SHAKE SHACK INC., 10-Q filed on 5/5/2017
Quarterly Report
Document and Entity Information Document and Entity Information
3 Months Ended
Mar. 29, 2017
Apr. 26, 2017
Class A Common Stock
Apr. 26, 2017
Class B Common Stock
Document Information [Line Items]
 
 
 
Document type
10-Q 
 
 
Amendment flag
false 
 
 
Document period end date
Mar. 29, 2017 
 
 
Document fiscal year focus
2017 
 
 
Document fiscal period focus
Q1 
 
 
Entity registrant name
Shake Shack Inc. 
 
 
Entity central index key
0001620533 
 
 
Current fiscal year end date
--12-27 
 
 
Entity filer category
Accelerated Filer 
 
 
Entity current reporting status
Yes 
 
 
Entity common stock, shares outstanding (in shares)
 
25,757,064 
10,879,592 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Current assets:
 
 
Cash and cash equivalents
$ 15,711 
$ 11,607 
Marketable Securities, Current
57,840 
62,040 
Accounts receivable
5,044 
6,006 
Inventories
903 
806 
Prepaid expenses and other current assets
4,302 
3,485 
Total current assets
83,800 
83,944 
Property and equipment, net
147,485 
136,264 
Deferred tax asset, non-current
319,530 
313,207 
Other assets
4,613 
4,779 
TOTAL ASSETS
555,428 
538,194 
Current liabilities:
 
 
Accounts payable
5,663 
6,921 
Accrued expenses
7,699 
8,538 
Accrued wages and related liabilities
4,027 
6,084 
Other current liabilities
11,427 
10,173 
Total current liabilities
28,816 
31,716 
Deemed Landlord Financing Liability
8,016 
2,007 
Deferred rent
31,354 
31,107 
Liabilities under tax receivable agreement, net of current portion
274,259 
267,902 
Other long-term liabilities
1,512 
4,109 
Total liabilities
343,957 
336,841 
Stockholders' equity:
 
 
Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of March 29, 2017 and December 28, 2016.
0 
0 
Additional paid-in capital
141,940 
135,448 
Retained earnings
18,986 
16,719 
Accumulated other comprehensive loss
(19)
(15)
Total stockholders' equity attributable to Shake Shack Inc.
160,944 
152,188 
Non-controlling interests
50,527 
49,165 
Total equity
211,471 
201,353 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
555,428 
538,194 
Class A Common Stock
 
 
Stockholders' equity:
 
 
Common stock
26 
25 
Class B Common Stock
 
 
Stockholders' equity:
 
 
Common stock
$ 11 
$ 11 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)
Mar. 29, 2017
Dec. 28, 2016
Preferred Stock, no par value (in dollars per share)
$ 0 
$ 0 
Preferred stock, shares authorized (in shares)
10,000,000 
10,000,000 
Preferred stock, shares issued (in shares)
0 
0 
Preferred stock, shares outstanding (in shares)
0 
0 
Class A Common Stock
 
 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized (in shares)
200,000,000 
200,000,000 
Common stock, shares, issued (in shares)
25,681,875 
25,151,384 
Common Stock, Shares, Outstanding
25,681,875 
25,151,384 
Class B Common Stock
 
 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized (in shares)
35,000,000 
35,000,000 
Common stock, shares, issued (in shares)
10,929,592 
11,253,592 
Common Stock, Shares, Outstanding
10,929,592 
11,253,592 
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) (UNAUDITED) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Income Statement [Abstract]
 
 
Shack sales
$ 74,155 
$ 52,153 
Licensing revenue
2,594 
2,012 
TOTAL REVENUE
76,749 
54,165 
Shack-level operating expenses:
 
 
Food and paper costs
21,174 
15,032 
Labor and related expenses
20,460 
13,162 
Other operating expenses
7,665 
4,919 
Occupancy and related expenses
6,176 
4,323 
General and administrative expenses
8,470 
6,884 
Depreciation expense
4,748 
3,106 
Pre-opening costs
2,415 
2,025 
Loss on disposal of property and equipment
13 
0 
TOTAL EXPENSES
71,121 
49,451 
OPERATING INCOME
5,628 
4,714 
Other income, net
195 
23 
Interest Expense
303 
87 
INCOME BEFORE INCOME TAXES
5,520 
4,650 
Income tax expense
1,658 
1,299 
NET INCOME
3,862 
3,351 
Less: net income attributable to non-controlling interests
1,595 
1,889 
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 2,267 
$ 1,462 
Earnings per share of Class A common stock:
 
 
Basic (in dollars per share)
$ 0.09 
$ 0.07 
Diluted (in dollars per share)
$ 0.09 
$ 0.07 
Weighted-average shares of Class A common stock outstanding:
 
 
Basic (in shares)
25,376 
20,353 
Diluted (in shares)
25,955 
20,812 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net income
$ 3,862 
$ 3,351 
Available-for-sale securities:
 
 
Change in net unrealized holding losses
(9)1
(2)1
Less: reclassification adjustments for net realized losses included in net income
3 1
0 1
OTHER COMPREHENSIVE LOSS
(6)
(2)
COMPREHENSIVE INCOME
3,856 
3,349 
Less: comprehensive income attributable to non-controlling interests
1,593 
1,888 
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 2,263 
$ 1,461 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) (USD $)
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
Income tax benefit
$ 0 
$ 0 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
USD ($)
Class A Common Stock
Class B Common Stock
Common stock
Class A Common Stock
USD ($)
Common stock
Class B Common Stock
USD ($)
Additional Paid-In Capital
USD ($)
Retained Earnings
USD ($)
Accumulated Other Comprehensive Loss
USD ($)
Non- Controlling Interest
USD ($)
Beginning balance at Dec. 30, 2015
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
$ 3,351 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Net unrealized losses related to available-for-sale securities
(2)
 
 
 
 
 
 
(1)
 
Ending balance (shares) at Mar. 30, 2016
 
 
 
 
14,582,886 
 
 
 
 
Beginning balance at Dec. 28, 2016
201,353 
 
 
25 
11 
135,448 
16,719 
(15)
49,165 
Beginning balance (shares) at Dec. 28, 2016
 
25,151,384 
11,253,592 
25,151,384 
11,253,592 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
Net income
3,862 
 
 
 
 
 
2,267 
 
1,595 
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Net unrealized losses related to available-for-sale securities
(6)
 
 
 
 
 
 
(4)
(2)
Equity-based compensation
1,289 
 
 
 
 
1,289 
 
 
 
Stock option exercises (in shares)
 
 
 
206,491 
 
 
 
 
 
Activity under stock compensation plans
4,317 
 
 
1 
 
2,870 
 
 
1,446 
Redemption of LLC Interests (in shares)
 
 
 
324,000 
(324,000)
 
 
 
 
Redemption of LLC Interests
0 
 
 
0 
0 
1,322 
 
 
(1,322)
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis
1,011 
 
 
 
 
1,011 
 
 
 
Distributions paid to non-controlling interest holders
(355)
 
 
 
 
 
 
 
355 
Ending balance at Mar. 29, 2017
$ 211,471 
 
 
$ 26 
$ 11 
$ 141,940 
$ 18,986 
$ (19)
$ 50,527 
Ending balance (shares) at Mar. 29, 2017
 
25,681,875 
10,929,592 
25,681,875 
10,929,592 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
OPERATING ACTIVITIES
 
 
Net income (including amounts attributable to non-controlling interests)
$ 3,862,000 
$ 3,351,000 
Adjustments to reconcile net income to net cash provided by operating activities
 
 
Depreciation expense
4,748,000 
3,106,000 
Equity-based compensation
1,249,000 
1,030,000 
Deferred income taxes
(1,009,000)
3,000 
Non-cash interest expense
71,000 
70,000 
Excess tax benefits on equity-based compensation
0 
(28,000)
Loss on sale of marketable securities
3,000 
0 
Loss on disposal of property and equipment
(13,000)
0 
Changes in operating assets and liabilities:
 
 
Accounts receivable
2,312,000 
1,019,000 
Inventories
(97,000)
(78,000)
Prepaid expenses and other current assets
(505,000)
345,000 
Other assets
(520,000)
(234,000)
Accounts payable
400,000 
561,000 
Accrued expenses
1,029,000 
(89,000)
Accrued wages and related liabilities
(2,057,000)
(2,086,000)
Other current liabilities
62,000 
202,000 
Deferred rent
164,000 
1,354,000 
Other long-term liabilities
(46,000)
(48,000)
NET CASH PROVIDED BY OPERATING ACTIVITIES
9,679,000 
8,478,000 
INVESTING ACTIVITIES
 
