and the right field leaders. Labor is a primary component of our operating costs, and we believe good managers and crew are a key part of our success. We devote...

  • Page 17
    ... Statements and Supplementary Data." Termination of a significant number of employees in specific markets or across our company would disrupt our operations including slowing our throughput, and could also cause additional adverse publicity and temporary increases in our labor costs as we train new...

  • Page 18
    ... and quick-service segments of the restaurant industry also emphasize lower-cost, "value meal" menu options, a strategy we do not currently pursue. Our sales may be adversely affected by these products and price competition. Annual Report Moreover, we may also compete with companies outside the...

  • Page 19
    ... income levels. Our average restaurant sales may decline during economic downturns or periods of uncertainty, which can be caused by various factors such as high unemployment, increasing taxes, interest rates, or other changes in fiscal or monetary policy, high gasoline prices, declining home prices...

  • Page 20
    ...in the quick-service and fast-casual segments have been a particular focus. For example, the State of California, New York City and a number of other jurisdictions around the U.S. have adopted regulations requiring that chain restaurants include calorie information on their menu boards or make other...

  • Page 21
    ... for us than for restaurant companies at which some or all of these risks are borne by franchisees or other operating contractors. The effect of recent changes to U.S. healthcare laws may increase our healthcare costs and negatively impact our financial results. We offer eligible full-time and part...

  • Page 22
    ... areas may adversely affect our existing and future operations and results, including by harming our ability to open new restaurants or increasing our operating costs" above, for additional discussion of these types of claims. From time to time, we also face claims alleging that technology we use...

  • Page 23
    ... contract, have created an employee culture, food culture and business strategy at our company that has been critical to our success and that may be difficult to replicate under another management team. We also believe that it may be difficult to locate and retain executive officers who are able to...

  • Page 24
    ... our employees, and we collect information about customers as part of some of our marketing programs as well. The collection and use of such information is regulated at the federal and state levels, and the regulatory environment related to information security and privacy is increasingly demanding...

  • Page 25
    ... may affect our reputation among employees and potential employees, which could make it more difficult for us to attract and retain top-performing employees. That could adversely impact the quality of the customer experience we can offer and our operations generally, and may increase our labor costs...

  • Page 26
    ...quarter or for any year. Average restaurant sales or comparable restaurant sales in any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors, which could cause our stock price to fall. We believe the market price...

  • Page 27
    ... the end of a line of retail outlets), in-lines (in a line of retail outlets), free-standing or other. Of our restaurants in operation as of December 31, 2013, we had 970 endcap locations, 264 in-line locations, 283 free-standing units, and 78 other. The average restaurant size is about 2,580 square...

  • Page 28
    Our main office is located at 1401 Wynkoop Street, Suite 500, Denver, Colorado, 80202 and our telephone number is (303) 595-4000. We lease our main office and substantially all of the properties on which we operate restaurants. For additional information regarding the lease terms and provisions, see...

  • Page 29
    ... MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The following table describes the per share range of high and low sales prices for shares of our common stock for the quarterly periods indicated, as reported by the New York Stock Exchange...

  • Page 30
    ... Annual Report $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 12/08 12/09 12/10 12/11 12/12 12/13 Chipotle Mexican Grill, Inc S&P Restaurants S&P 500 *$100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2014...

  • Page 31
    ...to be expected for any future period (in thousands, except per share data). 2013 2012 For the years ended December 31 2011 2010 2009 Statement of Income: Revenue ...$ Food, beverage and packaging costs ...Labor costs ...Occupancy costs ...Other operating costs ...General and administrative expenses...

  • Page 32
    ... we do not increase menu prices. Based on continued food cost inflation, we are likely to increase menu prices at some point during 2014, most likely the second half of the year. During 2013, we launched our catering service in Chipotle restaurants throughout the U.S, except New York City where...

  • Page 33
    ... more of our restaurants will serve conventionally raised meat, we clearly and specifically disclose this temporary change on signage in each affected restaurant, so that customers can avoid those meats if they choose to do so. Our food costs increased as a percentage of revenue in 2013 as a result...

  • Page 34
    ... ended December 31 2012 (dollars in millions) % increase 2013 over 2012 % increase 2012 over 2011 2013 2011 Revenue ...$ Average restaurant sales ...$ Comparable restaurant sales increases ...Number of restaurants as of the end of the period ...Number of restaurants opened in the period, net of...

