Shake Shack 2016 Annual Report Download - page 78

Table of Contents
NOTE 1 : NATURE OF OPERATIONS
Sha ke Shack Inc. was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related tran
sactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries. Unless the context otherwise requires, references to "we," "us," "our," "Shake
Shack" and the "Company" refer to Shake Shack Inc. and its subsidiaries, including SSE Holdings, LLC, which we refer to as "SSE Holdings."
We operate and license Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, wine and more. As
of December 30, 2015 , there were 84 Shacks in operation, system-wide, of which 44 were domestic company-operated Shacks, five were domestic licensed
Shacks and 35 were international licensed Shacks.
Initial Public Offering
On February 4, 2015, we completed an initial public offering ("IPO") of 5,750,000 shares of our 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. We received $112,298 in proceeds, net of underwriting discounts
and commissions, which we used to purchase newly-issued membership interests from SSE Holdings at a price per interest equal to the initial public offering price
of our Class A common stock.
Organizational Transactions
In connection with the IPO, we completed the following transactions (the "Organizational Transactions"):
▪ We amended and restated the limited liability company agreement of SSE Holdings ("LLC Agreement") to, among other things, (i) provide for a new
single class of common membership interests in SSE Holdings ("LLC Interests"), (ii) exchange all of the membership interests of the then-existing
holders of SSE Holdings' membership interests ("Original SSE Equity Owners") for LLC Interests and (iii) appoint Shake Shack as the sole managing
member of SSE Holdings. See Note 11 .
▪ We amended and restated our certificate of incorporation to, among other things, (i) provide for Class B common stock with voting rights but no
economic interests (where "economic interests" means the right to receive any distributions or dividends, whether cash or stock, in connection with
common stock) and (ii) issue shares of Class B common stock to the Original SSE Equity Owners on a one -to-one basis with the number of LLC
Interests they own. See Note 11 .
▪ We acquired, by merger, two entities that were owned by former indirect members of SSE Holdings ("Former SSE Equity Owners"), for which we issued
5,968,841 shares of Class A common stock as merger consideration (the "Mergers"). The only assets held by the two merged entities prior to the merger
were 5,968,841 LLC Interests and a corresponding number of shares of Class B common stock. Upon consummation of the Mergers, we canceled the
5,968,841 shares of Class B common stock and recognized the 5,968,841 of LLC Interests at carrying value, as the Mergers are considered to be
transactions between entities under common control.
Following the completion of the Organizational Transactions, we owned 33.3% of SSE Holdings. The SSE Holdings members subsequent to the Merger (the
"Continuing SSE Equity Owners") owned the remaining 66.7% of SSE Holdings. As a result of the Organizational Transactions, we became the sole managing
member of SSE Holdings and, although we had a minority economic interest in SSE Holdings, we had the sole voting power in, and control the management of,
SSE Holdings. Accordingly, we consolidated the financial results of SSE Holdings and reported a non-controlling interest in our consolidated financial statements.
As the Organizational Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and
Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.
Shake Shack Inc. Form 10-K | 76