 
Purchases of property and equipment
(13,132,000)
(14,128,000)
Purchases of marketable securities
(325,000)
0 
Sales of marketable securities
5,155,000 
0 
NET CASH USED IN INVESTING ACTIVITIES
(8,302,000)
(14,128,000)
FINANCING ACTIVITIES
 
 
Proceeds from Deemed Landlord Financing
293,000 
0 
Payments On Deemed Landlord Financing
(36,000)
0 
Distributions paid to non-controlling interest holders
(355,000)
0 
Tax Receivable Agreement Payments To Related Parties
(1,471,000)
0 
Proceeds from stock option exercises
4,296,000 
628,000 
Excess tax benefits from equity-based compensation
0 
28,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES
2,727,000 
656,000 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
4,104,000 
(4,994,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
11,607,000 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ 15,711,000 
 
NATURE OF OPERATIONS
NATURE OF OPERATIONS
NATURE OF OPERATIONS
 
Shake Shack Inc. ("we," "us," "our," "Shake Shack" and the "Company") was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries ("SSE Holdings"). On February 4, 2015, we completed an initial public offering ("IPO") of 5,750,000 shares of our Class A common stock at a public offering price of $21.00 per share. We used the net proceeds from the IPO to purchase newly-issued membership interests from SSE Holdings ("LLC Interests"). Following the organizational transactions completed in connection with the IPO, we became the sole managing member of SSE Holdings. As sole managing member, we operate and control all of the business and affairs of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. As of March 29, 2017 we owned 70.1% of SSE Holdings. Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company," and other similar references, refer to Shake Shack Inc. and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.
We operate and license Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, wine and more. As of March 29, 2017, there were 127 Shacks in operation, system-wide, of which 71 were domestic company-operated Shacks, seven were domestic licensed Shacks and 49 were international licensed Shacks.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016 ("2016 Form 10-K"). In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The accompanying Condensed Consolidated Balance Sheet as of December 28, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2016 Form 10-K.
SSE Holdings is considered a VIE. Shake Shack Inc. is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, we consolidate SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of March 29, 2017 and December 28, 2016, the net assets of SSE Holdings were $169,267 and $158,845, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreements. See Note 7 for more information.
Fiscal Year
We operate on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal 2017 contains 52 weeks and ends on December 27, 2017. Fiscal 2016 contained 52 weeks and ended on December 28, 2016. Unless otherwise stated, references to years in this report relate to fiscal years.
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements     
We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2017. The effects of adoption did not have a material impact on our consolidated financial statements.
Accounting Standards Update (“ASU”)
Description
Date
Adopted
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09)
This standard simplifies certain aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, certain classifications on the statement of cash flows, and an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur. Upon adoption, we made such policy election. The adoption methodology applied varied based on each applicable provision of the standard, and none of the provisions had a material impact on our consolidated financial statements.
December 29, 2016
Simplifying the Measurement of Inventory (ASU 2015-11)
This standard applies to inventory measured using methods other than last-in, first-out (LIFO) or the retail method, and requires entities to measure such inventory at the lower of cost or net realizable value. It should be applied prospectively.
December 29, 2016
Recently Issued Accounting Pronouncements       
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Statement of Cash Flows: Classification of Certain Cash Receipts and Payments (ASU 2016-15)
This standard provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice. It should be applied retrospectively to each period presented, subject to certain conditions.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Recognition and Measurement of Financial Assets and Financial Liabilities
(ASU 2016-01)
For public business entities, this standard requires: (i) certain equity investments to be measured at fair value with changes in fair value recognized in net income; (ii) a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) separate presentation of financial assets and liabilities by measurement category and form of financial asset in the financial statements; and (vii) an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet at the beginning of the fiscal year of adoption. Early adoption is permitted, subject to certain conditions resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Revenue from Contracts with Customers and related standards
(ASU’s 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2015-20)
This standard supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard also requires significantly more comprehensive disclosures than the existing standard. Guidance subsequent to ASU 2014-09 has been issued to clarify various provisions in the standard, including principal versus agent considerations, identifying performance obligations, licensing transactions, as well as various technical corrections and improvements. This standard may be adopted using either a retrospective or modified retrospective method. Early adoption is permitted.

We are currently in the process of evaluating the impact this standard is expected to have on our consolidated financial statements. It is still too early in our process to determine the magnitude of the potential impact. However, based on our preliminary assessment, we believe that further evaluation of the initial territory fees associated with our licensing agreements may reveal differences in the timing of revenue recognition from current policy, but that it is likely that recognition of sales-based royalties will not significantly change. In addition to further evaluating each of our licensing agreements, we are in the process of assessing whether any sales promotions or discounts we currently offer related to our Shack sales could be considered separate performance obligations. As we continue our evaluation, we will further clarify the expected impact of the adoption of the standard.

We plan to adopt the standard on December 28, 2017, and we have not yet selected a transition method.
December 28, 2017
Leases
(ASU 2016-02)

This standard establishes a new lease accounting model, which introduces the recognition of lease assets and liabilities for those leases classified as operating leases under previous GAAP. It should be applied using a modified retrospective approach, with the option to elect various practical expedients. Early adoption is permitted.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 27, 2018

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis as of March 29, 2017 and December 28, 2016, and indicate the classification within the fair value hierarchy.
Cash, Cash Equivalents and Marketable Securities
The following tables summarize our cash, cash equivalents and marketable securities by significant investment categories as of March 29, 2017 and December 28, 2016:
 
 
March 29, 2017
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
10,683

 
$
—

 
$
—

 
$
10,683

 
$
10,683

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,028

 
—

 
—

 
5,028

 
5,028

 
—

 
Mutual funds
55,393

 
—

 
—

 
55,393

 
—

 
55,393

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,480

 
2

 
(35
)
 
2,447

 


 
2,447

Total
$
73,584

 
$
2

 
$
(35
)
 
$
73,551

 
$
15,711

 
$
57,840

 
 
December 28, 2016
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
6,322

 
$
—

 
$
—

 
$
6,322

 
$
6,322

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,285

 
—

 
—

 
5,285

 
5,285

 
—

 
Mutual funds
60,232

 
—

 
—

 
60,232

 
—

 
60,232

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,473

 
3

 
(30
)
 
2,446

 
—

 
2,446

Total
$
74,312

 
$
3

 
$
(30
)
 
$
74,285

 
$
11,607

 
$
62,678

(1)
Corporate debt securities were measured at fair value using a market approach utilizing observable prices for identical securities or securities with similar characteristics and inputs that are observable or can be corroborated by observable market data.

Net unrealized losses on available-for-sale securities totaling $33 and $27 were included in accumulated other comprehensive loss on the Condensed Consolidated Balance Sheet as of March 29, 2017 and December 28, 2016, respectively.
The following tables summarize the gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 29, 2017 and December 28, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
 
 
March 29, 2017
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,117

 
(6
)
 
637

 
(29
)
 
1,754

 
(35
)
Total
$
1,117

 
$
(6
)
 
$
637

 
$
(29
)
 
$
1,754

 
$
(35
)
 
 
December 28, 2016
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,244

 
(10
)
 
540

 
(20
)
 
1,784

 
(30
)
Total
$
1,244

 
$
(10
)
 
$
540

 
$
(20
)
 
$
1,784

 
$
(30
)

A summary of other income from available-for-sale securities recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Available-for-sale securities:
 
 
 
 
Dividend income
$
178

 
$
—

 
Interest income
20

 
23

 
Loss on investments
3

 
—

Total other income, net
$
201

 
$
23


A summary of available-for-sale securities sold and gross realized gains and losses recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Available-for-sale securities:
 
 
 
 
Gross proceeds from sales and redemptions
$
155

 
$
—

 
Cost basis of sales and redemptions
158

 
—

 
Gross realized gains included in net income
—

 
—

 
Gross realized losses included in net income
(3
)
 
—

 
Amounts reclassified out of accumulated other comprehensive loss
3

 
—


Realized gains and losses are determined on a specific identification method and are included in other income,net on the Condensed Consolidated Statements of Income.
The estimated fair value of our investments in corporate debt securities that are accounted for as available-for-sale securities are all due within one year and are included within marketable securities on the Condensed Consolidated Balance Sheets.
We periodically review our marketable securities for other-than-temporary impairment. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For our debt securities, we also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. As of March 29, 2017 and December 28, 2016, the declines in the market value of our marketable securities investment portfolio were considered to be temporary in nature.
Other Financial Instruments
The carrying value of our other financial instruments, including accounts receivable, accounts payable, and accrued expenses as of March 29, 2017 and December 28, 2016 approximated their fair value due to the short-term nature of these financial instruments.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets and liabilities that are measured at fair value on a non-recurring basis include our long-lived assets and indefinite-lived intangible assets. There were no impairments recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016.
INVENTORIES
INVENTORIES
INVENTORIES
 