  • Page 35
    ... and increased legal costs, partially offset by costs from our biennial All Managers' Conference, or AMC, held in the third quarter of 2012, as well as a decrease in 2013 in non-cash stock-based compensation expense due to expenses in 2012 related to non-vested stock awards subject to performance...

  • Page 36
    ...of the benefit of higher average restaurant sales on a partially fixed cost base. Income Tax Provision For the years ended December 31 2013 % increase 2013 over 2012 % increase 2012 over 2011 Annual Report 2012 (dollars in millions) 2011 Provision for income taxes ...$ Effective tax rate ... 207...

  • Page 37
    ... corporate needs. We have a cash and short-term investment balance of $578.2 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 additional shares of our common stock...

  • Page 38
    ...Annual Report The primary areas of our operations affected by inflation are food, healthcare costs, labor, fuel, utility costs, materials used in the construction of our restaurants, and insurance. Although almost all of our crew members make more than the minimum wage, increases in the applicable...

  • Page 39
    ...we use to prepare our food, as well as our packaging materials, are commodities or ingredients that are affected by the price of other commodities, exchange rates, foreign demand, weather, seasonality, production, availability and other factors outside our control. We work closely with our suppliers...

  • Page 40
    ... interest rates on our investments. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. As of December 31, 2013, we had $652.5 million in investments and interest-bearing cash accounts, including an insurance related restricted...

  • Page 41
    ... Statement of Income and Comprehensive Income for the years ended December 31, 2013, 2012 and 2011 ...Consolidated Statement of Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011 . . Consolidated Statement of Cash Flows for the years ended December 31, 2013, 2012 and 2011...

  • Page 42
    ...the standards of the Public Company Accounting Oversight Board (United States), Chipotle Mexican Grill, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 43
    ...245 and 34,912 shares issued as of December 31, 2013 and 2012, respectively ...Additional paid-in capital ...Treasury stock, at cost, 4,212 and 3,819 common shares at December 31, 2013 and 2012, respectively ...Accumulated other comprehensive income ...Retained earnings ...Total shareholders' equity...

  • Page 44
    CHIPOTLE MEXICAN GRILL, INC. CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share data) 2013 Years ended December 31 2012 2011 Revenue ...Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Food, beverage and packaging...

  • Page 45
    CHIPOTLE MEXICAN GRILL, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in thousands) Additional Treasury Stock Paid-In Capital Shares Amount Accumulated Other Comprehensive Income (Loss) Common Stock Shares Amount Retained Earnings Total Balance, December 31, 2010 ...Stock-based ...

  • Page 46
    CHIPOTLE MEXICAN GRILL, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) Years ended December 31 2013 2012 2011 Operating activities Net income ...$ 327,438 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...96,054 Deferred ...

  • Page 47
    ... FINANCIAL STATEMENTS (dollar and share amounts in thousands, unless otherwise specified) 1. Description of Business and Summary of Significant Accounting Policies Chipotle Mexican Grill, Inc. (the "Company"), a Delaware corporation, develops and operates fast-casual, fresh Mexican food restaurants...

  • Page 48
    ... of food, beverages, and supplies, is valued at the lower of first-in, first-out cost or market. Certain key ingredients (beef, pork, chicken, beans, rice, sour cream, cheese, and tortillas) are purchased from a small number of suppliers. Investments Annual Report The Company's investments consist...

  • Page 49
    ... rent, wages, benefits and travel for the training and opening teams, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business. Insurance Liability The Company maintains various insurance policies including workers' compensation, employee health...

  • Page 50
    ...the years ended December 31, 2013, 2012 and 2011, respectively. Advertising and marketing costs are included in other operating costs in the consolidated statement of income and comprehensive income. Rent Rent expense for the Company's leases, which generally have escalating rentals over the term of...

  • Page 51
    ...United States, Canada, and England, and one for France and Germany. Subsequent Events The Company evaluated subsequent events and transactions for potential recognition or disclosure in the consolidated financial statements through the date of issuance. Recently Issued Accounting Standards Effective...

