Mail Stop 3561
December 30, 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. 2 to Registration Statement on Form S-1
Filed December 23, 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.
Explanatory Note
1. At your request, we have reconsidered prior comment 4 but
restate
the comment. The statutory prospectus should include plain, clear
and
balanced disclosure of facts upon which investors will make
investment
decisions. The materials developed to market your products are
not
appropriate for a statutory prospectus. Please remove the
attached
advertisements from the prospectus and revise disclosure where
necessary to remove references to these ads. If you include a
reference to an ipo website that contains the ads, the website
should
not be linked to the electronic version of the prospectus or
otherwise
incorporated into the prospectus. We understand that you intend
to
file these materials as a free writing prospectus apart from the
statutory prospectus. Provided that the information in the free
writing prospectus does not conflict with information in the
statutory
prospectus and you have included the required legend, we will have
no
comment on the content of your free writing prospectus.
Summary Consolidated Financial Data, page 7
Selected Consolidated Financial Data, page 29
Consolidated Balance Sheets and Statements of Operations
2. It appears that you have included the Series B convertible
preferred shares, the Series C junior convertible preferred shares
and
the Series D junior convertible preferred shares in both your
basic
and diluted earnings per share disclosures for certain periods
presented. Please tell us and explain in the notes to your
financial
statements why you believe this treatment is appropriate and in
accordance with the guidance in SFAS No.128 and EITF 03-6. Your
response should clearly explain why the two-class method discussed
in
EITF 03-6 was not used in preparing your basic and diluted
earnings
per share computations.
3. Also, we note your response to our prior comment number 6 but
continue to believe that presentation of historic earnings per
share
is not appropriate or meaningful to potential investors since the
one
for three reverse stock split will occur prior to the closing of
your
public offering. Accordingly, please revise your basic and diluted
earnings per share for all periods presented to give retroactive
effect to the one for three reverse stock split of your common
shares
that will occur in connection with your planned public offering.
Refer
to the guidance outlined in paragraph 54 of SFAS No.128 and SAB
Topic
4:C. Your balance sheet, your disclosures regarding stock-based
compensation and any other disclosure of share information in the
registration statement, and including the notes to your financial
statements, should be similarly revised to give effect to the
reverse
stock split.
4. Additionally, pro forma earnings per share for only the latest
fiscal year and subsequent interim period presented should also be
provided giving effect to the reclassification of the Company`s
outstanding preferred shares into one-third of one share of Class
B
common stock in connection with the offering. Please revise to
delete
the "Adjusted earnings (loss) per common share information"
included
in your Summary and Selected Financial Data for all periods other
than
the latest fiscal year and subsequent interim period presented.
This
information should also be referred to as "pro forma" earnings per
share, rather than as adjusted earnings (loss) per common share.
We may have further comment upon receipt of your response and our
review of your revised disclosures.
Capitalization, page 27
5. Revise the introductory paragraph to your capitalization
disclosures to explain the nature and terms of the transactions
comprising the "Reclassification" transaction.
Other Factors Affecting Our Results
Equity Compensation Expenses, page 38
6. We note your response to our prior comment number 14 and the
disclosures that have been added to page 38 of the registration
statement in response to our prior comment. Please tell us and
revise
MD&A to discuss the number and terms of the options that the
Company
expects to grant upon conversion of its stock appreciation rights
in
connection with the offering and disclose the amount of any
expense
that the Company expects to recognize in connection with the
conversion.
Contractual Obligations, page 49
7. We note your response to our prior comment number 15 but
continue
to believe that additional disclosure should be provided in MD&A
regarding the Services Agreement with McDonalds given the related
party nature of this transaction. Accordingly, please revise MD&A
to
discuss the significant terms of the Services Agreement with
McDonalds
that is expected to become effective upon the closing of the
offering.
Note 6. Stock Based Compensation, page F-17
8. We note your response to our prior comment number 13 and the
disclosures that have been added to Note 6 in response to our
prior
comment. However, we do not agree with your conclusion that
additional
disclosures in MD&A are not required with respect to the related
party
contemporaneous valuation of the 460,000 shares of common stock
granted to an officer during 2005. Although the estimated fair
value
of the shares issued, after consideration of the planned reverse
stock
split, will exceed your expected public offering price, we believe
that because the valuation was prepared by management, the
assumptions
and methods used in determining this valuation should be discussed
in
MD&A. Accordingly, please revise MD&A to include a discussion of
the
following matters:
* The significant factors, assumptions and methodologies used in
determining fair value of the options and shares granted.
* Discuss each significant factor contributing to the difference
between the fair value of the options and shares granted and the
expected public offering price.
* The valuation alternative selected and the reasons management
chose
not to obtain a contemporaneous valuation by an unrelated
valuation
specialist.
See paragraph 182 of the AICPA Audit and Accounting Practice Aid,
Valuation of Privately-Held-Company Equity Securities Issued as
Compensation.
Note 8. Related-Party Transactions, page F-19
9. Since your financial statements include expenses for certain
services provided to the Company by your parent, McDonalds, which
may
not be representative of expenses the Company would have incurred
on a
stand-alone basis, please revise to disclose an estimate of what
the
Company`s expenses for the services would have been on a stand
alone
basis for each period presented. Refer to the guidance outlined in
SAB
Topic 1:B:1, Question 2.
Exhibit 5.1
10. Please refer to the fourth paragraph, beginning with the
second
sentence. It is inappropriate to include assumptions relating to
the
accuracy of readily ascertainable factual matters of each document
as
well as assumptions that necessary corporate actions will be
taken.
Please delete these assumptions from your opinion.
* * * * *
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 30, 2005
Page 1 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-3561
DIVISION OF
CORPORATION FINANCE