Shake Shack 2015 Annual Report Download - page 67

Table of Contents
SSE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except unit, share, per unit and per share amounts)
Restricted Class B Units
In December 2010, we granted one of our executives 31,303 restricted Class B units as profits interests, which represented a 3.5% interest in the Company. These units vested in equal
installments on February 1, 2011, February 1, 2012 and February 1, 2013. In August 2013, we granted 9,034 restricted Class B units as profits interests to another executive of the
Company, which represent a 1.0% interest in the Company. These units were to vest in equal installments on August 21, 2014, August 27, 2015, August 25, 2016, August 24, 2017 and
August 23, 2018. If not already 100% vested, these units would have become fully vested (i) upon the occurrence of a change in control event, or (ii) upon the occurrence of an initial
public offering, each as defined in the grant agreement, and any unrecognized compensation expense related to these non-vested units would be subject to acceleration.
A summary of restricted Class B unit activity for fiscal 2014 is as follows:
In fiscal 2014, 2013 and 2012, we recognized equity-based compensation expense of $ 165 , $ 93 and $450, respectively, related to the restricted Class B units. No tax benefits were
realized related to the equity-
based compensation expense recognized. The total fair value of restricted Class B units that vested during fiscal 2014, 2013 and 2012 was $167, $450 and
$450, respectively. The weighted average grant date fair value of restricted Class B units granted in fiscal 2013 was $92.31. There were no restricted Class B units granted in fiscal
2014 or fiscal 2012. The grant-date fair value was determined based on a valuation prepared by a third-party and was based on contemporaneous information using the Black-
Scholes
formula. Significant assumptions used in the determination include: (i) expected term of 4.5 years, (ii) expected volatility of 40.1%, (iii) risk-
free interest rate of 1.3% and (iv) dividend
yield of 0.0%. Because we were unable to calculate specific stock price volatility as a private company, we used a blended volatility rate for comparable publicly traded companies. As
of December 31, 2014, total unrecognized compensation expense related to non-vested restricted Class B units was $608, which was expected to be recognized over a weighted-
average
period of 3.6 years, or upon the occurrence of a change in control or an initial public offering.
The 7,227 outstanding restricted Class B units equate to 158,251 LLC Interests with a weighted-
average grant date fair value of $4.22. The Corporation's IPO constituted a transaction
under the terms of the restricted Class B units that resulted in the acceleration of the unrecognized compensation expense of $608, which we recognized in fiscal 2015.
66
2014
Weighted
Average
Grant Date
Units Fair Value
Outstanding at beginning of period
9,034
$
92.31
Granted — —
Vested
(1,807
)
(92.31
)
Forfeited —
—
Outstanding at end of period
7,227
$
92.31