10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015  

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission File Number: 1-32731

CHIPOTLE MEXICAN GRILL, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1219301
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1401 Wynkoop St., Suite 500 Denver, CO	80202
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 595-4000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes       No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of July 17, 2015 there were 31,141,775 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

TABLE OF CONTENTS

	PART I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	12
	PART II
Item 1.	Legal Proceedings	12
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	Mine Safety Disclosures	13
Item 5.	Other Information	13
Item 6.	Exhibits	13
	Signatures	14

PART I

ITEM  1.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Chipotle Mexican Grill, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except per share data)

	June 30,		December 31,
	2015		2014
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	587,685	$	419,465
Accounts receivable, net of allowance for doubtful accounts of $1,172 and $1,199 as of June 30, 2015 and December 31, 2014, respectively		25,711		34,839
Inventory		16,529		15,332
Current deferred tax asset		20,224		18,968
Prepaid expenses and other current assets		39,686		34,795
Income tax receivable		7,851		16,488
Investments		291,545		338,592
Total current assets		989,231		878,479
Leasehold improvements, property and equipment, net		1,147,059		1,106,984
Long term investments		600,767		496,106
Other assets		47,228		42,777
Goodwill		21,939		21,939
Total assets	$	2,806,224	$	2,546,285
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	81,453	$	69,613
Accrued payroll and benefits		93,396		73,894
Accrued liabilities		86,167		102,203
Total current liabilities		261,016		245,710
Deferred rent		232,690		219,414
Deferred income tax liability		28,761		40,529
Other liabilities		32,047		28,263
Total liabilities		554,514		533,916
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of  June 30, 2015 and December 31, 2014, respectively		-		-
Common stock $0.01 par value, 230,000 shares authorized, and 35,704 and 35,394  shares issued as of June 30, 2015 and December 31, 2014, respectively		357		354
Additional paid-in capital		1,134,728		1,038,932
Treasury stock, at cost, 4,550 and 4,367 common shares at June 30, 2015 and December 31, 2014, respectively		(865,081)		(748,759)
Accumulated other comprehensive income (loss)		(3,410)		(429)
Retained earnings		1,985,116		1,722,271
Total shareholders' equity		2,251,710		2,012,369
Total liabilities and shareholders' equity	$	2,806,224	$	2,546,285

See accompanying notes to condensed consolidated financial statements.

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Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Income and Comprehensive Income

(unaudited)

(in thousands, except per share data)

	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Revenue	$	1,197,783	$	1,050,073	$	2,286,826	$	1,954,236
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		396,693		363,148		765,719		674,940
Labor		270,914		228,529		515,065		436,737
Occupancy		64,693		56,254		127,878		111,100
Other operating costs		130,359		115,418		243,900		210,555
General and administrative expenses		70,212		74,879		133,273		141,796
Depreciation and amortization		32,440		27,009		63,083		52,763
Pre-opening costs		3,668		3,392		7,103		7,692
Loss on disposal of assets		1,388		1,602		5,588		3,161
Total operating expenses		970,367		870,231		1,861,609		1,638,744
Income from operations		227,416		179,842		425,217		315,492
Interest and other income (expense), net		1,742		1,144		2,965		1,833
Income before income taxes		229,158		180,986		428,182		317,325
Provision for income taxes		(88,954)		(70,716)		(165,337)		(123,986)
Net income	$	140,204	$	110,270	$	262,845	$	193,339
Earnings per share:
Basic	$	4.51	$	3.55	$	8.47	$	6.23
Diluted	$	4.45	$	3.50	$	8.34	$	6.14
Weighted average common shares outstanding:
Basic		31,120		31,049		31,044		31,055
Diluted		31,526		31,474		31,525		31,480
Comprehensive income	$	141,935	$	110,139	$	259,864	$	193,687

See accompanying notes to condensed consolidated financial statements. 

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Chipotle Mexican Grill, Inc.

Condensed Consolidated Statement of Cash Flows

(unaudited)

(in thousands)

	Six months ended June 30,
	2015		2014
Operating activities
Net income	$	262,845	$	193,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		63,083		52,763
Deferred income tax (benefit) provision		(13,032)		(6,124)
Loss on disposal of assets		5,588		3,161
Bad debt allowance		(27)		(18)
Stock-based compensation expense		38,729		61,401
Excess tax benefit on stock-based compensation		(58,058)		(9,516)
Other		229		3
Changes in operating assets and liabilities:
Accounts receivable		9,093		3,754
Inventory		(1,205)		(2,476)
Prepaid expenses and other current assets		(4,915)		(2,744)
Other assets		(4,483)		(3,574)
Accounts payable		14,111		17,696
Accrued liabilities		5,083		15,781
Income tax payable/receivable		66,694		21,041
Deferred rent		13,512		12,584
Other long-term liabilities		3,883		3,360
Net cash provided by operating activities		401,130		360,431
Investing activities
Purchases of leasehold improvements, property and equipment		(114,395)		(102,840)
Purchases of investments		(273,907)		(191,281)
Maturities of investments		216,000		121,250
Net cash used in investing activities		(172,302)		(172,871)
Financing activities
Acquisition of treasury stock		(116,322)		(50,292)
Excess tax benefit on stock-based compensation		58,058		9,516
Stock plan transactions and other financing activities		(175)		(55)
Net cash used in financing activities		(58,439)		(40,831)
Effect of exchange rate changes on cash and cash equivalents		(2,169)		118
Net change in cash and cash equivalents		168,220		146,847
Cash and cash equivalents at beginning of year		419,465		323,203
Cash and cash equivalents at end of period	$	587,685	$	470,050
Supplemental disclosures of cash flow information
Increase (decrease) in purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities	$	(3,879)	$	917

See accompanying notes to condensed consolidated financial statements.

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Chipotle Mexican Grill, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(dollar and share amounts in thousands, unless otherwise specified)

1. Basis of Presentation

Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (collectively the “Company”), develops and operates fast-casual, fresh Mexican food restaurants. As of June 30, 2015, the Company operated 1,847 Chipotle restaurants throughout the United States. The Company also had nine Chipotle restaurants in Canada, six in England, three in France, and one in Germany. Further, the Company operated 10 ShopHouse Southeast Asian Kitchen restaurants, serving fast-casual, Asian inspired cuisine, as well as is an investor in a consolidated entity that owned and operated two Pizzeria Locale restaurants, a fast-casual pizza concept.  The Company operated eight regions during the second quarter 2015 and has aggregated its operations to one reportable segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2014.

2. Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The pronouncement was issued to clarify the principles for recognizing revenue. The pronouncement was deferred and is effective for reporting periods beginning after December 15, 2017. The expected adoption method of ASU 2014-09 is being evaluated by the Company and the adoption is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718).” The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2015, the FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40).” The pronouncement was issued to provide guidance concerning accounting for fees in a cloud computing arrangement. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

3. Fair Value of Financial Instruments

The carryingvalue of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short-term nature. Investments, all of which are classified as held-to-maturity, are carried at amortized cost, which approximates fair value. Investments consist of U.S. treasury notes and CDARS, certificates of deposit placed through an account registry service, with maturities up to approximately two years. Fair market value of U.S. treasury notes is measured using level 1 inputs (quoted prices for identical assets in active markets) and fair market value of CDARS is measured based on level 2 inputs (quoted prices for identical assets in markets that are not active).

The Company also maintains a rabbi trust to fund obligations under a deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value, and are included in other assets in the consolidated balance sheet. Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets). The fair value of the investments in the rabbi trust was $18,624 and $16,147 as of June 30, 2015 and December 31, 2014, respectively. The Company records trading gains and losses in general and administrative expenses in the consolidated statement of income, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure to liabilities for payment under the deferred plan.  For the three and six months ended June 30, 2015, the Company recorded $116 and $256, respectively, of unrealized gains on investments held in the rabbi trust. For the three and six months ended June 30, 2014, the company recorded $292 and $436, respectively, of unrealized gains on investments held in the rabbi trust.

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4. Shareholders’ Equity

As of June 30, 2015, the Company had announced authorizations by its Board of Directors of repurchases of shares of common stock, which in the aggregate authorized expenditures of up to $900,000.  On July 21, 2015, the company announced that its Board of Directors authorized the expenditure of up to an additional $100,000 to repurchase shares of common stock. Under the remaining repurchase authorization, shares may be purchased from time to time in open market transactions, subject to market conditions.

During the six months ended June 30, 2015, the Company repurchased 184 shares of common stock under authorized programs, for a total cost of $116,310. The cumulative shares repurchased under authorized programs as of June 30, 2015 were 4,397 for a total cost of $814,396. As of June 30, 2015, $85,906 was available to repurchase shares under the current repurchase authorizations. The 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

During the six months ended June 30, 2015, the Company granted stock only stock appreciation rights (“SOSARs”) on 367 shares of its common stock to eligible employees. The weighted average grant date fair value of the SOSARs was $156.96 per share with a weighted average exercise price of $662.24 per share based on the closing price of common stock on the date of grant. The SOSARs vest in two equal installments on the second and third anniversary of the grant date. During the six months ended June 30, 2015, 547 SOSARs were exercised, and 25 SOSARs were forfeited.

During the first quarter of 2015, the Company awarded performance shares that were subject to service, performance, and market vesting conditions. The quantity of shares that will ultimately vest is determined based on Chipotle’s relative performance versus a restaurant industry peer group, in average revenue growth, net income growth, and total shareholder return, with each performance measure to be weighted equally. Performance will be calculated over a three year period beginning January 1, 2015 through December 31, 2017. If minimum targets are not met, then no shares will vest.

Total stock-based compensation expense was $21,333 and $37,894 ($13,154 and $23,365 net of tax) for the three and six months ended June 30, 2015, respectively, and was $34,340 and $61,997 ($21,147 and$38,178 net of tax) for the three and six months ended June 30, 2014. A portion of stock-based compensation totaling $409 and $835 for the three and six months ended June 30, 2015, and $298 and $596 for the three and six months ended June 30, 2014, respectively, was recognized as capitalized development and is included in leasehold improvements, property and equipment in the consolidated balance sheet.

6. Earnings Per Share

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include common shares related to SOSARs and non-vested stock awards (collectively “stock awards”). However, stock awards are excluded from the calculation of diluted EPS in the event they are antidilutive or subject to performance conditions. Stock awards that were excluded from the calculation of diluted EPS because they were antidilutive totaled 350 and 241 awards for the three and six months ended June 30, 2015, respectively, compared to 536 and 431 awards for the three and six months ended June 30, 2014, respectively. Stock awards excluded from the calculation because they were subject to performance conditions totaled 326 and 315 awards for the three and six months ended June 30, 2015, respectively, compared to 382 and 388 awards for the three and six months ended June 30, 2014, respectively.  

The following table sets forth the computations of basic and diluted earnings per share:

	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Net income	$	140,204	$	110,270	$	262,845	$	193,339
Shares:
Weighted average number of common shares outstanding		31,120		31,049		31,044		31,055
Dilutive stock awards		406		425		481		425
Diluted weighted average number of common shares outstanding		31,526		31,474		31,525		31,480
Basic earnings per share	$	4.51	$	3.55	$	8.47	$	6.23
Diluted earnings per share	$	4.45	$	3.50	$	8.34	$	6.14

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7. Commitments and Contingencies

Notices of Inspection of Work Authorization Documents and Related Civil and Criminal Investigations

Following an inspection during 2010 by the U.S. Department of Homeland Security, or DHS, of the work authorization documents of the Company’s restaurant employees in Minnesota, the Immigration and Customs Enforcement arm of DHS, or ICE, issued to the Company a Noticeof Suspect Documents identifying a large number of employees who, according to ICE and notwithstanding the Company’s review of work authorization documents for each employee at the time they were hired, appeared not to be authorized to work in the U.S. The Company approached each of the named employees to explain ICE’s determination and afforded each employee an opportunity to confirm the validity of their original work eligibility documents, or provide valid work eligibility documents. Employees who were unable to provide valid work eligibility documents were terminated in accordance with the law. In December 2010, the Company was also requested by DHS to provide the work authorization documents of restaurant employees in the District of Columbia and Virginia, and the Company provided the requested documents in January 2011. The Company subsequently received requests from the office of the U.S. Attorney for the District of Columbia for work authorization documents covering all of the Company’s employees since 2007, plus employee lists and other documents concerning work authorization. The Company believes its practices with regard to the work authorization of its employees, including the review and retention of work authorization documents, are in compliance with applicable law. However, the termination of large numbers of employees in a short 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 authorization verification requirements and its related disclosures and statements, and the office of the U.S. Attorney for the District of Columbia advised the Company that its investigation has broadened to include a parallel criminal and civil investigation of the Company’s compliance with federal securities laws. The Company intends to continue to fully cooperate in the government’s investigations. It is not possible at this time to determine whether the Company will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with these matters.

