0001620533-21-000052.txt : 20210507 0001620533-21-000052.hdr.sgml : 20210507 20210507160646 ACCESSION NUMBER: 0001620533-21-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 80 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210507 DATE AS OF CHANGE: 20210507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Shake Shack Inc. CENTRAL INDEX KEY: 0001620533 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 471941186 FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36823 FILM NUMBER: 21902640 BUSINESS ADDRESS: STREET 1: 225 VARICK STREET STREET 2: SUITE 301 CITY: NEW YORK STATE: NY ZIP: 10014 BUSINESS PHONE: (646) 747-7200 MAIL ADDRESS: STREET 1: 225 VARICK STREET STREET 2: SUITE 301 CITY: NEW YORK STATE: NY ZIP: 10014 10-Q 1 shak-20210331.htm 10-Q shak-20210331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission file number: 001-36823
shak-20210331_g1.jpg
SHAKE SHACK INC.
(Exact name of registrant as specified in its charter)
Delaware47-1941186
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
225 Varick Street
Suite 301
New York,New York10014
(Address of principal executive offices)(Zip Code)
(646) 747-7200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class Trading symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001SHAKNew York Stock Exchange

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule-405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer  
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of April 28, 2021, there were 39,103,614 shares of Class A common stock outstanding and 2,921,588 shares of Class B common stock outstanding.



SHAKE SHACK INC.
TABLE OF CONTENTS



Cautionary Note Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.
All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2020 filed with the Securities and Exchange Commission (the "SEC").
The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q | 1

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
2 | Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q

SHAKE SHACK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
March 31
2021
December 30
2020
ASSETS
Current assets:
Cash and cash equivalents$374,999 $146,873 
Marketable securities40,914 36,887 
Accounts receivable, net8,838 9,464 
Inventories2,734 2,888 
Prepaid expenses and other current assets7,805 7,074 
Total current assets435,290 203,186 
Property and equipment, net of accumulated depreciation of $179,226 and $166,156, respectively
348,580 336,541 
Operating lease assets312,087 306,317 
Deferred income taxes, net299,838 287,007 
Other assets11,794 12,297 
TOTAL ASSETS$1,407,589 $1,145,348 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$24,307 $23,487 
Accrued expenses28,774 25,920 
Accrued wages and related liabilities13,306 10,441 
Operating lease liabilities, current37,275 35,657 
Other current liabilities15,087 14,200 
Total current liabilities118,749 109,705 
Long-term debt242,875  
Long-term operating lease liabilities349,670 343,736 
Liabilities under tax receivable agreement, net of current portion234,048 232,954 
Other long-term liabilities22,297 24,460 
Total liabilities967,639 710,855 
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of March 31, 2021 and December 30, 2020.  
Class A common stock, $0.001 par value—200,000,000 shares authorized; 39,103,239 and 38,717,790 shares issued and outstanding as of March 31, 2021 and December 30, 2020, respectively.39 39 
Class B common stock, $0.001 par value—35,000,000 shares authorized; 2,921,588 and 2,951,188 shares issued and outstanding as of March 31, 2021 and December 30, 2020, respectively.3 3 
Additional paid-in capital400,371 395,067 
Retained earnings13,518 12,209 
Accumulated other comprehensive income2 3 
Total stockholders' equity attributable to Shake Shack Inc.413,933 407,321 
Non-controlling interests26,017 27,172 
Total equity439,950 434,493 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,407,589 $1,145,348 
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q | 3

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share amounts)
Thirteen Weeks Ended
March 31
2021
March 25
2020
Shack sales$150,668 $138,048 
Licensing revenue4,614 5,122 
TOTAL REVENUE155,282 143,170 
Shack-level operating expenses:
Food and paper costs44,630 39,564 
Labor and related expenses46,382 41,766 
Other operating expenses23,144 17,779 
Occupancy and related expenses13,911 12,558 
General and administrative expenses19,565 16,191 
Depreciation and amortization expense13,726 11,768 
Pre-opening costs3,576 2,243 
Impairment and loss on disposal of assets369 2,088 
TOTAL EXPENSES165,303 143,957 
OPERATING LOSS(10,021)(787)
Other income (expense), net31 (93)
Interest expense(515)(112)
LOSS BEFORE INCOME TAXES(10,505)(992)
Income tax expense (benefit)(11,080)87 
NET INCOME (LOSS)575 (1,079)
Less: net loss attributable to non-controlling interests(734)(119)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.$1,309 $(960)
Earnings (loss) per share of Class A common stock:
Basic$0.03 $(0.03)
Diluted$0.01 $(0.03)
Weighted-average shares of Class A common stock outstanding:
Basic38,948 34,444 
Diluted42,789 34,444 
`See accompanying Notes to Condensed Consolidated Financial Statements.