Inventories as of March 29, 2017 and December 28, 2016 consisted of the following:
 
March 29
2017

 
December 28
2016

Food
$
577

 
$
543

Wine
54

 
47

Beer
58

 
58

Beverages
91

 
79

Retail merchandise
123

 
79

Inventories
$
903

 
$
806

PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
 
Property and equipment as of March 29, 2017 and December 28, 2016 consisted of the following:
 
March 29
2017

 
December 28
2016

Leasehold improvements
$
131,817

 
$
120,629

Landlord funded assets
3,296

 
—

Equipment
25,411

 
23,194

Furniture and fixtures
7,987

 
7,342

Computer equipment and software
9,582

 
8,710

Construction in progress (includes assets under construction from deemed landlord financing)
11,465

 
13,510

Property and equipment, gross
189,558

 
173,385

Less: accumulated depreciation
42,073

 
37,121

Property and equipment, net
$
147,485

 
$
136,264

SUPPLEMENTAL BALANCE SHEET INFORMATION
SUPPLEMENTAL BALANCE SHEET INFORMATION
SUPPLEMENTAL BALANCE SHEET INFORMATION
 
The components of other current liabilities as of March 29, 2017 and December 28, 2016 are as follows:
 
March 29
2017

 
December 28
2016

Sales tax payable
$
1,498

 
$
1,324

Current portion of liabilities under tax receivable agreement
3,110

 
4,580

Gift card liability
1,083

 
1,153

Deferred compensation
2,350

 
—

Other
3,386

 
3,116

Other current liabilities
$
11,427

 
$
10,173

DEBT
DEBT
DEBT
 
In January 2015, we executed a Third Amended and Restated Credit Agreement, which became effective on February 4, 2015 (together with the prior agreements and amendments, and as further amended, the "Revolving Credit Facility"), which provides for a revolving total commitment amount of $50,000, of which $20,000 is available immediately. The Revolving Credit Facility will mature and all amounts outstanding will be due and payable five years from the effective date. The Revolving Credit Facility permits the issuance of letters of credit upon our request of up to $10,000. Borrowings under the Revolving Credit Facility bear interest at either: (i) LIBOR plus a percentage ranging from 2.3% to 3.3% or (ii) the prime rate plus a percentage ranging from 0.0% to 0.8%, depending on the type of borrowing made under the Revolving Credit Facility. As of March 29, 2017 and December 28, 2016, there were no amounts outstanding under the Revolving Credit Facility. As of March 29, 2017, we had $19,920 of availability under the Revolving Credit Facility, after giving effect to $80 in outstanding letters of credit.
The Revolving Credit Facility is secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors. The obligations under the Revolving Credit Facility are guaranteed by each of SSE Holdings' wholly-owned domestic subsidiaries (with certain exceptions).
The Revolving Credit Facility contains a number of covenants that, among other things, limit our ability to, subject to specified exceptions, incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve ourselves; pay dividends or make distributions; engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the Revolving Credit Facility contains certain cross-default provisions. We are required to maintain a specified consolidated fixed-charge coverage ratio and a specified funded net debt to adjusted EBITDA ratio, both as defined under the Revolving Credit Facility. As of March 29, 2017, we were in compliance with all covenants.
As of March 29, 2017 and December 28, 2016 we had deemed landlord financing liabilities of $8,016 and $2,007, respectively, for certain leases where we are involved in the construction of leased assets and are considered the accounting owner of the construction project.
Total interest costs incurred were $324 and $87 for the thirteen weeks ended March 29, 2017 and March 30, 2016, respectively. During the thirteen weeks ended March 29, 2017 we capitalized $21 into property and equipment. No amounts were capitalized for the thirteen weeks ended March 30, 2016.
NON-CONTROLLING INTERESTS
NON-CONTROLLING INTERESTS
NON-CONTROLLING INTERESTS
 
We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement, as further amended, (the "LLC Agreement") of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. Changes in our ownership interest in SSE Holdings while we retain our controlling interest in SSE Holdings will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Interests in SSE Holdings by the other members of SSE Holdings will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.
The following table summarizes the ownership interest in SSE Holdings as of March 29, 2017 and December 28, 2016.
 
March 29, 2017
 
 
December 28, 2016
 
 
LLC Interests

 
Ownership %

 
LLC Interests

 
Ownership %

Number of LLC Interests held by Shake Shack Inc.
25,681,875

 
70.1
%
 
25,151,384

 
69.1
%
Number of LLC Interests held by non-controlling interest holders
10,929,592

 
29.9
%
 
11,253,592

 
30.9
%
Total LLC Interests outstanding
36,611,467

 
100.0
%
 
36,404,976

 
100.0
%

The weighted average ownership percentages for the applicable reporting periods are used to attribute net income and other comprehensive loss to Shake Shack Inc. and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the thirteen weeks ended March 29, 2017 and March 30, 2016 was 30.4% and 43.9%, respectively.
The following table summarizes the effects of changes in ownership in SSE Holdings on our equity during the thirteen weeks ended March 29, 2017 and March 30, 2016.
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Net income attributable to Shake Shack Inc.
$
2,267

 
$
1,462

Other comprehensive loss:
 
 
 
 
Unrealized holding losses on available-for-sale securities
(4
)
 
(1
)
Transfers (to) from non-controlling interests:
 
 
 
 
Increase in additional paid-in capital as a result of the redemption of LLC Interests
1,322

 
4,642

 
Increase in additional paid-in capital as a result of activity under stock compensation plans
2,870

 
216

Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
$
6,455

 
$
6,319


During thirteen weeks ended March 29, 2017, an aggregate of 324,000 LLC Interests were redeemed by non-controlling interest holders for newly-issued shares of Class A common stock, and we received 324,000 LLC Interests in connection with these redemptions, increasing our total ownership interest in SSE Holdings. During the thirteen weeks ended March 30, 2016 an aggregate of 1,877,855 LLC Interests were redeemed by non-controlling interest holders for newly-issued shares of Class A common stock, and we received 1,877,855 LLC Interests in connection with these redemptions, increasing our total ownership interest in SSE Holdings.
During thirteen weeks ended March 29, 2017 and March 30, 2016, we received an aggregate of 206,491 and 33,070 LLC Interests, respectively, in connection with the activity under our stock compensation plan.
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION
 
A summary of equity-based compensation expense recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
 
March 29
2017

 
March 30
2016

Stock options
$
964

 
$
1,030

Performance stock units
285

 
—

Equity-based compensation expense
$
1,249

 
$
1,030

Total income tax benefit recognized related to equity-based compensation
$
51

 
$
31


Amounts are included in general and administrative expense and labor and related expenses on the Condensed Consolidated Statements of Income.
INCOME TAXES
INCOME TAXES
INCOME TAXES
 
We are the sole managing member of SSE Holdings, and as a result, consolidate the financial results of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, SSE Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc. We are also subject to withholding taxes in foreign jurisdictions.
Income Tax Expense
A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:
 