  • Page 52
    ... for income taxes ...$ 207,033 $ 179,685 $ 134,760 Actual taxes paid for each tax period were less than the current tax expense due to the excess tax benefit on stock-based compensation of $38,379, $73,210, and $38,786 during the years ended December 31 2013, 2012, and 2011, respectively...

  • Page 53
    ... years before 2009. Some of the Company's foreign net operating losses begin expiring in 2015. 4. Shareholders' Equity Through December 31, 2013, the Company announced authorizations by its Board of Directors of the expenditure of up to $700 million to repurchase shares of the Company's common stock...

  • Page 54
    ... totaled 57 shares for a total cost of $28,916, and in the year ended 2012, totaled 28 shares for a total cost of $10,698. 5. Stock Based Compensation The Company issues shares pursuant to the Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the "2011 Incentive Plan"). Shares issued pursuant...

  • Page 55
    ... $26,357 for non-vested stock awards the Company has determined are probable of vesting, and is expected to be recognized over a weighted average period of 2.7 years. The fair value of shares earned as of the vesting date during the year ended December 31, 2013, 2012, and 2011 was $58,941, $31,309...

  • Page 56
    ...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...

  • Page 57
    ... and diluted earnings per share: 2013 Year ended December 31 2012 2011 Net income ...Shares: Weighted average number of common shares outstanding ...Dilutive stock awards ...Diluted weighted average number of common shares outstanding ...Basic earnings per share ...Diluted earnings per share ...55...

  • Page 58
    ... period of time does disrupt restaurant operations and results in a temporary increase in labor costs as new employees are trained. In May 2012, the U.S. Securities and Exchange Commission notified the Company that it is conducting a civil investigation of the Company's compliance with employee work...

  • Page 59
    ... increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially and adversely affect the Company's business, financial condition, results of operations and cash flows. 10. Quarterly...

  • Page 60
    ... co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. Changes in Internal Control over Financial Reporting There were no changes during the fiscal quarter ended December...

  • Page 61
    ... Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Chipotle Mexican Grill, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of income and comprehensive income, shareholders' equity, and cash flows for each of the three years...

  • Page 62
    ... INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Incorporated by reference from the definitive proxy statement for our 2014 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2013. ITEM 11. EXECUTIVE COMPENSATION...

  • Page 63
    ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Incorporated by reference from the definitive proxy statement for our 2014 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2013. Annual Report 61

  • Page 64
    ..., FINANCIAL STATEMENT SCHEDULES 1. All Financial statements Consolidated financial statements filed as part of this report are listed under Item 8. "Financial Statements and Supplementary Data." 2. Financial statement schedules No schedules are required because either the required information is...

  • Page 65
    ...1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHIPOTLE MEXICAN GRILL, INC. By: Name: Title: /s/ JOHN R. HARTUNG John R. Hartung Chief Financial Officer Date: February 4, 2014 KNOW ALL PERSONS BY THESE PRESENTS, that each...

  • Page 66
    ... No. 1 to Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan.(4) Amended and Restated Registration Rights Agreement dated January 31, 2006 among Chipotle Mexican Grill, Inc., McDonald's Corporation and certain shareholders.(13) Board Pay Policies.(14) Chipotle Mexican Grill, Inc. Supplemental...

  • Page 67
    ... Cash Flows for the years ended December 31, 2013, 2012 and 2011; and (v) Notes to the Consolidated Financial Statements. †- denotes management contract or compensatory plan or arrangement. (1) Incorporated by reference to Chipotle Mexican Grill, Inc.'s Registration Statement on Form 8-A/A filed...

  • Page 68
    (17) Incorporated by reference to Chipotle Mexican Grill, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 21, 2007 (File No. 001-32731). Annual Report 66

  • Page 69
    ... attend the annual meeting of shareholders of Chipotle Mexican Grill, Inc., which will be held on May 15, 2014 at 8:00 a.m. local time at The Hyatt Regency Denver at Colorado Convention Center, 650 15th Street, Denver, Colorado. Details of the business to be conducted at the annual meeting are given...

  • Page 70
    ... date for the meeting has been fixed by the Board of Directors as the close of business on March 17, 2014. Shareholders of record at that time are entitled to vote at the meeting. Proxy Statement By order of the Board of Directors /s/ Monty Moran Co-Chief Executive Officer, Secretary and Director...

