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Table of Contents
Schedule I: Condensed Financial Information of Registrant (continued)
SHAKE SHACK INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(PARENT COMPANY ONLY)
(in thousands, except share and per share amounts)
NOTE 1: ORGANIZATION
Sha ke Shack Inc. (the "Parent Company") was formed on September 23, 2014 as a Delaware corporation and is a holding company with no direct operations. The
Parent Company's assets consist primarily of its equity interest in SSE Holdings, LLC ("SSE Holdings") and certain deferred tax assets.
On February 4, 2015, the Parent Company completed an initial public offering ("IPO") of 5,750,000 shares of its Class A common stock at a public offering price
of $21.00 per share, which includes 750,000 shares issued pursuant to the underwriters' over-allotment option. The Parent Company received $112,298 in
proceeds, net of underwriting discounts and commissions, which it used to purchase newly-issued membership interests from SSE Holdings at a price per interest
equal to the initial public offering price of its Class A common stock.
The Parent Company's cash inflows are primarily from cash dividends or distributions and other transfers from SSE Holdings. The amounts available to the Parent
Company to fulfill cash commitments and pay cash dividends on its common stock are subject to certain restrictions in SSE Holdings' revolving credit agreement.
See Note 8 to the consolidated financial statements.
NOTE 2: BASIS OF PRESENTATION
These condensed parent company financial statements should be read in conjunction with the consolidated financial statements of Shake Shack Inc. and the
accompanying notes thereto, included in this Annual Report on Form 10-K. For purposes of these condensed financial statements, the Parent Company's interest in
SSE Holdings is recorded based upon its proportionate share of SSE Holdings' net assets (similar to presenting them on the equity method).
The Parent Company is the sole managing member of SSE Holdings, and pursuant to the Third Amended and Restated LLC Agreement of SSE Holdings (the
“LLC Agreement”), receives compensation in the form of reimbursements for all costs associated with being a public company. Intercompany revenue consists of
these reimbursement payments and is recognized when the corresponding expense to which it relates is recognized.
Certain intercompany balances presented in these condensed parent company financial statements are eliminated in the consolidated financial statements. $3,979 of
payables were eliminated in consolidation as of December 30, 2015. $1,336 and $6,906 of intercompany revenue and equity in net income of subsidiaries was
eliminated in consolidation for fiscal 2015. Related party amounts that were not eliminated in the consolidated financial statements include the Parent Company's
liabilities under the tax receivable agreement, which totaled $173,090 as of December 30, 2015.
NOTE 3: COMMITMENTS AND CONTINGENCIES
On February 4, 2015, the Parent Company entered into a tax receivable agreement with certain members of SSE Holdings (the "Continuing SSE Equity Owners")
that provides for the payment by us to the Continuing SSE Equity Owners 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 certain transactions. S ee Note 14 to the consolidated financial statements for more information regarding the Parent Company's tax
receivable agreement. As described in Note 17 to the consolidated financial statements, a mounts payable under the tax receivable agreement are contingent upon,
among other things, (i) generation of future taxable income of Shake Shack Inc. over the term of the tax receivable agreement and (ii) future changes in tax laws.
As of December 30, 2015, liabilities under the tax receivable agreement totaled $173,090 .
107 | Shake Shack Inc. Form 10-K