Miscellaneous

The Company is involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity or capital resources. However, a significant 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this report, including projections of our number and type of new restaurant openings, comparable restaurant sales trends and factors we expect to influence future sales trends, changes in food costs, labor costs, other operating costs, and general and administrative expenses, as well as discussion of possible stock repurchases and estimates of our effective tax rates, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate”, “believe”, “could”, “should”, “estimate”, “expect”, “intend”, “may”, “predict”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the risk factors described in our annual report on Form 10-K for the year ended December 31, 2014, as updated in Part II, Item 1.A of this report.

Overview

Chipotle operates fresh Mexican food restaurants serving burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. We began with a simple philosophy: demonstrate that food served fast doesn’t have to be a traditional “fast-food” experience. We do this by avoiding a formulaic approach when creating our restaurant experience, looking to fine dining restaurants for inspiration. We use high-quality raw ingredients, classic cooking methods and distinctive interior design, and have friendly people to take care of each customer—features that are more frequently found in the world of fine dining. Our approach is also guided by our belief in an idea we call “Food With Integrity.” Our objective is to find the highest quality ingredients we can—ingredients that are grown or raised with respect for the environment, animals and people who grow or raise the food. A similarly focused people culture, with an emphasis on identifying and empowering top performing employees, enables us to develop future leaders from within.

2015 Highlights

Restaurant Development. As of June 30, 2015, we had 1,878 restaurants in operation, including 1,847 Chipotle restaurants throughout the United States, with an additional nine in Canada, six in England, three in France, and one in Germany. Our restaurants also included 10 ShopHouse Southeast Asian Kitchen restaurants, serving fast-casual, Asian inspired cuisine, and two Pizzeria Locale restaurants, a fast-casual pizza concept in which we are an investor through a consolidated entity. New restaurants have contributed substantially to our revenue growth and we opened 97 restaurants during the six months ended June 30, 2015. We expect new restaurant openings at or above the high end of the previously announced range of 190 to 205 for the full year 2015, including a small number of international, ShopHouse and Pizzeria Locale restaurants.

Sales Growth. Average restaurant sales were $2.530 million as of June 30, 2015. We define average restaurant sales as the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months. Our comparable restaurant sales increased 7.1% for the first six months of 2015, and 4.3% for the second quarter of 2015. Comparable restaurant sales represent the change in period-over-period sales for restaurants beginning in their 13th full month of operation.  Comparable restaurant sales increases in the first six months of 2015 were driven primarily by an increase in average check, including a 5.1% impact from the nationwide menu price increase taken during the second quarter of 2014. We believe that the pork supply shortage discussed in the section below resulted in a reduction of comparable restaurant sales increases of approximately 2% during the second quarter of 2015. We expect our 2015 full year comparable restaurant sales increases to be in the low to mid-single digits, including the impact of price increases implemented in specific markets during the second half of 2015, as well as a continued negative impact in the range of 1% to 2% until we have enough pork to supply all of our restaurants.

Catering service is available in Chipotle restaurants throughout the U.S, except New York City. Catering represented 1.5% of company sales in the first half of 2015. 

Food With Integrity. In all of our restaurants, we endeavor to serve only meats that were raised without the use of non-therapeutic antibiotics or added hormones, and in accordance with criteria we’ve established in an effort to improve sustainability and promote animal welfare. We brand these meats as “Responsibly Raised®.” In addition, a portion of some of the produce items we serve is organically grown, and/or sourced locally when in season (by which we mean within 350 miles of the restaurant where it is served), and a portion of the beans we serve is organically grown and a portion is grown using conservation tillage methods that improve soil conditions, reduce erosion and help preserve the environment in which they are grown. The sour cream and cheese we buy is made with milk that comes from cows that are not given rBGH. Milk used to make much of our cheese and all of our sour cream is sourced from pasture-based dairies that provide an even higher standard of animal welfare by providing outdoor access for their cows. 

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Further, we announced during the second quarter that we have achieved our goal of eliminating genetically modified organisms, or GMOs, from the ingredients in our food (not including beverages) in U.S. Chipotle restaurants, as well as ShopHouse Southeast Asian Kitchen. While the meat and poultry we serve is not genetically modified, the animals are likely fed a diet containing GMOs. We will continue to search for quality ingredients that not only taste delicious, but also benefit local farmers or the environment, or otherwise benefit or improve the sustainability of our supply chain.

One of our primary goals is for all of our restaurants to continue serving meats that are raised to meet our standards, but we have and will continue to face challenges in doing so. In January 2015, through an ongoing audit of our suppliers, we identified a pork supplier that was not meeting our standards related to the size and condition of the housing offered to some of the pigs, so we suspended our purchases from this supplier. Without this supply, we have not been able to get enough pork that meets our standards for all of our restaurants, and were not able to serve carnitas in many of our U.S. restaurants during the first half of the year. During the third quarter, we began introducing carnitas from a new pork supplier in the United Kingdom in a handful of restaurants, and we expect that this new pork supply will allow us to serve carnitas in all of our restaurants by the end of 2015.  Additionally, some of our restaurants may periodically serve conventionally raised beef or chicken in the future due to supply constraints. When we become aware that one or more of our restaurants will serve conventionally raised meat or meat that does not meet every aspect of our standards, we clearly and specifically disclose this temporary change on signage in each affected restaurant, so customers can avoid those meats if they choose to do so.

Stock-Based Compensation Expense.   For the full year 2015, we expect non-cash stock-based compensation expense to be approximately $78 million, a decrease of $20 million from 2014.  We restructured our executive officer equity compensation program, contributing to an expected decrease of $33 million compared to the full year 2014.  We expect this benefit to be partially offset by an increase of $13 million for increased grants to staff and restaurant employees and a higher grant date fair value.  The majority of the stock-based compensation expense is recognized in general and administrative expense with a smaller portion impacting labor costs.