  • Page 71
    ... for 2015 Annual Meeting ...Availability of SEC Filings, Corporate Governance Guidelines, Code of Conduct, Codes of Ethics and Committee Charters ...Delivery of Materials to Shareholders with Shared Addresses ...Miscellaneous ...APPENDIX A-AMENDED AND RESTATED 2011 CHIPOTLE MEXICAN GRILL, INC. STOCK...

  • Page 72
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  • Page 73
    ... firm for the year ending December 31, 2014. Proxy Statement A proposal to approve the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, to authorize the issuance of an additional 2,600,000 shares of common stock under the plan and make other changes to the terms of the...

  • Page 74
    ...proxy statement. The method by which you vote will not limit your right to vote in person at the annual meeting. If you receive hard copy materials and sign and return your proxy card without specifying choices, your shares will be voted as recommended by the Board of Directors. Will my shares held...

  • Page 75
    ... say-on-pay vote, ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2014, the proposal to approve the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and approval of the shareholder...

  • Page 76
    ... proxy statement; each of our directors; and all of our current executive officers and directors as a group. The number of shares beneficially owned by each shareholder is determined under SEC rules and generally includes shares for which the holder has voting or investment power. The information...

  • Page 77
    ... to 1,707,093 shares or 5.49% of the total outstanding common stock at March 17, 2014. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. (2) Based solely on a report on Schedule 13G filed on February 13, 2013. The address of Sands Capital Management, LLC is 1101 Wilson...

  • Page 78
    ... currently serving as Class III directors and are the nominees for election as directors to serve for a one year term as Class I directors expiring at the 2015 annual meeting. Each of the nominees was nominated by the Board upon the recommendation of the Nominating and Corporate Governance Committee...

  • Page 79
    ... included responsibility for managing a large and diverse employee workforce similar in many ways to Chipotle's, and also gave him a detailed knowledge of restaurant operations, site selection and related matters. He also has developed strong financial acumen through his experience at McDonald's as...

  • Page 80
    Class III directors whose terms expire at the 2014 annual meeting of shareholders and who are nominees for terms expiring at the 2015 annual meeting Age Director Since Montgomery F. (Monty) Moran ... Mr. Moran is our Co-Chief Executive Officer. He was appointed to this position on January 1, 2009...

  • Page 81
    ... whose terms expire at the 2015 annual meeting of shareholders Age Director Since Steve Ells ... Mr. Ells founded Chipotle in 1993. He is Co-Chief Executive Officer and was appointed Chairman of the Board in 2005. Prior to launching Chipotle, Mr. Ells worked for two years at Stars restaurant in...

  • Page 82
    ... the 2015 annual meeting of shareholders Age Director Since Jeffrey B. Kindler ... Mr. Kindler is a director, advisor and investor in a number of private health care companies. He serves as CEO of Centrexion Corporation, a privately held therapeutics company. In addition to Chipotle, he serves on...

  • Page 83
    ...company. Mr. Flanzraich's executive experience has helped him develop outstanding skills in leading and managing strong teams of employees, and in oversight of the growth and financing of businesses in a rapidly-evolving market. His legal background also is valuable to us in the risk management area...

  • Page 84
    ... website at www.chipotle.com under the Corporate Governance link. Audit Committee In accordance with its charter, the Audit Committee acts to oversee the integrity of our financial statements and system of internal controls, the annual independent audit of our financial statements, the performance...

  • Page 85
    ... Discussion and Analysis-Components of Compensation-Long-Term Incentives." The committee has in some years, including 2013, delegated its authority under the plan to our executive officers to make grants to non-executive officer level employees, within limitations specified by the committee in its...

  • Page 86
    ... time limits and meet other requirements established by our bylaws. The committee oversees the annual evaluation of the performance of the Board and its committees and reviews and makes recommendations regarding succession plans for positions held by executive officers. The Nominating and Corporate...

  • Page 87
    ... closing price of the stock on the grant date, which is the date of our annual shareholders meeting each year. Each director who is not an employee of Chipotle also received a $2,000 cash payment for each meeting of the Board of Directors he or she attended and $1,500 for each meeting of a committee...

  • Page 88
    ... our Board committee charters; the Chipotle Mexican Grill, Inc. Code of Conduct, which applies to all Chipotle officers, directors and employees; and separate Codes of Ethics for our directors, our CoChief Executive Officers and our Chief Financial Officer/principal accounting officer. The Corporate...