Thirteen Weeks Ended
 
 
March 29
2017
 
 
March 30
2016
 
Expected U.S. federal income taxes at statutory rate
$
1,932

35.0
 %
 
$
1,581

34.0
 %
State and local income taxes, net of federal benefit
349

6.3
 %
 
272

5.8
 %
Foreign withholding taxes
186

3.4
 %
 
240

5.2
 %
Tax credits
(130
)
(2.4
)%
 
(39
)
(0.8
)%
Non-controlling interest
(679
)
(12.3
)%
 
(755
)
(16.3
)%
Income tax expense
$
1,658

30.0
 %
 
$
1,299

27.9
 %


Our effective income tax rates for the thirteen weeks ended March 29, 2017 and March 30, 2016 were 30.0% and 27.9%, respectively. The increase in our effective income tax rate for the period is primarily due to an increase in our ownership interest in SSE Holdings, partially offset by higher tax credits. As our ownership interest in SSE Holdings increases, our share of the taxable income of SSE Holdings also increases. Our weighted-average ownership interest in SSE Holdings was 69.6% and 56.1% for the thirteen weeks ended March 29, 2017 and March 30, 2016, respectively.
Deferred Tax Assets and Liabilities
During the thirteen weeks ended March 29, 2017, we acquired an aggregate of 530,491 LLC Interests in connection with the redemption of LLC Interests and activity relating to our stock compensation plan. We recognized a deferred tax asset in the amount of $5,310 associated with the basis difference in our investment in SSE Holdings upon acquisition of these LLC Interests. As of March 29, 2017, the total deferred tax asset related to the basis difference in our investment in SSE Holdings was $216,281. However, a portion of the total basis difference will only reverse upon the eventual sale of our interest in SSE Holdings, which we expect would result in a capital loss. As of March 29, 2017, we established a valuation allowance in the amount of $16,077 against the deferred tax asset to which this portion relates.
During the thirteen weeks ended March 29, 2017, we also recognized $2,567 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments. See "—Tax Receivable Agreement" for more information.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of March 29, 2017, we concluded, based on the weight of all available positive and negative evidence, that all of our deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon the eventual sale of our interest in SSE Holdings) are more likely than not to be realized. As such, no additional valuation allowance was recognized.
Uncertain Tax Positions
No uncertain tax positions existed as of March 29, 2017. Shake Shack Inc. was formed in September 2014 and did not engage in any operations prior to the IPO and related organizational transactions. Shake Shack Inc. first filed tax returns for tax year 2014, which is the first tax year subject to examination by taxing authorities for U.S. federal and state income tax purposes. Additionally, although SSE Holdings is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service ("IRS"). The statute of limitations has expired for tax years through 2012 for SSE Holdings.
Tax Receivable Agreement
Pursuant to our election under Section 754 of the Internal Revenue Code (the "Code"), we expect to obtain an increase in our share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings. We plan to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs. We intend to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On February 4, 2015, we entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments"). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or us. The rights of each SSE Holdings member party under the Tax Receivable Agreement are assignable to transferees of its LLC Interests.
During the thirteen weeks ended March 29, 2017, we acquired an aggregate of 324,000 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of our investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement. We recognized an additional liability in the amount of $6,357 for the TRA Payments due to the redeeming members, representing 85% of the aggregate tax benefits we expect to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on our estimates of future taxable income. During the thirteen weeks ended March 29, 2017, payments of $1,471, inclusive of interest, were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement. No amounts were paid to the members during the thirteen weeks ended March 30, 2016. As of March 29, 2017, the total amount of TRA Payments due under the Tax Receivable Agreement, was $277,370, of which $3,110 was included in other current liabilities on the Condensed Consolidated Balance Sheet. See Note 13 for more information relating to our liabilities under the Tax Receivable Agreement.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE
 
Basic earnings per share of Class A common stock is computed by dividing net income available to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the thirteen weeks ended March 29, 2017 and March 30, 2016.
 
 
 
Thirteen Weeks Ended
 
 
 
 
March 29
2017

 
March 30
2016

Numerator:
 
 
 
 
Net income
$
3,862

 
$
3,351

 
Less: net income attributable to non-controlling interests
1,595

 
1,889

 
Net income attributable to Shake Shack Inc.
$
2,267

 
$
1,462

Denominator:
 
 
 
 
Weighted-average shares of Class A common stock outstanding—basic
25,376

 
20,353

 
Effect of dilutive securities:
 
 
 
 
 
Stock options
552

 
459

 
 
Performance stock units
27

 
—

 
Weighted-average shares of Class A common stock outstanding—diluted
25,955

 
20,812

 
 
 
 
 
 
Earnings (loss) per share of Class A common stock—basic
$
0.09

 
$
0.07

Earnings (loss) per share of Class A common stock—diluted
$
0.09

 
$
0.07


Shares of our Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of our Class B common stock are, however, considered potentially dilutive shares of Class A common stock. After evaluating the potential dilutive effect under the if-converted and two-class methods, the 10,929,592 shares of Class B common stock outstanding as of March 29, 2017 and the 14,582,886 share of Class B common stock outstanding as of March 30, 2016 were determined to be anti-dilutive and have therefore been excluded from the computations of diluted earnings per share of Class A common stock.
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
 
The following table sets forth supplemental cash flow information for the thirteen weeks ended March 29, 2017 and March 30, 2016:
 
 
Thirteen Weeks Ended
 
 
 
March 29
2017

 
March 30
2016

Cash paid for:
 
 
 
 
Income taxes, net of refunds
$
1,093

 
$
475

 
Interest, net of amounts capitalized
19

 
15

Non-cash investing activities:
 
 
 
 
Accrued purchases of property and equipment
4,415

 
3,133

 
Capitalized landlord assets for leases where we are deemed the accounting owner
4,545

 
—

 
Capitalized equity-based compensation
40

 
30

Non-cash financing activities:
 
 
 
 
Class A common stock issued in connection with the redemption of LLC Interests
—

 
2

 
Cancellation of Class B common stock in connection with the redemption of LLC Interests
—

 
(2
)
 
Establishment of liabilities under tax receivable agreement
6,357

 
34,920

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
 
Lease Commitments
We are obligated under various operating leases for Shacks and our home office space, expiring in various years through 2035. Under certain of these leases, we are liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for our proportionate share of real estate taxes, common area maintenance charges and utilities.
As security under the terms of several of our leases, we are obligated under letters of credit totaling $160 as of March 29, 2017. The letters of credit expire on April 23, 2018 and February 28, 2026. In addition, in December 2013, we entered into an irrevocable standby letter of credit in conjunction with our home office lease in the amount of $80. The letter of credit expires in September 2017 and renews automatically for one-year periods through September 30, 2019.
Purchase Commitments
Purchase obligations include legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. These obligations are generally short-term in nature and are recorded as liabilities when the related goods are received or services rendered. We also enter into long-term, exclusive contracts with certain vendors to supply us with food, beverages and paper goods, obligating us to purchase specified quantities.
Legal Contingencies
In November 2015, we participated in a voluntary mediation with counsel representing two former Shake Shack managers, who alleged that we improperly classified our restaurant managers as exempt from overtime protections. At the conclusion of the mediation, the parties mutually agreed to fully and finally resolve the matter by settling, rather than litigating. In connection with the settlement, the parties entered into a memorandum of understanding, pursuant to which we agreed to create a settlement fund in the amount of $750 and, in exchange for their participation in the settlement fund, all participating employees (current and former) will be required to release Shake Shack from all federal and/or state wage and hour claims that may exist through the settlement date. On March 11, 2016, as required by the memorandum of understanding, the parties entered into a settlement agreement in the amount of $750 million. To facilitate the resolution of the matter, the parties coordinated the filing by the plaintiff's counsel of a Complaint on March 17, 2016 with the Supreme Court of the State of New York (the “Court”). On October 25, 2016, the Court granted preliminary approval of the settlement agreement. On December 13, 2016, all eligible class members were mailed the notice of settlement, and the deadline to opt-out or object was January 27, 2017. On March 7, 2017, the Court held a fairness hearing, at which time it determined that the settlement agreement was fair, adequate and equitable, and subsequently issued its order granting final approval of the settlement. As of March 29, 2017, an accrual in the amount of $770 was recorded for this matter and the related expenses. On May 1, 2017, we paid to the claims administrator $774 in full satisfaction of the amounts owed by us under the settlement agreement.
We are subject to various legal and regulatory proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. As of March 29, 2017, the amount of ultimate liability with respect to these matters was not material.
Liabilities under Tax Receivable Agreement
As described in Note 10, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay certain of the members of SSE Holdings 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions. We are not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized. Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments. During the thirteen weeks ended March 29, 2017 and March 30, 2016, we recognized liabilities totaling $6,357 and $34,920, respectively, relating to our obligations under the Tax Receivable Agreement, after concluding that it was probable that we would have sufficient future taxable income to utilize the related tax benefits. As of March 29, 2017 and December 28, 2016, our total obligations under the Tax Receivable Agreement, including accrued interest, were $277,370 and $272,482, respectively. There were no transactions subject to the Tax Receivable Agreement for which we did not recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the related tax benefits.
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
 