Stock Repurchases. In accordance with stock repurchases authorized by our Board of Directors, we purchased stock with an aggregate total repurchase price of $116.3 million during the first six months of 2015. As of June 30, 2015, $85.9 million was available to be repurchased under the repurchase authorization announced on February 3, 2015.On July 21, 2015 we announced that our Board of Directors authorized the expenditure of up to an additional $100 million to repurchase shares of our common stock. We have entered into an agreement with a broker under SEC rule 10b5-1(c), authorizing the broker to make open market purchases of common stock from time to time, subject to market conditions. The existing repurchase agreement and the Board’s authorization of the repurchases may be modified, suspended, or discontinued at any time.

Restaurant Activity

The following table details restaurant unit data for the periods indicated:

	For the three months ended June 30,		For the six months ended June 30,
	2015	2014	2015	2014
Beginning of period	1,831	1,637	1,783	1,595
Openings	48	45	97	89
Relocations	(1)	(1)	(2)	(3)
Total restaurants at end of period	1,878	1,681	1,878	1,681

Results of Operations

Our results of operations as a percentage of revenue and period-over-period changes are discussed in the following section. As our business grows and we open more restaurants and hire more employees, our aggregate restaurant operating costs increase.

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Revenue

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Revenue	$	1,197.8	$	1,050.1	14.1%	$	2,286.8	$	1,954.2	17.0%
Average restaurant sales	$	2.530	$	2.307	9.7%	$	2.530	$	2.307	9.7%
Comparable restaurant sales increases		4.3%		17.3%			7.1%		15.5%
Number of restaurants as of the end of the period		1,878		1,681	11.7%		1,878		1,681	11.7%
Number of restaurants opened in the period, net of  relocations		47		44			95		86

The significant factors contributing to our increase in revenue were new restaurant openings and comparable restaurant sales increases.For the three and six months ended June 30, 2015, revenuefrom restaurants not yet in the comparable restaurant base contributed $104.9 million and $198.8 million of the increase in revenue, respectively, of which $36.8 million and $48.6 million were attributable to restaurants opened in 2015.  Comparable restaurant sales increases contributed $42.8 million of the increase in revenue for the second quarter of 2015, and $133.7 million of the increase in revenue for the first half of 2015. Comparable restaurant sales increases were driven primarily by an increase in average check, including the impact of the menu price increase implemented in the second quarter of 2014.

Food, Beverage and Packaging Costs

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Food, beverage and packaging	$	396.7	$	363.1	9.2%	$	765.7	$	674.9	13.4%
As a percentage of revenue		33.1%		34.6%			33.5%		34.5%

Food, beverage and packaging costs decreased as a percentage of revenue for the three and six months ended June 30, 2015 as a result of the impact of the menu price increase implemented in the second quarter of 2014, as well as relief in dairy and avocado prices, partially offset by increased beef and packaging costs. We expect that food costs as a percentage of revenue for the full year 2015 will remain consistent with the first half of 2015.

Labor Costs

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Labor costs	$	270.9	$	228.5	18.5%	$	515.1	$	436.7	17.9%
As a percentage of revenue		22.6%		21.8%			22.5%		22.3%

Labor costs as a percentage of revenue increased in the three and six months ended June 30, 2015 primarily due to an increased number of crew and managers in each of our restaurants due to scheduling inefficiencies, as well as wage inflation, partially offset by the benefit of higher average restaurant sales, including the impact of menu price increases. For the second half of 2015, we expect labor costs to benefit from the resolution of the scheduling inefficiencies we experienced in the second quarter as a result of reporting challenges from a system change. That benefit will be offset by seasonally higher labor costs during the second half of the year, as well as additional labor costs from wage inflation and the expansion of certain employee benefit programs. As a result, for the full year 2015, we expect labor costs as a percent of revenue to be comparable to the six months ended June 30, 2015. 

9

Occupancy Costs

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Occupancy costs	$	64.7	$	56.3	15.0%	$	127.9	$	111.1	15.1%
As a percentage of revenue		5.4%		5.4%			5.6%		5.7%

Occupancy costs as a percentage of revenue remained relatively consistent for the three and six months ended June 30, 2015. The benefit of higher average restaurant sales was offset by increased occupancy costs during the first half of 2015.

Other Operating Costs

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Other operating costs	$	130.4	$	115.4	12.9%	$	243.9	$	210.6	15.8%
As a percentage of revenue		10.9%		11.0%			10.7%		10.8%

Other operating costs include, among other items, marketing and promotional costs, bank and credit card fees, and restaurant utilities and maintenance costs. Other operating costs as a percentage of revenue decreased for the three and six months ended June 30, 2015 due primarily to lower marketing and promotional spend. While marketing costs fluctuate significantly each quarter during the year, for the full year 2015, we expect other operating costs as a percentage of revenue to increase modestly compared to the first half of 2015.

General and Administrative Expenses

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		decrease	2015		2014		decrease
	(dollars in millions)					(dollars in millions)
General and administrative expense	$	70.2	$	74.9	(6.2%)	$	133.3	$	141.8	(6.0%)
As a percentage of revenue		5.9%		7.1%			5.8%		7.3%

The decrease in general and administrative expenses in dollar terms in the three and six months ended June 30, 2015 primarily resulted from decreased non-cash stock-based compensation and bonus expense, partially offset by increased wages as we grew, and the employer portion of taxes paid in connection with employee stock award exercises and vesting. Stock-based compensation expense decreased due to a change in the structure of our executive compensation. We expect general and administrative expenses in dollar terms for the full year 2015 to remain generally consistent with the $273.9 million recognized in the full year 2014, due primarily to decreased non-cash stock-based compensation expense and costs associated with our biennial All Managers’ Conference held in the 2014 comparable period, offset by higher expenses as we grow.

Depreciation and Amortization

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Depreciation and amortization	$	32.4	$	27.0	20.1%	$	63.1	$	52.8	19.6%
As a percentage of revenue		2.7%		2.6%			2.8%		2.7%

The increase in depreciation and amortization in dollar terms was primarily due to restaurants opened in 2015 and 2014. Depreciation and amortization increased as a percentage of revenue due to restaurants opened at a higher average investment cost in 2015 compared to 2014. 

10

Loss on Disposal of Assets

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		decrease	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Loss  on disposal of assets	$	1.4	$	1.6	(13.4%)	$	5.6	$	3.2	76.8%
As a percentage of revenue		0.1%		0.2%			0.2%		0.2%

Loss on disposal of assets remained relatively consistent for the three months ended June 30, 2015. The increase in dollar terms for the six months ended June 30, 2015 was primarily due to a write-off of $2.8 million during the first quarter, for an internally developed software program that we chose not to implement.