  • Page 89
    ... for vacant Board positions and for election at each annual meeting of shareholders. The committee's policies and procedures for consideration of Board candidates are described below. Messrs. Charlesworth, Moran and Musk, the nominees for election as directors at this year's annual meeting, were...

  • Page 90
    ... proxy statement for election by the shareholders at the annual meeting (or, if between annual meetings, one or more nominees may be elected by the Board itself if needed to fill vacancies, including vacancies resulting from an increase in the number of directors). Policies and Procedures for Review...

  • Page 91
    ... of risk management includes its review each year of an annual risk assessment conducted by our internal audit department, which functionally reports to the Audit Committee. The Audit Committee also recommends from time to time that key identified risk areas be considered by the full Board, and...

  • Page 92
    ... our stock price increases from the grant date to the date of exercise. Our Compensation Committee believes that this allows the recipients of SOSARs, including our executive officers, to share in the value created for shareholders and makes stock appreciation rights an inherently performance-based...

  • Page 93
    ... performance and stock price gains, and that have aligned the interests of our officer team with those of shareholders. Accordingly, our Board asks that you vote in favor of the following shareholder resolution: "RESOLVED, that the compensation of the executive officers of Chipotle Mexican Grill...

  • Page 94
    ... auditors to audit our consolidated financial statements for the year ending December 31, 2014 and to perform other permissible, pre-approved services. As a matter of good corporate governance, we are requesting that shareholders ratify the Audit Committee's appointment of Ernst & Young LLP...

  • Page 95
    ... described above, the Audit Committee recommended to our Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 for filing with the SEC. The Audit Committee: Albert S. Baldocchi, Chairperson Neil...

  • Page 96
    ... type of covered service being performed or expected to be provided. Our Chief Financial Officer is also required to report to the committee any non-compliance with this policy of which he becomes aware. The committee may delegate pre-approval authority for individual services or a class of services...

  • Page 97
    ... by the Board of Directors on March 6, 2014 subject to shareholder approval at the 2014 Annual Meeting. If this proposal is approved 2,600,000 shares will be added to the number of shares authorized for issuance under the 2011 Stock Incentive Plan; eligible persons who may receive equity awards...

  • Page 98
    ... series of related transactions and payments of nonqualified deferred compensation shall not be made on account of a change in control if doing so would violate Section 409A of the Internal Revenue Code. The Compensation Committee is also authorized to establish special rules in order to comply with...

  • Page 99
    ... not provide for any tax gross-ups. • • • • • • Proxy Statement Key Terms of the 2011 Stock Incentive Plan Eligible Persons Currently, executive officers, officers, other employees, and non-employee directors of our Company and our subsidiaries are eligible to participate in the...

  • Page 100
    ... subsequent awards under the plan. Chipotle may not increase the applicable share limits of the 2011 Stock Incentive Plan by repurchasing shares of our common stock on the market (by using cash received through the exercise of stock options or otherwise). Shares issued in connection with awards that...

  • Page 101
    ... two years following a change in control (as defined in the 2011 Stock Incentive Plan). The Compensation Committee may, but is not required, to grant Full Value Awards under the plan in a manner intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code...

  • Page 102
    ... revenue; (xxxiii) net or gross revenue; (xxxiv) comparable restaurant sales; (xxxv) new restaurant openings; (xxxvi) market share; (xxxvii) economic value added; (xxxviii) cost of capital; (xxxix) expense reduction levels; (xl) safety record; (xli) stock price; (xlii) productivity; (xliii) customer...

  • Page 103
    ... of the fair market value of the stock on the date of exercise over the option price. Upon disposition of the shares, any additional gain or loss realized by the recipient will be taxed as a capital gain or loss, long-term or short-term, based upon how long the shares are held. 31 Proxy Statement

  • Page 104
    ... disposes of restricted or unrestricted stock, the difference between the amounts received upon such disposition and the fair market value of such shares on the date the recipient realizes ordinary income will be treated as a capital gain or loss, long-term or short-term, based upon how long the...

  • Page 105
    ... applicable year. A higher burn rate indicates an increased number of equity awards being granted to employees and/or directors. The burn rate is usually compared to industry data, particularly date furnished by various shareholder services groups. "Total Potential Overhang" is the number of shares...