Union Square Hospitality Group
The Chairman of our Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC. As a result, Union Square Hospitality Group, LLC and its subsidiaries are considered related parties.
USHG, LLC
Effective January 2015, we entered into an Amended and Restated Management Services Agreement with USHG, LLC ("USHG"), in which USHG provides reduced management services to SSE Holdings comprised of executive leadership from members of its senior management, advisory and development services and limited leadership development and human resources services. The initial term of the Amended and Restated Management Services Agreement is through December 31, 2019, with renewal periods. Total amounts paid to USHG for general corporate expenses were $5 and $6 for the thirteen weeks ended March 29, 2017 and March 30, 2016, respectively. These amounts are included in general and administrative expenses on the Condensed Consolidated Statements of Income.
Total amounts payable to USHG as of March 29, 2017 and December 28, 2016 were $1. These amounts are included in other current liabilities on the Condensed Consolidated Balance Sheets. No amounts were due from USHG as of March 29, 2017 and December 28, 2016.
Hudson Yards Sports and Entertainment
In fiscal 2011, we entered into a Master License Agreement (as amended, "MLA") with Hudson Yards Sports and Entertainment LLC ("HYSE") to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States. The agreement expires on December 31, 2027 and includes five consecutive five-year renewal options at HYSE's option. As consideration for these rights, HYSE pays us a license fee based on a percentage of net food sales, as defined in the MLA. HYSE also pays us a percentage of profits on sales of branded beverages, as defined in the MLA. Amounts paid to us by HYSE in the thirteen weeks ended March 29, 2017 were $20. These amounts are included in licensing revenue on the Condensed Consolidated Statements of Income. No amounts were paid to us in the thirteen weeks ended March 30, 2016. Total amounts due from HYSE as of March 29, 2017 and December 28, 2016 were $24 and $11, which are included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.
Madison Square Park Conservancy
The Chairman of our Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which we have a license agreement and pay license fees to operate our Madison Square Park Shack. Amounts paid to Madison Square Park Conservancy as rent amounted to $199 and $195 for the thirteen weeks ended March 29, 2017 and March 30, 2016, respectively. These amounts are included in occupancy and related expenses on the Condensed Consolidated Statements of Income. No amounts were due to MSP Conservancy as of March 29, 2017. Total amounts due to MSP Conservancy as of December 28, 2016 were $1, which is included in accrued expenses on the Condensed Consolidated Balance Sheets.
Additionally, we received tenant improvement allowances from MSP Conservatory related to a reconstruction project which ended in 2015. Total amounts due from MSP Conservancy as of December 28, 2016 were $200, which are included in accounts receivable on the Condensed Consolidated Balance Sheets. Amounts paid to us during the thirteen weeks ended March 29, 2017 totaled $200 and no amounts were paid to us during the thirteen weeks ended March 30, 2016. As of March 29, 2017 no amounts were due from MSP Conservancy.
Share Our Strength
The Chairman of our Board of Directors serves as a director of Share Our Strength, for which Shake Shack holds the "Great American Shake Sale" every year during the month of May to raise money and awareness for childhood hunger. During the Great American Shake Sale, we encourage guests to donate money to Share Our Strength's No Kid Hungry campaign in exchange for a coupon for a free cake-themed shake. All of the guest donations we collect go directly to Share Our Strength. No amounts have been raised for the thirteen weeks ended March 29, 2017 and March 30, 2016.
Mobo Systems, Inc.
The Chairman of our Board of Directors serves as a director of Mobo Systems, Inc. (also known as "Olo"), a platform we use in connection with our mobile ordering application. Amounts paid to Olo during the thirteen weeks ended March 29, 2017 totaled $18, which are included in other operating expenses on the Condensed Consolidated Statements of Income. No amounts were paid to Olo for the thirteen weeks ended March 30, 2016. No amounts were payable to Olo as of March 29, 2017 and December 28, 2016.
Tax Receivable Agreement
As described in Note 10, we entered into a tax receivable agreement with certain members of SSE Holdings that provides for the payment by us of 85% of the amount of tax benefits, if any, that Shake Shack actually realizes or in some cases is deemed to realize as a result of certain transactions. During the thirteen weeks ended March 29, 2017, payments of $1,471, inclusive of interest, were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement. No amounts were paid to the members during the thirteen weeks ended March 30, 2016. As of March 29, 2017 and December 28, 2016, total amounts due under the Tax Receivable Agreement were $277,370 and $272,482, respectively.
Distributions to Members of SSE Holdings
Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members. During the thirteen weeks ended March 29, 2017 distributions paid to non-controlling interest holders were $355. No tax distributions were paid to non-controlling interest holders during the thirteen weeks ended March 30, 2016. As of March 29, 2017 and December 28, 2016, tax distributions payable to non-controlling interest holders were $607.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Basis of Presentation 
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016 ("2016 Form 10-K"). In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The accompanying Condensed Consolidated Balance Sheet as of December 28, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2016 Form 10-K.
SSE Holdings is considered a VIE. Shake Shack Inc. is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, we consolidate SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement.
Fiscal Year 
Fiscal Year
We operate on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal 2017 contains 52 weeks and ends on December 27, 2017. Fiscal 2016 contained 52 weeks and ended on December 28, 2016. Unless otherwise stated, references to years in this report relate to fiscal years.
Use of Estimates 
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted and Issued Accounting Pronouncements 
Recently Adopted Accounting Pronouncements     
We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2017. The effects of adoption did not have a material impact on our consolidated financial statements.
Accounting Standards Update (“ASU”)
Description
Date
Adopted
Improvements to Employee Share-Based Payment Accounting
(ASU 2016-09)
This standard simplifies certain aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, certain classifications on the statement of cash flows, and an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur. Upon adoption, we made such policy election. The adoption methodology applied varied based on each applicable provision of the standard, and none of the provisions had a material impact on our consolidated financial statements.
December 29, 2016
Simplifying the Measurement of Inventory (ASU 2015-11)
This standard applies to inventory measured using methods other than last-in, first-out (LIFO) or the retail method, and requires entities to measure such inventory at the lower of cost or net realizable value. It should be applied prospectively.
December 29, 2016
Recently Issued Accounting Pronouncements       
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Statement of Cash Flows: Classification of Certain Cash Receipts and Payments (ASU 2016-15)
This standard provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice. It should be applied retrospectively to each period presented, subject to certain conditions.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Accounting Standards Update (“ASU”)
Description
Expected Impact
Effective Date
Recognition and Measurement of Financial Assets and Financial Liabilities
(ASU 2016-01)
For public business entities, this standard requires: (i) certain equity investments to be measured at fair value with changes in fair value recognized in net income; (ii) a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) separate presentation of financial assets and liabilities by measurement category and form of financial asset in the financial statements; and (vii) an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet at the beginning of the fiscal year of adoption. Early adoption is permitted, subject to certain conditions resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 28, 2017
Revenue from Contracts with Customers and related standards
(ASU’s 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2015-20)
This standard supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard also requires significantly more comprehensive disclosures than the existing standard. Guidance subsequent to ASU 2014-09 has been issued to clarify various provisions in the standard, including principal versus agent considerations, identifying performance obligations, licensing transactions, as well as various technical corrections and improvements. This standard may be adopted using either a retrospective or modified retrospective method. Early adoption is permitted.

We are currently in the process of evaluating the impact this standard is expected to have on our consolidated financial statements. It is still too early in our process to determine the magnitude of the potential impact. However, based on our preliminary assessment, we believe that further evaluation of the initial territory fees associated with our licensing agreements may reveal differences in the timing of revenue recognition from current policy, but that it is likely that recognition of sales-based royalties will not significantly change. In addition to further evaluating each of our licensing agreements, we are in the process of assessing whether any sales promotions or discounts we currently offer related to our Shack sales could be considered separate performance obligations. As we continue our evaluation, we will further clarify the expected impact of the adoption of the standard.

We plan to adopt the standard on December 28, 2017, and we have not yet selected a transition method.
December 28, 2017
Leases
(ASU 2016-02)

This standard establishes a new lease accounting model, which introduces the recognition of lease assets and liabilities for those leases classified as operating leases under previous GAAP. It should be applied using a modified retrospective approach, with the option to elect various practical expedients. Early adoption is permitted.
We are currently evaluating the impact this standard will have on our consolidated financial statements.
December 27, 2018



FAIR VALUE MEASUREMENTS (Tables)
Schedule of Cash and Cash Equivalents 
The following tables summarize our cash, cash equivalents and marketable securities by significant investment categories as of March 29, 2017 and December 28, 2016:
 
 
March 29, 2017
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
10,683

 
$
—

 
$
—

 
$
10,683

 
$
10,683

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,028

 
—

 
—

 
5,028

 
5,028

 
—

 
Mutual funds
55,393

 
—

 
—

 
55,393

 
—

 
55,393

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,480

 
2

 
(35
)
 
2,447

 


 
2,447

Total
$
73,584

 
$
2

 
$
(35
)
 
$
73,551

 
$
15,711

 
$
57,840

 
 
December 28, 2016
 
 
Cost Basis

 
 Gross Unrealized Gains

 
 Gross Unrealized Losses

 
 Fair Value

 
 Cash and Cash Equivalents

 
Marketable Securities

Cash
$
6,322

 
$
—

 
$
—

 
$
6,322

 
$
6,322

 
$
—

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
5,285

 
—

 
—

 
5,285

 
5,285

 
—

 
Mutual funds
60,232

 
—

 
—

 
60,232

 
—

 
60,232

Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities(1)
2,473

 
3

 
(30
)
 
2,446

 
—

 
2,446

Total
$
74,312

 
$
3

 
$
(30
)
 
