Shake Shack 2016 Annual Report Download - page 98

Table of Contents
Receivable Agreement (the "TRA Payments"). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments
are not conditioned upon any continued ownership interest in SSE Holdings or us. The rights of each Continuing SSE Equity Owner under the Tax Receivable
Agreement are assignable to transferees of its LLC Interests.
During fiscal 2015 , SSE Holdings paid a distribution in the amount of $11,125 to certain of the Original SSE Equity Owners (the "Special Distribution"). The
Special Distribution was considered a direct purchase of LLC Interests for U.S. federal income tax purposes and resulted in an increase in the tax basis of the net
assets of SSE Holdings subject to the provisions of the Tax Receivable Agreement. Additionally, during fiscal 2015 , an aggregate of 6,003,308 LLC Interests were
redeemed by the Continuing SSE Equity Owners (including 3,155,273 LLC Interests redeemed in connection with the secondary offering) for newly-issued shares
of Class A common stock. In connection with these redemptions, we received 6,003,308 LLC Interests, which resulted in an increase in the tax basis of our
investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement. We recognized a liability for the TRA Payments due to the Continuing
SSE Equity Owners, representing 85% of the aggregate tax benefits we expect to realize from the tax basis increases related to the Special Distribution and
redemptions of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on our estimates of future taxable income. As of
December 30, 2015 , the total amount of TRA Payments due to the Continuing SSE Equity Owners under the Tax Receivable Agreement was $173,090 , of which
$2,157 was included in other current liabilities on the Consolidated Balance Sheet. See Note 17 for more information relating to our liabilities under the Tax
Receivable Agreement.
Pro Forma Financial Information
For periods prior to the IPO and Organizational Transactions, our income taxes represent those of SSE Holdings, our predecessor, and relate solely to foreign
withholding taxes and certain LLC entity-level taxes. As a result of the IPO and Organizational Transactions that occurred on February 4, 2015, we became subject
to U.S. federal and certain state and local income taxes with respect to our allocable share of any taxable income or loss generated by SSE Holdings. The pro forma
financial information presented on the Consolidated Statements of Income (Loss) for fiscal 2015 has been computed to reflect income tax expense at an effective
tax rate of 27.8% . The amounts were calculated assuming the Organizational Transactions occurred on January 1, 2015 and were based on the statutory rates in
effect during the period.
NOTE 15 : EARNINGS PER SHARE
Basic earnings per share of Class A common stock is computed by dividing net income available to Shake Shack Inc. by the weighted-average number of shares of
Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Shake
Shack Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
As described in Note 1, on February 4, 2015, the SSE Holdings LLC Agreement was amended and restated to, among other things, (i) provide for a new single
class of common membership interests, the LLC Interests, and (ii) exchange all of the then-existing membership interests of the Original SSE Equity Owners for
LLC Interests. For purposes of calculating earnings per share, the prior period amounts have been retroactively adjusted to give effect to the above-mentioned
amendment and resulting recapitalization. The computations of earnings per share for periods prior to our IPO do not consider the 5,750,000 shares of Class A
common stock issued to investors in our IPO or the 339,306 shares of Class A common stock issued upon settlement of outstanding UARs in connection with the
IPO.
Shake Shack Inc. Form 10-K | 96