  • Page 106
    ... December 31, 2013, all of the shares available for grant under the Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan may instead be issued in the form of restricted stock, restricted stock units, performance shares or other equity-based awards. Each share underlying a full value award such as...

  • Page 107
    ... it uses from sustainable sources", has very limited information on its policies and progress towards achieving its objectives. Resolved: Shareholders request Chipotle to issue an annual sustainability report describing the company's short- and long-term responses to ESG-related issues. The report...

  • Page 108
    ... as project partners. Statement in Opposition by our Board of Directors Through our constant efforts to expand our Food with Integrity mission, we believe Chipotle is driving more positive change in the nation's food supply than any other restaurant company. Today, we serve more meat that has been...

  • Page 109
    ...use of our resources. While we do report a number of key measures related to our Food with Integrity mission in press releases and our filings with the SEC, and include much of the same information, as well as additional information about other sustainability aspects of our business, on our web site...

  • Page 110
    ..., Chipotle shareholders gave 98% support to the 2013 management proposal to elect each director annually. This proposal should also be more favorably evaluated due to our Company's clearly improvable environmental, social and corporate governance performance as reported in 2013: GMI Ratings, an...

  • Page 111
    ... the context of our clearly improvable corporate climate, please vote to protect shareholder value: Simple Majority Vote-Proposal F Statement in Opposition by our Board of Directors Chipotle's supermajority voting provisions apply to limited fundamental changes. Under our Amended and Restated Bylaws...

  • Page 112
    ... Proxy Statement $200 $100 $0 12/08 12/09 12/10 12/11 12/12 12/13 Chipotle Mexican Grill, Inc S&P 500 S&P Restaurants *$100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2014 S&P, a division of The McGraw-Hill Companies...

  • Page 113
    ... links to environmental or social performance in its current incentive pay policies." These statements appear to suggest that the proposal seeks to recommend changes to Chipotle's compensation program or the terms of our equity compensation awards. But the proposal does nothing of the sort...

  • Page 114
    ... of annual awards of stock-only stock appreciation rights, or SOSARs, which are inherently performance based since the grantees only realize compensation in connection with the awards if our stock price increases over a multi-year period following the grant date of the award, and performance share...

  • Page 115
    ...of sales growth, net income growth, and total shareholder return. The following table illustrates our relative performance in each of these areas as a percentile of the peer group over the one, three, and five year periods ended December 31, 2013, computed based on the compound annual growth rate of...

  • Page 116
    ...compensation system for all of our employees, including our executive officers, the total compensation of each executive officer is weighted heavily towards atrisk elements of compensation: annual AIP bonuses, SOSAR awards, and performance shares. For 2013, these performance-based elements accounted...

  • Page 117
    ... that this ensures that compensation packages for our executive officers are structured in a manner rewarding superior operating performance and the creation of shareholder value. The restaurant peer group used for these purposes is generally comprised of all publicly-traded companies in the Global...

  • Page 118
    ... salary to compensate our executive officers for services rendered during the year, and also to provide them with income regardless of our stock price performance, which helps avoid incentives to create short-term stock price fluctuations and mitigates the impact of forces beyond our control such as...

  • Page 119
    ... the market. Individual targeted amounts can also be increased or decreased based on subjective individual considerations such as level of responsibility, experience and internal equity issues. Following completion of our year-end financial statements and each executive officer's annual performance...

  • Page 120
    ... determined following completion of the third quarter of 2016. Because our practice has been to make periodic performance share awards designed to compensate performance over a multi-year performance period, the compensation reported for each executive officer in the Summary Compensation Table below...

  • Page 121
    ... awards to, the executive officers in February of each year. In making these decisions, the committee references our company performance primarily by comparing our sales growth, net income growth and total shareholder return over the preceding oneyear, three-year and five-year periods to the same...

  • Page 122
    ... our top performers, consistent with our goal of building shareholder value. To determine the company and team performance factors for each year, during the first quarter of the year the committee approves targeted performance levels for a number of financial or operating measures (on a company-wide...

  • Page 123
    ... development employees. For 2013, as with past years, the four measures the committee selected to be used in determining the company and team performance factors were income from operations (prior to accrual for AIP payouts), new restaurant average daily sales, comparable restaurant sales increases...