$
74,285

 
$
11,607

 
$
62,678

(1)
Corporate debt securities were measured at fair value using a market approach utilizing observable prices for identical securities or securities with similar characteristics and inputs that are observable or can be corroborated by observable market data
Schedule of Unrealized Loss on Investments 
The following tables summarize the gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 29, 2017 and December 28, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
 
 
March 29, 2017
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,117

 
(6
)
 
637

 
(29
)
 
1,754

 
(35
)
Total
$
1,117

 
$
(6
)
 
$
637

 
$
(29
)
 
$
1,754

 
$
(35
)
 
 
December 28, 2016
 
 
 
Less than 12 Months
 
 
12 Months or Greater
 
 
Total
 
 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Fair Value

 
Unrealized Loss

 
Money market funds
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
Mutual funds
—

 
—

 
—

 
—

 
—

 
—

 
Corporate debt securities
1,244

 
(10
)
 
540

 
(20
)
 
1,784

 
(30
)
Total
$
1,244

 
$
(10
)
 
$
540

 
$
(20
)
 
$
1,784

 
$
(30
)
Schedule of Other Income From Available for Sale Securities 
A summary of other income from available-for-sale securities recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Available-for-sale securities:
 
 
 
 
Dividend income
$
178

 
$
—

 
Interest income
20

 
23

 
Loss on investments
3

 
—

Total other income, net
$
201

 
$
23

Schedule of Available-for-sale Securities and Gross Realized Gains and Losses 
A summary of available-for-sale securities sold and gross realized gains and losses recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Available-for-sale securities:
 
 
 
 
Gross proceeds from sales and redemptions
$
155

 
$
—

 
Cost basis of sales and redemptions
158

 
—

 
Gross realized gains included in net income
—

 
—

 
Gross realized losses included in net income
(3
)
 
—

 
Amounts reclassified out of accumulated other comprehensive loss
3

 
—

INVENTORIES (Tables)
Inventories
Inventories as of March 29, 2017 and December 28, 2016 consisted of the following:
 
March 29
2017

 
December 28
2016

Food
$
577

 
$
543

Wine
54

 
47

Beer
58

 
58

Beverages
91

 
79

Retail merchandise
123

 
79

Inventories
$
903

 
$
806

PROPERTY AND EQUIPMENT (Tables)
Property, Plant and Equipment
Property and equipment as of March 29, 2017 and December 28, 2016 consisted of the following:
 
March 29
2017

 
December 28
2016

Leasehold improvements
$
131,817

 
$
120,629

Landlord funded assets
3,296

 
—

Equipment
25,411

 
23,194

Furniture and fixtures
7,987

 
7,342

Computer equipment and software
9,582

 
8,710

Construction in progress (includes assets under construction from deemed landlord financing)
11,465

 
13,510

Property and equipment, gross
189,558

 
173,385

Less: accumulated depreciation
42,073

 
37,121

Property and equipment, net
$
147,485

 
$
136,264

SUPPLEMENTAL BALANCE SHEET INFORMATION (Tables)
Supplemental Balance Sheet Information
The components of other current liabilities as of March 29, 2017 and December 28, 2016 are as follows:
 
March 29
2017

 
December 28
2016

Sales tax payable
$
1,498

 
$
1,324

Current portion of liabilities under tax receivable agreement
3,110

 
4,580

Gift card liability
1,083

 
1,153

Deferred compensation
2,350

 
—

Other
3,386

 
3,116

Other current liabilities
$
11,427

 
$
10,173

NON-CONTROLLING INTERESTS (Tables)
Schedule of ownership interests in SSE holdings 
The following table summarizes the ownership interest in SSE Holdings as of March 29, 2017 and December 28, 2016.
 
March 29, 2017
 
 
December 28, 2016
 
 
LLC Interests

 
Ownership %

 
LLC Interests

 
Ownership %

Number of LLC Interests held by Shake Shack Inc.
25,681,875

 
70.1
%
 
25,151,384

 
69.1
%
Number of LLC Interests held by non-controlling interest holders
10,929,592

 
29.9
%
 
11,253,592

 
30.9
%
Total LLC Interests outstanding
36,611,467

 
100.0
%
 
36,404,976

 
100.0
%
Schedule of non-controlling interest 
The following table summarizes the effects of changes in ownership in SSE Holdings on our equity during the thirteen weeks ended March 29, 2017 and March 30, 2016.
 
 
Thirteen Weeks Ended
 
 
March 29
2017

 
March 30
2016

Net income attributable to Shake Shack Inc.
$
2,267

 
$
1,462

Other comprehensive loss:
 
 
 
 
Unrealized holding losses on available-for-sale securities
(4
)
 
(1
)
Transfers (to) from non-controlling interests:
 
 
 
 
Increase in additional paid-in capital as a result of the redemption of LLC Interests
1,322

 
4,642

 
Increase in additional paid-in capital as a result of activity under stock compensation plans
2,870

 
216

Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
$
6,455

 
$
6,319

EQUITY-BASED COMPENSATION (Tables)
Schedule of equity-based compensation expense recognized
A summary of equity-based compensation expense recognized during the thirteen weeks ended March 29, 2017 and March 30, 2016 is as follows:
 
 
Thirteen Weeks Ended
 
 
 
March 29
2017

 
March 30
2016

Stock options
$
964

 
$
1,030

Performance stock units
285

 
—

Equity-based compensation expense
$
1,249

 
$
1,030

Total income tax benefit recognized related to equity-based compensation
$
51

 
$
31

INCOME TAXES (Tables)
Schedule of effective income tax rate reconciliation
A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:
 
Thirteen Weeks Ended
 
 
March 29
2017
 
 
March 30
2016
 
Expected U.S. federal income taxes at statutory rate
$
1,932

35.0
 %
 
$
1,581

34.0
 %
State and local income taxes, net of federal benefit
349

6.3
 %
 
272

5.8
 %
Foreign withholding taxes
186

3.4
 %
 
240

5.2
 %
Tax credits
(130
)
(2.4
)%
 
(39
)
(0.8
)%
Non-controlling interest
(679
)
(12.3
)%
 
(755
)
(16.3
)%
Income tax expense
$
1,658

30.0
 %
 
$
1,299

27.9
 %
EARNINGS PER SHARE (Tables)
Schedule of earnings per share
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the thirteen weeks ended March 29, 2017 and March 30, 2016.
 
 
 
Thirteen Weeks Ended
 
 
 
 
March 29
2017

 
March 30
2016

Numerator:
 
 
 
 
Net income
$
3,862

 
$
3,351

 
Less: net income attributable to non-controlling interests
1,595

 
1,889

 
Net income attributable to Shake Shack Inc.
$
2,267

 
$
1,462

Denominator:
 
 
 
 
Weighted-average shares of Class A common stock outstanding—basic
25,376

 
20,353

 
Effect of dilutive securities:
 
 
 
 
 
Stock options
552

 
459

 
 
Performance stock units
27

 
—

 
Weighted-average shares of Class A common stock outstanding—diluted
25,955

 
20,812

 
 
 
 
 
 
Earnings (loss) per share of Class A common stock—basic
$
0.09

 
$
0.07

Earnings (loss) per share of Class A common stock—diluted
$
0.09

 
$
0.07

SUPPLEMENTAL CASH FLOW INFORMATION (Tables)
Schedule of Cash Flow Information
The following table sets forth supplemental cash flow information for the thirteen weeks ended March 29, 2017 and March 30, 2016:
 
 
Thirteen Weeks Ended
 
 
 
March 29
2017

 
March 30
2016

Cash paid for:
 
 
 
 
Income taxes, net of refunds
$
1,093

 
$
475

 
Interest, net of amounts capitalized
19

 
15

Non-cash investing activities:
 
 
 
 
Accrued purchases of property and equipment
4,415

 
3,133

 
Capitalized landlord assets for leases where we are deemed the accounting owner
4,545

 
—

 
Capitalized equity-based compensation
40

 
30

Non-cash financing activities:
 
 
 
 
Class A common stock issued in connection with the redemption of LLC Interests
—

 
2

 
Cancellation of Class B common stock in connection with the redemption of LLC Interests
—

 
(2
)
 
Establishment of liabilities under tax receivable agreement
6,357

 
34,920

NATURE OF OPERATIONS (Details) (USD $)
0 Months Ended
Mar. 29, 2017
Restaurant
Dec. 28, 2016
Feb. 4, 2015
IPO
Common stock
Class A Common Stock
Feb. 4, 2015
IPO
Common stock
Class A Common Stock
Mar. 29, 2017
United States
Company-operated
Restaurant
Mar. 29, 2017
United States
Licensed
Restaurant
Mar. 29, 2017
Non-United States
Licensed
Restaurant
Class of Stock [Line Items]
 
 
 
 
 
 
 
Shares issued during the period (in shares)
 