4 | Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
Thirteen Weeks Ended
March 31
2021
March 25
2020
Net income (loss)$575 $(1,079)
Other comprehensive income (loss), net of tax(1):
Change in foreign currency translation adjustment(1)1 
Net change(1)1 
OTHER COMPREHENSIVE INCOME (LOSS)(1)1 
COMPREHENSIVE INCOME (LOSS)574 (1,078)
Less: comprehensive loss attributable to non-controlling interest(734)(119)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.$1,308 $(959)
(1) Net of tax expense of $0 for the thirteen weeks ended March 31, 2021 and March 25, 2020.
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q | 5

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands, except share amounts)
For the Thirteen Weeks Ended March 31, 2021 and March 25, 2020
Class A
Common Stock
Class B
Common Stock
Additional
Paid-In
Capital
Retained EarningsAccumulated Other Comprehensive Income (Loss)Non-
Controlling
Interest
Total
Equity
SharesAmountSharesAmount
BALANCE, DECEMBER 30, 202038,717,790 $39 2,951,188 $3 $395,067 $12,209 $3 $27,172 $434,493 
Net income (loss) 1,309 (734)575 
Other comprehensive income (loss):
Net change in foreign currency translation adjustment(1)(1)
Equity-based compensation1,696 1,696 
Activity under stock compensation plans355,849 3,359 82 3,441 
Redemption of LLC Interests29,600 (29,600)36 (36) 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis213 213 
Distributions paid to non-controlling interest holders(467)(467)
BALANCE, MARCH 31, 202139,103,239 $39 2,921,588 $3 $400,371 $13,518 $2 $26,017 $439,950 
BALANCE, DECEMBER 25, 201934,417,302 $35 3,145,197 $3 $244,410 $54,367 $2 $23,168 $321,985 
Net loss(960)(119)(1,079)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment1 1 
Equity-based compensation1,313 1,313 
Activity under stock compensation plans77,903 — 424 (361)63 
Redemption of LLC Interests28,195  (28,195) 195 (195) 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis628 628 
Distributions paid to non-controlling interest holders(305)(305)
BALANCE, MARCH 25, 202034,523,400 $35 3,117,002 $3 $246,970 $53,407 $3 $22,188 $322,606 

6 | Shake Shack Inc. shak-20210331_g2.jpg Form 10-Q

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Thirteen Weeks Ended
March 31
2021
March 25
2020
OPERATING ACTIVITIES
Net income (loss) (including amounts attributable to non-controlling interests)$575 $(1,079)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization expense13,726 11,768 
Amortization of debt issuance costs86  
Amortization of cloud computing asset313 260 
Non-cash operating lease cost12,330 10,742 
Equity-based compensation1,681 1,300 
Deferred income taxes(1,523)3,775 
Non-cash interest expense337 69 
Gain on sale of marketable securities (79)
Impairment and loss on disposal of assets369 2,088 
Unrealized loss on available-for-sale securities46 356 
Other non-cash (income) expense(1)183 
Changes in operating assets and liabilities:
Accounts receivable626 3,150 
Inventories154 306 
Prepaid expenses and other current assets(731)(439)
Other assets(216)(1,039)
Accounts payable1,474 (4,449)
Accrued expenses(9,420)(6,330)
Accrued wages and related liabilities2,865 (5,113)
Other current liabilities(158)273 
Long-term operating lease liabilities(10,754)(8,755)
Other long-term liabilities(1,828)497 
NET CASH PROVIDED BY OPERATING ACTIVITIES9,951 7,484 
INVESTING ACTIVITIES
Purchases of property and equipment(23,155)(19,159)
Purchases of marketable securities(4,073)(192)
Sales of marketable securities 20,000 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES(27,228)649 
FINANCING ACTIVITIES
Proceeds from issuance of convertible notes, net of discount243,750  
Proceeds from revolving credit facility 50,000 
Deferred financing costs(70) 
Payments on principal of finance leases(602)(615)
Distributions paid to non-controlling interest holders(467)(305)
Payments under tax receivable agreement (6,569)
Debt issuance costs(649) 
Proceeds from stock option exercises6,451 1,032 
Employee withholding taxes related to net settled equity awards(3,010)(969)
NET CASH PROVIDED BY FINANCING ACTIVITIES245,403 42,574 
NET INCREASE IN CASH AND CASH EQUIVALENTS228,126 50,707 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD146,873 37,099 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$374,999 $87,806 
See accompanying Notes to Condensed Consolidated Financial Statements.
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SHAKE SHACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
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NOTE 1: NATURE OF OPERATIONS
Shake Shack Inc. was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries ("SSE Holdings"). We are the sole managing member of SSE Holdings and, as sole managing member, we operate and control all of the business and affairs of SSE Holdings. As a result, we consolidate the financial results of SSE Holdings and report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. As of March 31, 2021 we owned 93.0% of SSE Holdings. Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references, refer to Shake Shack Inc. and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.
We operate and license Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, chicken, crinkle-cut fries, shakes, frozen custard, beer, wine and more. As of March 31, 2021, there were 321 Shacks in operation, system-wide, of which 192 were domestic Company-operated Shacks, 22 were domestic licensed Shacks and 107 were international licensed Shacks. As of March 31, 2021, four domestic Company-operated Shacks and 16 licensed Shacks were temporarily closed, primarily due to the COVID-19 pandemic.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 30, 2020 ("2020 Form 10-K"). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2020 Form 10-K. In our opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of our financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
SSE Holdings is considered a variable interest entity. Shake Shack Inc. is the primary beneficiary as we have the majority economic interest in SSE Holdings and, as the sole managing member, have decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, we consolidate SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of our consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of March 31, 2021 and December 30, 2020, the net assets of SSE Holdings were $380,713 and $383,669, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreement. See Note 6, Debt, for more information.
Fiscal Year
We operate on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal 2021 contains 52 weeks and ends on December 29, 2021. Fiscal 2020 contained 53 weeks and ended on December 30, 2020. Unless otherwise stated, references to years in this report relate to fiscal years.
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
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liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements   
We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2021.
Accounting Standards UpdateDescriptionDate
Adopted
Simplifying the Accounting for Income Taxes

