Shake Shack 2016 Annual Report Download - page 68

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Table of Contents
JUMPSTART OUR BUSINESS STARTUPS ACT OF 2012
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") permits us, as an "emerging growth company," to take advantage of an extended transition
period to comply with new or revised accounting standards applicable to public companies. We chose to "opt out" of this provision and, as a result, we will comply
with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is
irrevocable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
COMMODITY PRICE RISKS
We are exposed to commodity price risks. Many of the ingredients we use to prepare our food, as well as our packaging materials, are commodities or are affected
by the price of other commodities. Factors that affect the price of commodities are generally outside of our control and include foreign currency exchange rates,
foreign and domestic supply and demand, inflation, weather, and seasonality. For the majority of our major ingredients, we enter into long-term supply contracts,
obligating us to purchase specified quantities. However, the prices associated with these supply contracts is not fixed and is typically pegged to a commodity
market price and, therefore, fluctuate with the market. Significant increases in the price of commodities could have a material impact on our operating results to the
extent that such increases cannot be offset by menu price increases or other operating efficiencies.
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.
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 30, 2015 , we had no
outstanding borrowings under the Revolving Credit Facility.
We are also exposed to interest rate risk through fluctuations of interest rates on our investments. Our available-for-sale securities primarily consist of a fixed-
income instruments. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.
Shake Shack Inc. Form 10-K | 66