 
5,750,000 
 
 
 
 
Shares issued, share price (in dollars per share)
 
 
 
$ 21 
 
 
 
Ownership percent of noncontrolling interest
70.10% 
69.10% 
 
 
 
 
 
Number of restaurants
127 
 
 
 
71 
7 
49 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (Variable Interest Entity, Primary Beneficiary, USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Variable Interest Entity, Primary Beneficiary
 
 
Variable Interest Entity [Line Items]
 
 
Net assets held by SSE holders
$ 169,267 
$ 158,845 
FAIR VALUE MEASUREMENTS - Cash, Cash Equivalents and Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Sep. 30, 2015
Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
$ 15,711 
$ 11,607 
$ 65,855 
$ 70,849 
Cash and cash equivalents fair value
15,711 
11,607 
 
 
Gross Unrealized Gains
2 
3 
 
 
Gross Unrealized Losses
(35)
(30)
 
 
Fair Value Including Mutual Funds
73,551 
 
 
 
Fair Value
 
74,285 
 
 
Fair value of marketable securities
57,840 
62,678 
 
 
Total cost basis including Mutual Funds
73,584 
 
 
 
Total cost basis
 
74,312 
 
 
Level 1 |
Mutual funds
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Mutual funds
55,393 
60,232 
 
 
Fair value of marketable securities
55,393 
60,232 
 
 
Level 2 |
Corporate debt securities
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Corporate debt securities
2,480 
2,473 
 
 
Gross Unrealized Gains
2 
3 
 
 
Gross Unrealized Losses
(35)
(30)
 
 
Fair value of marketable securities
2,447 
2,446 
 
 
Cash
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
10,683 
6,322 
 
 
Cash and cash equivalents fair value
10,683 
6,322 
 
 
Money market funds |
Level 1
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cost Basis
5,028 
5,285 
 
 
Cash and cash equivalents fair value
$ 5,028 
$ 5,285 
 
 
FAIR VALUE MEASUREMENTS - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Dec. 28, 2016
Fair Value Disclosures [Abstract]
 
 
 
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax
$ 33 
 
$ 27 
Fair value of investments with unrealized losses
35 
 
30 
Change in net unrealized holding losses
(9)1
(2)1
 
Asset impairment charges
$ 0 
$ 0 
 
FAIR VALUE MEASUREMENTS - Other Income From Available For Sale Securities (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Available-for-sale securities
 
 
Other Income
$ 195 
$ 23 
Available-for-sale Securities
 
 
Available-for-sale securities
 
 
Dividend income
178 
0 
Interest income
20 
23 
Loss on investments
3 
0 
Other Income
$ 201 
$ 23 
FAIR VALUE MEASUREMENTS - Available for Sale Securities and Gross Realized Gains and Losses (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Available-for-sale securities:
 
 
Gross proceeds from sales and redemptions
$ 155 
$ 0 
Cost basis of sales and redemptions
158 
0 
Gross realized gains included in net income
0 
0 
Gross realized losses included in net income
(3)
0 
Amounts reclassified out of accumulated other comprehensive loss
$ 3 1
$ 0 1
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS - Unrealized Loss on Investments (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Gain (Loss) on Investments [Line Items]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
$ 1,117 
$ 1,244 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss
(35)
(30)
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
(6)
(10)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
637 
540 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss
(29)
(20)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
1,754 
1,784 
Corporate debt securities
 
 
Gain (Loss) on Investments [Line Items]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
1,117 
1,244 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss
(35)
(30)
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
(6)
(10)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
637 
540 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss
(29)
(20)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
$ 1,754 
$ 1,784 
INVENTORIES (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Inventory [Line Items]
 
 
Inventories
$ 903 
$ 806 
Food
 
 
Inventory [Line Items]
 
 
Inventories
577 
543 
Wine
 
 
Inventory [Line Items]
 
 
Inventories
54 
47 
Beer
 
 
Inventory [Line Items]
 
 
Inventories
58 
58 
Beverages
 
 
Inventory [Line Items]
 
 
Inventories
91 
79 
Retail merchandise
 
 
Inventory [Line Items]
 
 
Inventories
$ 123 
$ 79 
PROPERTY AND EQUIPMENT (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 189,558 
$ 173,385 
Less: accumulated depreciation
42,073 
37,121 
Property and equipment, net
147,485 
136,264 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
131,817 
120,629 
Buildings, Deemed Landlord Financing [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
3,296 
0 
Equipment
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
25,411 
23,194 
Furniture and fixtures
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
7,987 
7,342 
Computer equipment and software
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
9,582 
8,710 
Construction in progress (includes assets under construction from deemed landlord financing)
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 11,465 
$ 13,510 
SUPPLEMENTAL BALANCE SHEET INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 29, 2017
Dec. 28, 2016
Other Liabilities, Current
 
 
Sales tax payable
$ 1,498 
$ 1,324 
Current portion of liabilities under tax receivable agreement
3,110 
4,580 
Gift card liability
1,083 
1,153 
Deferred Compensation Liability, Current
2,350 
0 
Other
3,386 
3,116 
Other current liabilities
$ 11,427 
$ 10,173 
DEBT (Details) (USD $)
3 Months Ended 3 Months Ended 0 Months Ended 1 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Dec. 28, 2016
Mar. 29, 2017
Notes payable
Mar. 29, 2017
Letter of credit
Feb. 4, 2015
Revolving Credit Facility
Line of credit
Mar. 29, 2017
Revolving Credit Facility
Line of credit
Dec. 28, 2016
Revolving Credit Facility
Line of credit
Feb. 4, 2015
Revolving Credit Facility
Line of credit
Mar. 29, 2017
Revolving Credit Facility
Letter of credit
Line of credit
Feb. 4, 2015
Revolving Credit Facility
Letter of credit
Line of credit
May 31, 2016
Revolving Credit Facility
Minimum
Line of credit
London Interbank Offered Rate (LIBOR)
May 31, 2016
Revolving Credit Facility
Minimum
Line of credit
Prime rate
May 31, 2016
Revolving Credit Facility
Maximum
Line of credit
London Interbank Offered Rate (LIBOR)
May 31, 2016
Revolving Credit Facility
Maximum
Line of credit
Prime rate
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
$ 50,000,000 
 
$ 10,000,000 
 
 
 
 
Current borrowing capacity
 
 
 
 
 
 
 
 
20,000,000 
80,000 
 
 
 
 
 
Term to maturity
 
 
 
 
1 year 
5 years 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate
 
 
 
 
 
 
 
 
 
 
 
2.25% 
0.00% 
3.25% 
0.75% 
Amount available under revolving credit facility
 
 
 
 
 
 
19,920,000 
 
 
 
 
 
 
 
 
Notes payable
 
 
 
0 
 
 
 
0 
 
 
 
 
 
 
 
Deemed Landlord Financing Liability
8,016,000 
 
2,007,000 
 
 
 
 
 
 
 
 
 
 
 
 
Interest costs incurred
(324,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
303,000 
87,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest costs capitalized
$ 21,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-CONTROLLING INTERESTS - Ownership Interest in SSE Holdings (Details)
Mar. 29, 2017
Dec. 28, 2016
Noncontrolling Interest [Abstract]
 
 
Number of LLC Interests held by Shake Shack Inc. (in shares)
25,681,875 
25,151,384 
Number of LLC Interests held by Shake Shack Inc. (as a percentage)
70.10% 
69.10% 
Number of LLC Interests held by non-controlling interest holders (in shares)
10,929,592 
11,253,592 
Number of LLC Interests held by non-controlling interest holders (as a percentage)
29.90% 
30.90% 
Total LLC Interests outstanding (in shares)
36,611,467 
36,404,976 
Total LLC Interests outstanding (as a percentage)
100.00% 
100.00% 
NON-CONTROLLING INTERESTS - Narrative (Details)
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Noncontrolling Interest [Line Items]
 
 
Non-controlling interest holders' weighted average ownership percentage
30.40% 
43.90% 
Units acquired during the period (in shares)
530,491 
 
Redemption or Exchange of Units
 
 
Noncontrolling Interest [Line Items]
 
 
Units acquired during the period (in shares)
324,000 
1,877,855 
Employee Stock Option
 
 
Noncontrolling Interest [Line Items]
 
 
Units acquired during the period (in shares)
206,491 
33,070 
Limited Liability Company
 
 
Noncontrolling Interest [Line Items]
 
 
Number of units redeemed (in shares)
324,000 
1,877,855 
NON-CONTROLLING INTERESTS - Changes in Ownership Interests in SSE Holdings (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Noncontrolling Interest [Line Items]
 