(ASU 2019-12)
This standard simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ASC 740, “Income Taxes” (“ASC 740”), and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

The adoption of this standard did not have a material impact to our condensed consolidated financial statements.
December 31, 2020
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own
Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity.

(ASU 2020-06)
This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics.

We elected to early adopt this standard, beginning December 31, 2020.

The guidance of this ASU is applicable to our convertible notes issued in March 2021. As a result, the convertible notes are accounted for as a single liability measured at amortized cost. The if-converted earnings per share ("EPS") method is used, with the effect of potential share settlement included in diluted EPS. Refer to Note 6, Debt, for further details of the convertible notes issued.
December 31, 2020
NOTE 3: REVENUE
Revenue Recognition
Revenue consists of Shack sales and Licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Shack revenues are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied.
Revenue from Shack sales is presented net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from Shack sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from our gift cards is deferred and recognized upon redemption.
Licensing revenues include initial territory fees, Shack opening fees, and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in our contracts, and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the licenses and considered as one performance obligation per Shack. We determine the transaction price for each contract, which is comprised of the initial territory fee, and an estimate of the total Shack opening fees we expect to be entitled to. The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimate of the number of Shacks we expect the licensee to open. The transaction price is then allocated equally to each Shack expected to open. The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the license granted to the Shack. Because we are transferring licenses to access our intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license term. Generally, payment for the initial territory fee is received upon execution of the licensing agreement, and payment for the Shack opening fees are received either in advance of or upon opening the related Shack. These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.
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Revenue from sales-based royalties is recognized as the related sales occur.
Revenue recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020, disaggregated by type is as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Shack sales$150,668 $138,048 
Licensing revenue:
Sales-based royalties4,425 4,944 
Initial territory and opening fees189 178 
Total revenue$155,282 $143,170 
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2021 was $16,748. We expect to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years. This amount excludes any variable consideration related to sales-based royalties.
Contract Balances
Opening and closing balances of contract liabilities and receivables from contracts with customers is as follows:
March 31
2021
December 31
2020
Shack sales receivables$5,641 $5,373 
Licensing receivables, net of allowance for doubtful accounts2,420 2,647 
Gift card liability2,600 2,637 
Deferred revenue, current612 608 
Deferred revenue, long-term11,965 12,151 
Revenue recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 that was included in their respective liability balances at the beginning of the period is as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Gift card liability$219 $300 
Deferred revenue181 175 
NOTE 4: FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying value of our Cash and cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximate their fair value due to the short-term nature of these financial instruments.
As of March 31, 2021 and December 30, 2020, we held certain assets that are required to be measured at fair value on a recurring basis including our Marketable securities, which consist of investments in equity securities. Fair value of these investments is measured using Level 1 inputs (unadjusted quoted prices in active markets for identical assets). The carrying value of these investments in equity securities approximates fair value.
Our assets measured at fair value on a recurring basis as of March 31, 2021 and December 30, 2020 were as follows:
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Fair Value Measurements
March 31
2021
December 30
2020
Level 1Level 1
Equity securities:
Mutual funds$40,914 $36,887 
Total Marketable securities$40,914 $36,887 
Refer to Note 6, Debt, for the fair value of the Company's outstanding debt instruments.
