Mail Stop 3561
December 19, 2005
Via U.S. Mail
Montgomery F. Moran
President and Chief Operating Officer
Chipotle Mexican Grill, Inc.
1543 Wazee Street, Suite 200
Denver, CO 80202
Re: Chipotle Mexican Grill, Inc.
Amendment no. 1 to Registration Statement on Form S-1
Filed December 5, 2005
File No. 333-129221
Dear Mr. Moran,
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments. Page references are to the marked copies you provided.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free to
call us at the telephone numbers listed at the end of this letter.
General
1. We note your response to prior comment 2 and reissue. We note
your
belief that your style and approach are key elements to your
strategy,
day-to-day operations and brand identity. We continue to believe,
however, that the abundance of marketing language that appears in
your
prospectus overshadows the type of meaningful disclosure upon
which
investors will make an investment decision. For example, the
subheading "Act Like You Own The Place" that appears on page 2
does
not accurately describe the disclosure that follows regarding the
location of your front line crew. Additionally, we are unclear
about
the purpose of the quotation marks that appear around some of your
subheadings. Please revise.
2. We note your response to prior comment 4 and reissue in part.
We
continue to believe your subheadings, "Sometimes It`s the Whisper
That`s Heard: Advertising and Marketing" and "Pssst, Over Here" on
page 61 seem to suggest that you are not heavily engaged in
advertising your products. We note that you believe your
advertising
expenditures are lower than your competitors; however, in light of
your response to prior comment 6, we do not believe low
advertising
expenditures reflects your lack of reliance on advertising. We
note
that you believe advertising is important to position your brand
and
to communicate with potential customers, as well as investors
seeking
to understand your business. Therefore, in this case, we do not
believe "a whisper" accurately reflects your advertising and
marketing
strategy. Please revise your subheadings and corresponding
disclosure
or advise.
Registration Statement Cover Page
3. We note your response to prior comment 5. Please list the
selling
shareholder shares as a separate line item in the fee table.
Explanatory Note
4. We note your response to prior comment 6, and your belief that
disclosing advertisements would better enable an investor to
understand how the Company positions its brand and how it
communicates
with potential customers. We, however, believe the artwork that
is
already included in the prospectus adequately illustrates how you
brand your product and how you communicate with customers, and
that
plain, clear disclosure about your marketing methods and the
results
of your operations should provide investors with information they
should consider in making an investment decision. Please remove
the
references to attached advertisements throughout the prospectus,
including the reference to the ads on your chipotleipo.com website
and
the text in Annex A.
Prospectus summary, page 1
When a Chain Isn`t a Chain, page 1
5. We note your response to prior comment 8. Please revise to
indicate your loss of $7.7 million in parentheses.
6.
We note your response to our prior comment number 11. As
previously
requested, please revise your earnings per share computations, and
all
related disclosures in the registration statement to give
retroactive
effect to the reverse stock-split that you plan to effect prior to
completion of your planned public offering.
What We Do, page 49
7. We note your response to prior comments 24 and 25 and your
response
that some repetition of disclosure is inevitable. We continue to
believe, however, that the disclosure repeats the same detailed
information within the same section. For example, beginning on
page
51, you begin to describe your "Food With Integrity" concept with
some
detail. Then on page 58, you discuss largely the same information
in
greater detail. We suggest revising to succinctly summarize your
business strengths at the beginning of the "What We Do" section.
We
believe removing detailed repetition will help an investor better
understand your business and its strategy.
8. Furthermore, please relocate your section "The Good, the Bad
and
the Ugly: Competition" on page 62 to follow "Our Industry" on
page
55. We believe that describing your industry along with
competition
would aid an investor to better understand the "fast-casual"
segment
and your position in it. Please revise.
Consolidated Balance Sheet, page F-3
9. We note your response to our prior comment 38. As previously
requested, please revise your filing to include a pro forma
balance
sheet alongside your historical balance sheet giving effect to the
changes in capitalization that will occur in connection with the
offering. Also, revise to disclose pro forma earnings per share
for
the latest fiscal year and any subsequent interim period presented
giving effect to these changes in capitalization. Your Summary
Consolidated Financial Data on page 7 and your Selected
Consolidated
Financial Data on page 29 should also be revised to include
disclosure
of your pro forma earnings per share for the latest fiscal year
and
subsequent interim period presented. We also note your revised
disclosure in Note 1 under the heading "Initial Public Offering
and
Unaudited Pro Forma Balance Sheet and Earnings Per Common Share"
where
you state that the pro forma disclosures will give effect to the
issuance of shares of class A common stock. Please note that the
pro
forma balance sheet and the pro forma earnings per share
disclosures
requested above should exclude effects of the offering. Also, pro
forma earnings per share should be disclosed only for the most
recent
fiscal year and subsequent interim period presented.
Additionally, as
it relates to your pro forma earnings per share disclosures,
please
revise to include disclosure similar to Note 10, as required by
paragraph 40 of SFAS No. 128.
Note 1. Description of Business and Summary of Significant
Accounting
Policies
Equity -Based Compensation Plan, page F-10
10. We note your response to our prior comment 40. However, we
still
do not see the disclosure required by paragraph 84(b) of SFAS
123(R).
Please disclose in the table under the section labeled "Equity -
Based
Compensation Plan" on page F-10 the amount of share-based
employee
compensation cost ,net of related tax effects, included in net
income
as reported, during 2002, 2003 and 2004, as required by paragraph
84(b) of SFAS 123(R).
Note 6. Stock Based Compensation, page F-15
11. Revise to disclose the total compensation cost associated with
unvested stock appreciation rights as of the latest balance sheet
date
presented, that has not yet been recognized in the Company`s
financial
statements and the weighted average period over which it is
expected
to be recognized. Refer to the disclosure requirements outlined
in
paragraph A240(h) of SFAS No.123R.
12. Please explain why the grant date fair value of the stock
appreciation rights on 501,300 shares of $7.45 as disclosed in
Note 6
significantly exceeds the fair value of these rights at September
30,
2005 as disclosed in Note 1 on page F-11 of $2.19 per share.
13. Please revise Note 6 to indicate whether the contemporaneous
valuation of the 460,000 shares of common stock with a fair value
of
$6.50 per share issued during 2005 was performed by a valuation
specialist and indicate whether this party was an affiliate of the
Company. See paragraph 179 of the AICPA Audit and Accounting
Practice
Aid, Valuation of Privately-Held-Company Equity Securities Issued
as
Compensation.
14. We note your response to our prior comment 45. Please discuss
in
MD&A the planned accounting treatment that the Company will use
for
the conversion of its outstanding stock appreciation rights into
options to acquire Class A common shares that will occur in
connection
with the Company`s planned offering.
Other
15. We note your response to our prior comment 48. As requested in
our
prior comment, please revise the notes to the Company`s financial
statements to disclose the terms of the Services Agreement with
McDonalds once this agreement has been finalized.
* * * * *
As appropriate, please amend the registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have
made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Jeffrey Jaramillo at (202) 551-3212 or Linda
Cvrkel at (202) 551-3813 if you have questions regarding comments
on
the financial statements and related matters. Please contact
Rolaine
Bancroft at (202) 551-3313 or me at (202) 551-3765 with any other
questions.
Regards,
Pamela Long
Assistant Director
cc: Janet L. Fisher, Esq.
Cleary Gottlieb Steen & Hamilton LLP
via facsimile: (212) 225-3999
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Montgomery F. Moran
Chipotle Mexican Grill, Inc.
December 19, 2005
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