Provision for Income Taxes

	For the three months ended June 30,				%	For the six months ended June 30,				%
	2015		2014		increase	2015		2014		increase
	(dollars in millions)					(dollars in millions)
Provision for income taxes	$	89.0	$	70.7	25.8%	$	165.3	$	124.0	33.4%
Effective tax rate		38.8%		39.1%			38.6%		39.1%

For the full year 2015, we estimate our effective tax rate will be 38.7% compared to 37.6% in 2014. The 2014 rate benefitted 1.0% from federal and state credits that we recognized from filing 2013 tax returns and also from certain federal tax credits that have not been renewed for 2015. The increase in the estimated rate is partially offset by a decrease in the estimated state tax rate for 2015.

Seasonality

Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales are lower, and our net income is generally lower in the first and fourth quarters due—in part—to the holiday season and because fewer people eat out during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For example, restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as fluctuations in food or packaging costs or the timing of menu price increases. The number of trading days can also affect our quarterly results. Overall, on an annual basis, changes in trading days do not have a significant impact on our results. Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based compensation expense, the number of new restaurants opened in a quarter, timing of marketing and promotional spend, and planned events—such as our biennial All Managers’ Conference. Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.

Liquidity and Capital Resources

Our primary liquidity and capital requirements are for new restaurant construction, working capital and general corporate needs. We have a cash and short-term investment balance of $879.2 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 subject to market conditions (including up to $85.9 million in repurchases under programs announced as of June 30, 2015 and an additional $100 million program announced on July 21, 2015), to maintain our existing restaurants, and for general corporate purposes. We also have a long term investments balance of $600.8 million, which consists of U.S. treasury notes and certificate of deposit products with maturities up to approximately 2 years. We believe that cash from operations, together with our cash and investment balances, will be enough to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future.  

We haven’t required significant working capital because customers pay using cash or credit cards and because our operations do not require significant receivables, nor do they require significant inventories due, in part, to our use of various fresh ingredients. In addition, we generally have the right to pay for the purchase of food, beverage and supplies sometime after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support growth.

Off-Balance Sheet Arrangements

As of June 30, 2015 we had no off-balance sheet arrangements or obligations.

11

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We had no significant changes in our critical accounting estimates since our last annual report. Our critical accounting estimates are identified and described in our annual report on Form 10-K for the year ended December 31, 2014.

ITEM  3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risks

We are exposed to commodity price risks. Many of the ingredients 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 and use a mix of forward pricing protocols under which we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing protocols under which we agree on a fixed price with our supplier for the duration of that protocol, and formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of the goods, such as spot prices. However, a majority of the dollar value of goods purchased by us is effectively at spot prices. Generally our pricing protocols with suppliers can remain in effect for periods ranging from one to 18 months, depending on the outlook for prices of the particular ingredient. In several cases, we have minimum purchase obligations. We’ve tried to increase, where necessary, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign demand, weather, crises and other world events that may affect our ingredient prices. Increases in ingredient prices could adversely affect our results if we choose not to increase menu prices at the same pace for competitive or other reasons.

Changing Interest Rates

We are also exposed to interest rate risk through fluctuations of 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 June 30, 2015, we had about $1.0 billion in investments and interest-bearing cash accounts, including insurance related restricted trust accounts classified in other assets, and $421.5 million in accounts with an earnings credit we classify as interest income, which combined bear a weighted-average interest rate of 0.48%.

Foreign Currency Exchange Risk

A portion of our operations consists of activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. However, a substantial majority of our operations and investment activities are transacted in the U.S. and therefore our foreign currency risk is limited at this date.

ITEM  4.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of June 30, 2015, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our 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 report.

During the quarter ended March 31, 2015, we implemented a new human resource information and payroll management system. We continued to integrate the software with our processes, systems, and controls in the quarter ended June 30, 2015, and these activities will continue in future periods. There were no other changes during the three months ended June 30, 2015 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II

ITEM 1.LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 7 “Commitments and Contingencies” in our notes to condensed consolidated financial statements included in Item 1. “Financial Statements and Supplementary Data.”

ITEM  1A.RISK FACTORS

There have been no material changes in our risk factors since our annual report on Form 10-K for the year ended December 31, 2014.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The table below reflects shares of common stock we repurchased during the second quarter of 2015.

		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
April		23,376	$	650.51	23,376	$	163,756,629
	Purchased 4/1 through 4/30
May		57,753	$	630.37	57,753	$	127,350,624
	Purchased 5/1 through 5/31
June		68,000	$	609.48	68,000	$	85,906,255
	Purchased 6/1 through 6/30
Total		149,129	$	624.00	149,129	$	85,906,255

(1) Shares were repurchased pursuant to repurchase programs announced on April 17, 2014 and February 3, 2015. Repurchases under each program are limited to $100 million in total repurchase price, and there is no expiration date.

(2) This column includes $100 million in authorized repurchases announced on April 17, 2014 and February 3, 2015, but does not include an additional $100 million in authorized repurchases announced on July 21, 2015. These repurchase programs have no expiration date. Authorization of repurchase programs may be modified, suspended or discontinued at any time.

ITEM  3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM  6.EXHIBITS

The exhibits listed in the exhibit index following the signature page are filed or furnished as part of this report.

13

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 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:	/S/ JOHN R. HARTUNG
Name:	John R. Hartung
Title:	Chief Financial Officer (principal financial officer and duly authorized signatory for the registrant)

Date: July 21, 2015

14

	Exhibit Index
Exhibit Number	Description of Exhibit
3.1	Amended and Restated Certificate of Incorporation of Chipotle Mexican Grill, Inc.*
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Chipotle Mexican Grill, Inc.**
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Chipotle Mexican Grill, Inc. (implementing simple majority voting)***
3.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Chipotle Mexican Grill, Inc. (removing plurality voting standard)***
3.5	Amended and Restated Bylaws of Chipotle Mexican Grill, Inc.****
4.1	Form of Stock Certificate for Common Stock*
10.1	Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan***
31.1	Certification of Co-Chief Executive Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Co-Chief Executive Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Certification of Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Co-Chief Executive Officers and Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial statements, formatted in XBRL: (i) Condensed Consolidated Balance Sheet as of June 30, 2015 and December 31, 2014, (ii) Condensed Consolidated Statement of Income and Comprehensive Income for the three and six months ended June 30, 2015 (iii) Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2015; and (iv) Notes to the Condensed Consolidated Financial Statements.