  • Page 124
    ..., as well as the size of SOSAR awards made to each executive officer in past years. In evaluating company performance, the committee considered our performance versus the restaurant industry peer group on the basis of sales growth, net income growth and total shareholder return over the one, two...

  • Page 125
    ... such limit date). The committee believes that the cumulative adjusted cash flow from operations targets add an additional performance-based element to awards that, as discussed above, are already dependent on performance in order to return value to the recipient. This further reinforces the pay for...

  • Page 126
    ...three year period beginning October 1, 2013 of specified levels of cumulative adjusted cash flow from operations. Each executive may earn zero shares if cumulative adjusted cash flow from operations over the performance period falls short of a threshold amount, and a stated number of shares based on...

  • Page 127
    .... The committee may consider the accounting treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB Topic 718) of alternative grant proposals when determining the form and timing of equity compensation grants to our executive officers. The accounting...

  • Page 128
    ... consolidated financial statements for the year ended December 31, 2013, which are included in our Annual Report on Form 10-K filed with the SEC on February 5, 2014, for descriptions of the methodologies and assumptions we use to value stock awards and the manner in which we recognize the related...

  • Page 129
    ... our audited consolidated financial statements for the year ended December 31, 2013, which are included in our Annual Report on Form 10-K filed with the SEC on February 5, 2014, for descriptions of the methodologies and assumptions we use to value SOSAR and performance share awards pursuant to FASB...

  • Page 130
    ... Each executive may earn zero shares if cumulative adjusted cash flow from operations over the performance period falls short of a threshold amount, or a stated number of shares based on achievement at threshold, target and maximum levels, with the number of shares to be issued to be pro-rated based...

  • Page 131
    ... were subject to performance-based vesting requiring our achievement following the grant date and prior to the fifth anniversary of the award of a stated level of cumulative adjusted cash flow from operations, subject to adjustments for stock-based compensation expense and for one-time or unusual...

  • Page 132
    ... the 2013 performance share awards, assuming achievement at the threshold level of cumulative adjusted cash flow from operations, subject to certain adjustments for stockbased compensation expense and for one-time or unusual items, through September 30, 2016. (10) Based on the closing stock price of...

  • Page 133
    NON-QUALIFIED DEFERRED COMPENSATION FOR 2013 The Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan permits eligible management employees who elect to participate in the plan, including our executive officers, to make contributions to deferral accounts once the participant has ...

  • Page 134
    ... that we make post-employment severance payments to the executive officers in the event their employment terminates. In addition, payouts under the AIP are conditioned on the employee being employed as of the payout date. We have in the past paid severance to executives or other key employees who...

  • Page 135
    ... of the equity-based awards made to our executive officers do provide for post-employment benefits in certain circumstances. The table below reflects the dollar value, based on the closing price of our common stock on December 31, 2013, of the value of each listed type of equity award that was not...

  • Page 136
    ...a corporation" under applicable U.S. Treasury Regulations, the performance shares remain outstanding and vesting will accelerate (with payout at target level performance) in the event the employment of the holder is terminated without cause or by the holder for good reason within two years following...

  • Page 137
    ... of each executive officer assumes that the performance shares actually paid out at target. These amounts would not be realizable until following completion of the performance period. (5) The dollar values reflected in the table are based on the excess of the closing price of our common stock on...

  • Page 138
    ... our 2011 Stock Incentive Plan that also constitutes a "change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation" under applicable U.S. Treasury Regulations, the performance share awards remain outstanding and...

  • Page 139
    ... Committee of our Board of Directors has reviewed and approved our relationship with Sequence pursuant to the policy described on page 18. Registration Rights Prior to our initial public offering, certain of our current shareholders, including Steve Ells, our Chairman and Co-Chief Executive Officer...

  • Page 140
    ... 25, 2014, unless the date of our 2015 annual meeting is more than 30 days before or after May 15, 2015, in which case the proposal must be received a reasonable time before we begin to print and send our proxy materials. All proposals should be addressed to Chipotle Mexican Grill, Inc., 1401...

  • Page 141
    ... to you, or if you are a holder of record and have received a proxy card, via telephone as explained on the proxy card. We will appreciate your prompt response. By order of the Board of Directors /s/ Monty Moran Co-Chief Executive Officer, Secretary and Director March 27, 2014 Proxy Statement 69

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  • Page 143
    ..., profitability and financial success of the Company. 2. Definitions As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below: (a) "Board of Directors" means the Board of Directors of Chipotle. (b) "Business...