 
Net Income (Loss) Attributable to Parent
$ 2,267 
$ 1,462 
Net unrealized losses related to available-for-sale securities
(6)
(2)
Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.
6,455 
6,319 
Redemption or Exchange of Units
 
 
Noncontrolling Interest [Line Items]
 
 
Increase (decrease) in additional paid-in capital
1,322 
4,642 
Employee Stock Option
 
 
Noncontrolling Interest [Line Items]
 
 
Increase (decrease) in additional paid-in capital
2,870 
216 
Accumulated Other Comprehensive Loss
 
 
Noncontrolling Interest [Line Items]
 
 
Net unrealized losses related to available-for-sale securities
$ (4)
$ (1)
EQUITY-BASED COMPENSATION - Schedule of compensation expense recognized (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
$ 1,249 
$ 1,030 
Total income tax benefit recognized related to equity-based compensation
51 
31 
Stock options
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
964 
1,030 
Performance stock units
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
$ 285 
$ 0 
EQUITY-BASED COMPENSATION (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
$ 1,249 
$ 1,030 
Stock options
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
964 
1,030 
Performance stock units
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Equity-based compensation expense
$ 285 
$ 0 
INCOME TAXES - Reconciliation of Income Tax Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Income Tax Disclosure [Abstract]
 
 
Effective income tax rate reconciliation (in percentage)
35.00% 
34.00% 
Expected U.S. federal income taxes at statutory rate
$ 1,932 
$ 1,581 
State and local income taxes, net of federal benefit
349 
272 
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent
6.30% 
5.80% 
Foreign withholding taxes
186 
240 
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Percent
3.40% 
5.20% 
Tax credits
(130)
(39)
Effective Income Tax Rate Reconciliation, Tax Credit, Percent
(2.40%)
(0.80%)
Non-controlling interest
(679)
(755)
Effective Income Tax Rate Reconciliation, Noncontrolling Interest Income (Loss), Percent
(12.30%)
(16.30%)
Income tax expense
$ 1,658 
$ 1,299 
Effective income tax rate reconciliation (in percentage)
30.00% 
27.90% 
INCOME TAXES - Narrative (Details) (USD $)
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Dec. 28, 2016
Income Tax Contingency [Line Items]
 
 
 
Effective income tax rate reconciliation (in percentage)
30.00% 
27.90% 
 
Noncontrolling Interest, Ownership Percentage by Parent, Weighted Average
69.60% 
56.10% 
 
Units acquired during the period (in shares)
530,491 
 
 
Deferred tax asset recognized as a result of investment in partnership
$ 5,310,000 
 
 
Deferred Tax Asset, Investment in Partnership
216,281,000 
 
 
Valuation allowance, deferred tax asset
16,077,000 
 
 
Deferred tax asset related to additional tax basis
2,567,000 
 
 
Uncertain tax positions
0 
 
 
Percentage of tax benefits due to equity owners
85.00% 
 
 
Tax Receivable Agreement Payments To Related Parties
1,471,000 
0 
 
Percentage of tax benefits expected to be realized
15.00% 
 
 
Establishment of liabilities under tax receivable agreement
6,357,000 
34,920,000 
 
Liabilities under tax receivable agreement
277,370,000 
 
272,482,000 
Current portion of liabilities under tax receivable agreement
$ 3,110,000 
 
$ 4,580,000 
Redemption or Exchange of Units
 
 
 
Income Tax Contingency [Line Items]
 
 
 
Units acquired during the period (in shares)
324,000 
1,877,855 
 
EARNINGS PER SHARE - Schedule of Earnings Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Numerator:
 
 
Net income
$ 3,862 
$ 3,351 
Less: net income attributable to non-controlling interests
1,595 
1,889 
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
$ 2,267 
$ 1,462 
Denominator:
 
 
Weighted-average shares of Class A common stock outstanding—basic (in shares)
25,376 
20,353 
Effect of dilutive securities:
 
 
Weighted-average shares of Class A common stock outstanding—diluted (in shares)
25,955 
20,812 
Earnings (loss) per share of Class A common stock—basic (in dollars per share)
$ 0.09 
$ 0.07 
Earnings (loss) per share of Class A common stock—diluted (in dollars per share)
$ 0.09 
$ 0.07 
Stock options
 
 
Effect of dilutive securities:
 
 
Stock options (in shares)
552 
459 
Performance stock units
 
 
Effect of dilutive securities:
 
 
Stock options (in shares)
27 
0 
EARNINGS PER SHARE - Antidilutive Securities (Details) (Class B Common Stock)
Mar. 29, 2017
Dec. 28, 2016
Mar. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Common Stock, Shares, Outstanding
10,929,592 
11,253,592 
 
Common stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Common Stock, Shares, Outstanding
10,929,592 
11,253,592 
14,582,886 
SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Cash paid for:
 
 
Income taxes, net of refunds
$ 1,093 
$ 475 
Interest, net of amounts capitalized
19 
15 
Non-cash investing activities:
 
 
Accrued purchases of property and equipment
4,415 
3,133 
Noncash Deemed Landlord Financing
4,545 
0 
Capitalized equity-based compensation
40 
30 
Non-cash financing activities:
 
 
Establishment of liabilities under tax receivable agreement
6,357 
34,920 
Redemption or Exchange of Units |
Class A Common Stock
 
 
Non-cash investing activities:
 
 
Class A common stock issued
0 
2 
Redemption or Exchange of Units |
Class B Common Stock
 
 
Non-cash financing activities:
 
 
Cancellation of Class B common stock
$ 0 
$ (2)
COMMITMENTS AND CONTINGENCIES (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Dec. 28, 2016
Nov. 30, 2015
Exempt Classification Matter
manager
Mar. 29, 2017
Exempt Classification Matter
Mar. 29, 2017
Letter of credit
Mar. 29, 2017
Retail site
Dec. 31, 2013
Office building
May 1, 2017
Subsequent Event [Member]
Exempt Classification Matter
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Letters of credit outstanding
 
 
 
 
 
 
$ 160 
$ 80 
 
Renewal term
 
 
 
 
 
1 year 
 
 
 
Number of former Shake Shack managers
 
 
 
2 
 
 
 
 
 
Settlement amount
 
 
 
750 
 
 
 
 
 
Amount of loss accrued
 
 
 
 
770 
 
 
 
 
Loss Contingency Accrual, Payments
 
 
 
 
 
 
 
 
774 
Percentage of tax benefits due to equity owners
85.00% 
 
 
 
 
 
 
 
 
Establishment of liabilities under tax receivable agreement
6,357 
34,920 
 
 
 
 
 
 
 
Tax receivable agreement liability
$ 277,370 
 
$ 272,482 
 
 
 
 
 
 
RELATED PARTY TRANSACTIONS (Details) (USD $)
3 Months Ended
Mar. 29, 2017
Mar. 30, 2016
Dec. 28, 2016
Related Party Transaction [Line Items]
 
 
 
Percentage of tax benefits due to equity owners
85.00% 
 
 
Tax Receivable Agreement Payments To Related Parties
$ 1,471,000 
$ 0 
 
Tax receivable agreement liability
277,370,000 
 
272,482,000 
Distributions paid to non-controlling interest holders
355,000 
0 
 
Tax distributions payable to non-controlling interest holders
607,000 
 
607,000 
Affiliated Entity
 
 
 
Related Party Transaction [Line Items]
 
 
 
Amount paid to USHG for general corporate expenses
5,000 
6,000 
 
Amounts due to related parties
1,000 
 
1,000 
Due from related parties, current
0 
 
 
Charitable campaign flow through
 
0 
 
Hudson Yards Sports and Entertainment
 
 
 
Related Party Transaction [Line Items]
 
 
 
Number of renewal terms
5 
 
 
Renewal option period
5 years 
 
 
Hudson Yards Sports and Entertainment |
Concession income
 
 
 
Related Party Transaction [Line Items]
 
 
 
Due from related parties, current
24,000 
 
11,000 
Revenue from related parties
20,000 
0 
 
Madison Square Park Conservancy |
Rent expense
 
 
 
Related Party Transaction [Line Items]
 
 
 
Expenses from transactions with related party
199,000 
195,000 
 
Due to MSP conservancy
0 
 
1,000 
Madison Square Park Conservancy |
Tenant Improvement Allowance [Member]
 
 
 
Related Party Transaction [Line Items]
 
 
 
Accounts Receivable, Related Parties, Current
 
 
200,000 
Related Party Transaction, Other Revenues from Transactions with Related Party
200,000 
0 
 
Board of Directors Chairman |
Mobo Systems, Inc.
 
 
 
Related Party Transaction [Line Items]
 
 
 
Expenses from transactions with related party
18,000 
0 
 
Due to MSP conservancy
$ 0 
 
$ 0