*	Incorporated by reference to Chipotle Mexican Grill, Inc.’s Registration Statement on Form 8-A/A filed with the Securities and Exchange Commission on December 16, 2009 (File No. 001-32731).
**	Incorporated by reference to Chipotle Mexican Grill, Inc.’s Quarterly Report on Form 10-Q filed on July 19, 2013 (File No. 001-32731).
***	Incorporated by reference to Chipotle Mexican Grill, Inc.’s Current Report on Form 8-K filed on May 15, 2015 (File No. 15871124).
****	Incorporated by reference to Chipotle Mexican Grill, Inc.’s Current Report on Form 8-K filed on January 5, 2009 (File No. 001-32731).

15

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Steve Ells, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chipotle Mexican Grill, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 21, 2015

/s/     Steve Ells

Steve Ells

Founder, Chairman and Co-Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Montgomery F. Moran, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chipotle Mexican Grill, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 21, 2015

/s/    Montgomery F. Moran

Montgomery F. Moran

Co-Chief Executive Officer

(Principal Executive Officer)

EX-31.3

Exhibit 31.3

CERTIFICATION

I, John R. Hartung, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Chipotle Mexican Grill, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 21, 2015

/s/     John R. Hartung

John R. Hartung

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Steve Ells, the Founder, Chairman and Co-Chief Executive Officer Chipotle Mexican Grill, Inc. (the “Registrant”), Montgomery F. Moran, the Co-Chief Executive Officer of the Registrant and John R. Hartung, the Chief Financial Officer of the Registrant, each hereby certifies that, to the best of his knowledge:

1. The Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2015, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Registrant at the end of the period covered by the Periodic Report and results of operations of the Registrant for the periods covered by the Periodic Report.

Date: July 21, 2015

/s/     Steve Ells	/s/     John R. Hartung
Steve Ells	John R. Hartung
Founder, Chairman and Co-Chief Executive Officer (Principal Executive Officer)	Chief Financial Officer (Principal Financial Officer)
/s/    Montgomery F. Moran
Montgomery F. Moran
Co-Chief Executive Officer (Principal Executive Officer)

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Shareholders' Equity

6 Months Ended

Jun. 30, 2015

Shareholders’ Equity [Abstract]

Shareholder's Equity

4. Shareholders’ Equity

As of June 30, 2015, the Company had announced authorizations by its Board of Directors of repurchases of shares of common stock, which in the aggregate authorized expenditures of up to $900,000.  On July 21, 2015, the company announced that its Board of Directors authorized the expenditure of up to an additional $100,000 to repurchase shares of common stock. Under the remaining repurchase authorization, shares may be purchased from time to time in open market transactions, subject to market conditions.

During the six months ended June 30, 2015, the Company repurchased 184 shares of common stock under authorized programs, for a total cost of $116,310. The cumulative shares repurchased under authorized programs as of June 30, 2015 were 4,397 for a total cost of $814,396. As of June 30, 2015, $85,906 was available to repurchase shares under the current repurchase authorizations. The shares are being held in treasury stock until such time as they are reissued or retired at the discretion of the Board of Directors.

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The carryingvalue of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short-term nature. Investments, all of which are classified as held-to-maturity, are carried at amortized cost, which approximates fair value. Investments consist of U.S. treasury notes and CDARS, certificates of deposit placed through an account registry service, with maturities up to approximately two years. Fair market value of U.S. treasury notes is measured using level 1 inputs (quoted prices for identical assets in active markets) and fair market value of CDARS is measured based on level 2 inputs (quoted prices for identical assets in markets that are not active).

The Company also maintains a rabbi trust to fund obligations under a deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value, and are included in other assets in the consolidated balance sheet. Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets). The fair value of the investments in the rabbi trust was $18,624 and $16,147 as of June 30, 2015 and December 31, 2014, respectively. The Company records trading gains and losses in general and administrative expenses in the consolidated statement of income, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure to liabilities for payment under the deferred plan.  For the three and six months ended June 30, 2015, the Company recorded $116 and $256, respectively, of unrealized gains on investments held in the rabbi trust. For the three and six months ended June 30, 2014, the company recorded $292 and $436, respectively, of unrealized gains on investments held in the rabbi trust.

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Condensed Consolidated Balance Sheet - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 587,685	$ 419,465
Accounts receivable, net of allowance for doubtful accounts of $1,172 and $1,199 as of June 30, 2015 and December 31, 2014, respectively	25,711	34,839
Inventory	16,529	15,332
Current deferred tax asset	20,224	18,968
Prepaid expenses and other current assets	39,686	34,795
Income tax receivable	7,851	16,488
Investments	291,545	338,592
Total current assets	989,231	878,479
Leasehold improvements, property and equipment, net	1,147,059	1,106,984
Long term investments	600,767	496,106
Other assets	47,228	42,777
Goodwill	21,939	21,939
Total assets	2,806,224	2,546,285
Current liabilities:
Accounts payable	81,453	69,613
Accrued payroll and benefits	93,396	73,894
Accrued liabilities	86,167	102,203
Total current liabilities	261,016	245,710
Deferred rent	232,690	219,414
Deferred income tax liability	28,761	40,529
Other liabilities	32,047	28,263
Total liabilities	$ 554,514	$ 533,916
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2015 and December 31, 2014, respectively
Common stock $0.01 par value, 230,000 shares authorized, and 35,704 and 35,394 shares issued as of June 30, 2015 and December 31, 2014, respectively	$ 357	$ 354
Additional paid-in capital	1,134,728	1,038,932
Treasury stock, at cost, 4,550 and 4,367 common shares at June 30, 2015 and December 31, 2014, respectively	(865,081)	(748,759)
Accumulated other comprehensive income (loss)	(3,410)	(429)
Retained earnings	1,985,116	1,722,271
Total shareholders' equity	2,251,710	2,012,369
Total liabilities and shareholders' equity	$ 2,806,224	$ 2,546,285

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Basis of Presentation

6 Months Ended

Jun. 30, 2015

Basis of Presentation [Abstract]

Basis of Presentation

1. Basis of Presentation

Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (collectively the “Company”), develops and operates fast-casual, fresh Mexican food restaurants. As of June 30, 2015, the Company operated 1,847Chipotle restaurants throughout the United States. The Company also had nine Chipotle restaurants in Canada, six in England, three in France, and one in Germany. Further, the Company operated 10 ShopHouse Southeast Asian Kitchen restaurants, serving fast-casual, Asian inspired cuisine, as well as is an investor in a consolidated entity that owned and operated two Pizzeria Locale restaurants, a fast-casual pizza concept.  The Company operated eight regions during the second quarter 2015 and has aggregated its operations to one reportable segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2014.