  • Page 144
    ... for such Business Combination constitute a majority of the members of the board of directors of the Surviving Corporation, or a corporation beneficially owning a majority of the voting securities of the Surviving Corporation; and (z) no Person other than the Company or any employee benefit plan (or...

  • Page 145
    ... date of the occurrence of such Change in Control and any incidental matters relating thereto. (e) "Chipotle" means Chipotle Mexican Grill, Inc., a Delaware corporation, and any successor thereto. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and all regulations...

  • Page 146
    ..., that the Committee may, in its discretion, determine the Fair Market Value of a share of Common Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Common Stock on such date or the preceding trading day, the actual sale price of a Share, any other...

  • Page 147
    ...-Based Compensation. (v)(y) "Person" means a "person" as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any "group" within the meaning of Section 13(d)(3) under the Exchange Act. (w)(z) "Plan" means this Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock...

  • Page 148
    ... to pay the exercise price or withholding taxes related to an outstanding Incentive Award that is not a Full Value Award, or (iii) shares of Common Stock reacquired by the Company with the amount received upon exercise of an Option. Subject to adjustment as provided in Section 9, the maximum number...

  • Page 149
    ... the Plan as the Committee may deem necessary or appropriate (including without limitation the adoption or amendment of rules or regulations applicable to the grant, vesting or exercise of Incentive Awards issued to employees located outside the United States). Without limiting the generality of the...

  • Page 150
    ... number of shares of Common Stock as shall be determined by the Committee on or after the date such Option is granted (including without limitation in accordance with terms and conditions relating to the vesting or exercisability of an Option set forth in any employment, severance, change in control...

  • Page 151
    ...Code) are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company (or any "subsidiary" as such term is defined in Section 424 of the Code of Chipotle) shall not exceed $100,000. Such Fair Market Value A-9 Proxy Statement

  • Page 152
    ... to qualify as Performance-Based Compensation. Notwithstanding the foregoing, any Other Stock-Based Award that is a stock appreciation right (i) shall have a base price of not less than 100% of the Fair Market Value of a share of Common Stock on the date on which such stock appreciation right is...

  • Page 153
    ... revenue; comparable restaurant sales; new restaurant openings; market share; economic value added; cost of capital; expense reduction levels; safety record; stock price; productivity; customer satisfaction; employee satisfaction; and total shareholder return. For any Plan Year, Performance Measures...

  • Page 154
    ...not, make such adjustments in the number and class of shares of Common Stock with respect to which Incentive Awards may be granted as the Committee may deem appropriate. (b) Increase or Decrease in Issued Shares Without Consideration Subject to any required action by the shareholders of Chipotle, in...

  • Page 155
    ... Chipotle or corporate change other than those specifically referred to in paragraphs (b), (c) or (d), the Committee may, in its discretion, make such adjustments in the number and class of shares subject to Incentive Awards outstanding on the date on which such change occurs and in such other terms...

  • Page 156
    ... sum, without interest, on the earliest date permitted under Section 409A of the Code that is also a business day. 10. Rights as a Stockholder No person shall have any rights as a stockholder with respect to any shares of Common Stock covered by or relating to any Incentive Award granted pursuant to...

  • Page 157
    ... of an Option hereunder or the issuance or transfer of shares of Common Stock pursuant to any Incentive Award pending or to ensure compliance under federal or state securities laws or the rules or regulations of any exchange on which the Shares are then listed for trading. Chipotle shall inform the...

  • Page 158
    ... of the Plan The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent any applicable law, regulation or rule of a stock exchange requires shareholder approval in order for any such revision...

  • Page 159
    ... any right or obligation that the Company may have regarding the recovery of "incentive-based compensation" under Section 10D of the Exchange Act, as amended (as determined by the applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission...

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  • Page 163
    ...exhibits), including our audited financial statements, as well as other reports we file with the SEC, at no cost on the investor relations page of our website at ir.chipotle.com, or by writing to the Corporate Secretary, Chipotle Mexican Grill, Inc., 1401 Wynkoop Street, Suite 500, Denver, CO 80202...

  • Page 164
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