Shake Shack 2016 Annual Report Download - page 61

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Table of Contents
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP supplemental measures of operating performance that do not represent and should not be considered alternatives
to net income or cash flow from operations, as determined by GAAP. We use EBITDA and Adjusted EBITDA to measure the operating performance of our
business, excluding specifically identified items that we don't believe directly reflect our core operations. A reconciliation of EBITDA and Adjusted EBITDA to
net income, the most directly comparable GAAP measure, is set forth below.
(in thousands) 2015
2014 (1)
2013
Net income $ 3,124
$ 2,118
$ 5,423
Depreciation expense 10,222
5,809
3,541
Interest expense, net 325
363
52
Income tax expense 3,304
662
460
EBITDA 16,975
8,952
9,476
Equity-based compensation (2) 4,314
165
93
Deferred compensation (3) —
—
2,054
Pre-opening costs (4) 4,107
4,024
1,737
Deferred rent (5) 1,482
2,830
975
Loss on disposal of property and equipment (6) 17
105
25
Non-recurring compensation expenses related to the IPO (7) 12,818
—
—
IPO-related expenses (8) 635
2,675
—
Legal settlement (9) 770
—
—
Other non-cash items (10) —
135
99
ADJUSTED EBITDA $ 41,118
$ 18,886
$ 14,459
(1) We operate on a 52/53 week fiscal year that ends on the last Wednesday of the calendar year. Fiscal 2014 was a 53-week year. Fiscal 2015 and 2013 each contained 52
weeks.
(2) Non-cash charges related to equity-based compensation programs, which vary from period to period depending on the timing of awards.
(3) For the periods presented, represents amounts accrued under a bonus agreement we entered into with an employee pursuant to which we agreed to a pay a bonus in a
future period.
(4) Non-capital expenditures associated with opening new Shacks exclusive of deferred rent incurred prior to opening.
(5) Reflects the extent to which our straight-line rent expense has been above or below our cash rent payments.
(6) Includes the loss on disposal of property and equipment in the ordinary course of business.
(7) Non-recurring compensation expense incurred in connection with the IPO, including expense recognized in settlement of outstanding awards under our Unit Appreciation
Rights Plan, the related employer withholding taxes and the accelerated vesting of outstanding restricted Class B units. See Note 13 to the consolidated financial statements
included in Item 8 of this Form 10-K.
(8) Costs incurred in connection with our initial public offering, including legal, accounting and other related expenses.
(9) Expense incurred to establish an accrual related to the settlement of a legal matter. See Note 17 to the consolidated financial statements included in Item 8 of this Form 10-
K.
(10) For the periods presented, represents non-cash charges related to certain employee benefits.
59 | Shake Shack Inc. Form 10-K