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Recently Issued Accounting Standards

6 Months Ended

Jun. 30, 2015

Recently Issued Accounting Standards [Abstract]

Recently Issued Accounting Standards

2. Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The pronouncement was issued to clarify the principles for recognizing revenue. The pronouncement was deferred and is effective for reporting periods beginning after December 15, 2017. The expected adoption method of ASU 2014-09 is being evaluated by the Company and the adoption is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718).” The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2015, the FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40).” The pronouncement was issued to provide guidance concerning accounting for fees in a cloud computing arrangement. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

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Condensed Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Condensed Consolidated Balance Sheet [Abstract]
Allowance for doubtful accounts, Accounts receivable	$ 1,172	$ 1,199
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	600,000,000	600,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	230,000,000	230,000,000
Common stock, shares issued	35,704,000	35,394,000
Treasury stock, shares at cost	4,550,000	4,367,000

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock only stock appreciation rights (SOSARs) granted			367
Weighted-average grant date fair value			$ 156.96
Granted, Weighted-Average Exercise Price			$ 662.24
SOSARs exercised			547
SOSARs forfeited			25
Stock-based compensation expense	$ 21,333	$ 34,340	$ 37,894	$ 61,997
Stock-based compensation expense, net of tax	13,154	21,147	$ 23,365	38,178
Stock Options And SOSARs [Member] | First Half Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for SOSARs			2 years
Stock Options And SOSARs [Member] | Second Half Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for SOSARs			3 years
Leasehold Improvements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation recognized as capitalized development	$ 409	$ 298	$ 835	$ 596

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 17, 2015
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Entity Registrant Name	CHIPOTLE MEXICAN GRILL INC
Entity Central Index Key	0001058090
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		31,141,775

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Earnings Per Share (Narrative) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Stock awards excluded, anti-dilutive	350	536	241	431
Stock awards excluded, performance conditions	326	382	315	388

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Condensed Consolidated Statement of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Condensed Consolidated Statement of Income and Comprehensive Income [Abstract]
Revenue	$ 1,197,783	$ 1,050,073	$ 2,286,826	$ 1,954,236
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging	396,693	363,148	765,719	674,940
Labor	270,914	228,529	515,065	436,737
Occupancy	64,693	56,254	127,878	111,100
Other operating costs	130,359	115,418	243,900	210,555
General and administrative expenses	70,212	74,879	133,273	141,796
Depreciation and amortization	32,440	27,009	63,083	52,763
Pre-opening costs	3,668	3,392	7,103	7,692
Loss on disposal of assets	1,388	1,602	5,588	3,161
Total operating expenses	970,367	870,231	1,861,609	1,638,744
Income from operations	227,416	179,842	425,217	315,492
Interest and other income (expense), net	1,742	1,144	2,965	1,833
Income before income taxes	229,158	180,986	428,182	317,325
Provision for income taxes	(88,954)	(70,716)	(165,337)	(123,986)
Net income	$ 140,204	$ 110,270	$ 262,845	$ 193,339
Earnings per share:
Basic	$ 4.51	$ 3.55	$ 8.47	$ 6.23
Diluted	$ 4.45	$ 3.50	$ 8.34	$ 6.14
Weighted average common shares outstanding:
Basic	31,120	31,049	31,044	31,055
Diluted	31,526	31,474	31,525	31,480
Comprehensive income	$ 141,935	$ 110,139	$ 259,864	$ 193,687

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Notices of Inspection of Work Authorization Documents and Related Civil and Criminal Investigations

Following an inspection during 2010 by the U.S. Department of Homeland Security, or DHS, of the work authorization documents of the Company’s restaurant employees in Minnesota, the Immigration and Customs Enforcement arm of DHS, or ICE, issued to the Company a Notice of Suspect Documents identifying a large number of employees who, according to ICE and notwithstanding the Company’s review of work authorization documents for each employee at the time they were hired, appeared not to be authorized to work in the U.S. The Company approached each of the named employees to explain ICE’s determination and afforded each employee an opportunity to confirm the validity of their original work eligibility documents, or provide valid work eligibility documents. Employees who were unable to provide valid work eligibility documents were terminated in accordance with the law. In December 2010, the Company was also requested by DHS to provide the work authorization documents of restaurant employees in the District of Columbia and Virginia, and the Company provided the requested documents in January 2011. The Company subsequently received requests from the office of the U.S. Attorney for the District of Columbia for work authorization documents covering all of the Company’s employees since 2007, plus employee lists and other documents concerning work authorization. The Company believes its practices with regard to the work authorization of its employees, including the review and retention of work authorization documents, are in compliance with applicable law. However, the termination of large numbers of employees in a short 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 authorization verification requirements and its related disclosures and statements, and the office of the U.S. Attorney for the District of Columbia advised the Company that its investigation has broadened to include a parallel criminal and civil investigation of the Company’s compliance with federal securities laws. The Company intends to continue to fully cooperate in the government’s investigations. It is not possible at this time to determine whether the Company will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with these matters.

Miscellaneous

The Company is involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity or capital resources. However, a significant 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.

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Earnings Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

6. Earnings Per Share

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include common shares related to SOSARs and non-vested stock awards (collectively “stock awards”). However, stock awards are excluded from the calculation of diluted EPS in the event they are antidilutive or subject to performance conditions. Stock awards that were excluded from the calculation of diluted EPS because they were antidilutive totaled 350 and 241 awards for the three and six months ended June 30, 2015, respectively, compared to 536 and 431awards for the three and six months ended June 30, 2014, respectively. Stock awards excluded from the calculation because they were subject to performance conditions totaled 326 and 315 awards for the three and six months ended June 30, 2015, respectively, compared to 382 and 388awards for the three and six months ended June 30, 2014, respectively.  

