Shake Shack 2015 Annual Report Download - page 48

Table of Contents
INTEREST RATE RISK
We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations. Our Revolving Credit Facility carries interest at a floating rate. We seek to manage
exposure to adverse interest rate changes through our normal operating and financing activities. As of December 31, 2014, we had $32.0 million in outstanding borrowings under the
Revolving Credit Facility.
FOREIGN CURRENCY EXCHANGE RISK
Although we conduct business outside of the United States, the revenue and expenses associated with our international business are transacted in U.S. dollars and none of our
subsidiaries have functional currencies that are not the U.S. dollar. Accordingly, we do not have foreign currency translation risk. However, we are exposed to foreign exchange risk in
that sales at our international licensed Shacks are denominated in their local currencies and the amount of licensing revenue we earn is directly affected by fluctuations in currency
exchange rates.
IMPACT OF INFLATION
While we have been able to partially offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient
purchasing practices, productivity improvements and greater economies of scale,
there can be no assurance that we will be able to continue to do so in the future. From time to time,
competitive conditions could limit our menu pricing flexibility. In addition, macroeconomic conditions could make additional menu price increases imprudent. There can be no
assurance that future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our guests without any resulting change to their visit
frequencies or purchasing patterns. In addition, there can be no assurance that we will generate same Shack sales growth in an amount sufficient to offset inflationary or other cost
pressures.
Substantially all of the leases for our domestic company-
operated Shacks provide for contingent rent obligations based on a percentage of sales. As a result, an increase in occupancy
and related expenses will offset a proportionate share of any menu price increases at our domestic company-operated Shacks.
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
47
Shake Shack Inc.
Report of Independent Registered Public Accounting Firm
48
Balance Sheets
49
Notes to Balance Sheets
50
SSE Holdings, LLC
Report of Independent Registered Public Accounting Firm
53
Consolidated Balance Sheets
54
Consolidated Statements of Income
55
Consolidated Statements of Members' Equity
56
Consolidated Statements of Cash Flows
57
Notes to Consolidated Financial Statements
58