The following table sets forth the computations of basic and diluted earnings per share:

	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Net income	$	140,204	$	110,270	$	262,845	$	193,339
Shares:
Weighted average number of common shares outstanding		31,120		31,049		31,044		31,055
Dilutive stock awards		406		425		481		425
Diluted weighted average number of common shares outstanding		31,526		31,474		31,525		31,480
Basic earnings per share	$	4.51	$	3.55	$	8.47	$	6.23
Diluted earnings per share	$	4.45	$	3.50	$	8.34	$	6.14

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Earnings Per Share (Basic and Diluted Earnings) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net income	$ 140,204	$ 110,270	$ 262,845	$ 193,339
Weighted average number of common shares outstanding	31,120	31,049	31,044	31,055
Dilutive stock awards	406	425	481	425
Diluted weighted average number of common shares outstanding	31,526	31,474	31,525	31,480
Basic earnings per share	$ 4.51	$ 3.55	$ 8.47	$ 6.23
Diluted earnings per share	$ 4.45	$ 3.50	$ 8.34	$ 6.14

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Fair Value of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Fair Value of Financial Instruments [Abstract]
Fair value of investments in rabbi trust	$ 18,624		$ 18,624		$ 16,147
Investment maturity term			2 years
Unrealized gains (losses) on investments held in rabbi trust	$ 116	$ 292	$ 256	$ 436

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Net income	$	140,204	$	110,270	$	262,845	$	193,339
Shares:
Weighted average number of common shares outstanding		31,120		31,049		31,044		31,055
Dilutive stock awards		406		425		481		425
Diluted weighted average number of common shares outstanding		31,526		31,474		31,525		31,480
Basic earnings per share	$	4.51	$	3.55	$	8.47	$	6.23
Diluted earnings per share	$	4.45	$	3.50	$	8.34	$	6.14

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Basis of Presentation (Narrative) (Details) - Jun. 30, 2015	item segment
Product Information [Line Items]
Number of regions | segment	8
Number of reportable segments | segment	1
ShopHouse Southeast Asian Kitchen [Member]
Product Information [Line Items]
Number of restaurants	10
Pizzeria Locale [Member]
Product Information [Line Items]
Number of restaurants	2
United States [Member]
Product Information [Line Items]
Number of restaurants	1,847
Canada [Member]
Product Information [Line Items]
Number of restaurants	9
England [Member]
Product Information [Line Items]
Number of restaurants	6
France [Member]
Product Information [Line Items]
Number of restaurants	3
Germany [Member]
Product Information [Line Items]
Number of restaurants	1

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Shareholders' Equity (Narrative) (Details) - USD ($) shares in Thousands, $ in Thousands	6 Months Ended	81 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Jul. 21, 2015
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, authorized amount	$ 900,000	$ 900,000
Acquisition of treasury stock (shares)	184	4,397
Acquisition of treasury stock (value), total	$ 116,310	$ 814,396
Value of common shares remaining to be repurchased	$ 85,906	$ 85,906
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, additional authorized amount			$ 100,000

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Condensed Consolidated Statement of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities
Net income	$ 262,845	$ 193,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	63,083	52,763
Deferred income tax (benefit) provision	(13,032)	(6,124)
Loss on disposal of assets	5,588	3,161
Bad debt allowance	(27)	(18)
Stock-based compensation expense	38,729	61,401
Excess tax benefit on stock-based compensation	(58,058)	(9,516)
Other	229	3
Changes in operating assets and liabilities:
Accounts receivable	9,093	3,754
Inventory	(1,205)	(2,476)
Prepaid expenses and other current assets	(4,915)	(2,744)
Other assets	(4,483)	(3,574)
Accounts payable	14,111	17,696
Accrued liabilities	5,083	15,781
Income tax payable/receivable	66,694	21,041
Deferred rent	13,512	12,584
Other long-term liabilities	3,883	3,360
Net cash provided by operating activities	401,130	360,431
Investing activities
Purchases of leasehold improvements, property and equipment	(114,395)	(102,840)
Purchases of investments	(273,907)	(191,281)
Maturities of investments	216,000	121,250
Net cash used in investing activities	(172,302)	(172,871)
Financing activities
Acquisition of treasury stock	(116,322)	(50,292)
Excess tax benefit on stock-based compensation	58,058	9,516
Stock plan transactions and other financing activities	(175)	(55)
Net cash used in financing activities	(58,439)	(40,831)
Effect of exchange rate changes on cash and cash equivalents	(2,169)	118
Net change in cash and cash equivalents	168,220	146,847
Cash and cash equivalents at beginning of year	419,465	323,203
Cash and cash equivalents at end of period	587,685	470,050
Supplemental disclosures of cash flow information
Increase (decrease) in purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities	$ (3,879)	$ 917

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

Stock-Based Compensation [Abstract]

Stock-Based Compensation

5. Stock-based Compensation

During the six months ended June 30, 2015, the Company granted stock only stock appreciation rights (“SOSARs”) on 367 shares of its common stock to eligible employees. The weighted average grant date fair value of the SOSARs was $156.96 per share with a weighted average exercise price of $662.24 per share based on the closing price of common stock on the date of grant. The SOSARs vest in two equal installments on the second and third anniversary of the grant date. During the six months ended June 30, 2015,  547 SOSARs were exercised, and 25 SOSARs were forfeited.

During the first quarter of 2015, the Company awarded performance shares that were subject to service, performance, and market vesting conditions. The quantity of shares that will ultimately vest is determined based on Chipotle’s relative performance versus a restaurant industry peer group, in average revenue growth, net income growth, and total shareholder return, with each performance measure to be weighted equally. Performance will be calculated over a three year period beginning January 1, 2015 through December 31, 2017. If minimum targets are not met, then no shares will vest.

Total stock-based compensation expense was $21,333 and $37,894 ($13,154 and $23,365 net of tax) for the three and six months ended June 30, 2015, respectively, and was $34,340and $61,997 ($21,147 and$38,178 net of tax) for the three and six months ended June 30, 2014. A portion of stock-based compensation totaling $409 and $835 for the three and six months ended June 30, 2015, and $298 and $596 for the three and six months ended June 30, 2014, respectively, was recognized as capitalized development and is included in leasehold improvements, property and equipment in the consolidated balance sheet.