A summary of Other income (expense) from equity securities recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Equity securities:
Dividend income$74 $184 
Realized gain (loss) on sale of investments 79 
Unrealized gain (loss) on equity securities(46)(356)
Total$28 $(93)
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets and liabilities that are measured at fair value on a non-recurring basis include our long-lived assets, operating lease right-of-use assets and indefinite-lived intangible assets. During the thirteen weeks ended March 25, 2020, we recognized an impairment charge of $1,132 at one location. Of the total impairment charge, $736 was attributed to property and equipment held and used, $383 was attributed to operating lease right-of-use assets, and $13 was attributed to finance lease right-of-use assets. The asset impairment charge was included in Impairment and loss on disposal of assets on the Condensed Consolidated Statement of Income (Loss). The fair values of assets were determined using an income-based approach and are classified as Level 3 within the fair value hierarchy. Significant inputs include projections of future cash flows, discount rates, Shack sales and profitability. There were no impairment charges recognized during the thirteen weeks ended March 31, 2021.
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NOTE 5: SUPPLEMENTAL BALANCE SHEET INFORMATION
The components of Other current liabilities as of March 31, 2021 and December 30, 2020 are as follows:
March 31
2021
December 30
2020
Sales tax payable$4,045 $4,285 
Gift card liability2,600 2,637 
Current portion of financing equipment lease liabilities2,445 1,998 
Other5,997 5,280 
Other current liabilities$15,087 $14,200 
The components of Other long-term liabilities as of March 31, 2021 and December 30, 2020 are as follows:
March 31
2021
December 30
2020
Deferred licensing revenue$11,965 $12,151 
Long-term portion of financing equipment lease liabilities4,056 3,586 
Other(1)
6,276 8,723 
Other long-term liabilities$22,297 $24,460 
(1)    As of March 31, 2021, Other included $3,359 of deferred lease incentive liabilities related to leases with variable lease cost as well as $2,607 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act.
NOTE 6: DEBT
Revolving Credit Facility
In August 2019, we entered into a revolving credit facility agreement ("Revolving Credit Facility"), which permits borrowings up to $50,000, of which the entire amount is available immediately, with the ability to increase available borrowings up to an additional $100,000, to be made available subject to satisfaction of certain conditions. The Revolving Credit Facility also permits the issuance of letters of credit upon our request of up to $15,000.
In March 2020, we drew down the full $50,000 available under the Revolving Credit Facility to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic. We repaid this amount in full, plus interest, in June 2020.
In May 2020, we entered into a first amendment to the Revolving Credit Facility ("First Amendment"), which, among other things, provided for modified financial covenant compliance requirements for a period of time. The First Amendment required us to maintain minimum liquidity of $25,000 through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bore interest at either: (i) the London Interbank Offered Rate ("LIBOR") plus a percentage ranging from 1.0% to 2.5% or (ii) the base rate plus a percentage ranging from 0.0% to 1.5%, in each case depending on our net lease adjusted leverage ratio.
In March 2021, we entered into a second amendment to the Revolving Credit Facility (“Second Amendment”). The Second Amendment modified the applicable covenants and restrictions in the Credit Agreement to permit the incurrence of the Convertible Notes (as defined below), including obligations and transactions in connection therewith. In addition, the Second Amendment, among other things, (i) extended the period applicable to the increased interest rate margin as set forth in the First Amendment; (ii) shortened the maturity date of the Revolving Credit Facility from August 2024 to September 2022 and (iii) added mechanics relating to the transition from the use of LIBOR to the Secured Overnight Financing Rate ("SOFR") upon the discontinuance or unavailability of LIBOR.
Subsequently, and also in March 2021, we entered into a third amendment to the Revolving Credit Facility (“Third Amendment”) with JPMorgan Chase Bank, N.A. (as successor agent to Wells Fargo Bank, National Association), as administrative agent, and
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the lenders party thereto. In addition, in March 2021, Wells Fargo Bank resigned as administrative agent under the Revolving Credit Facility and assigned its commitments thereunder to JPMorgan Bank, N.A. The Third Amendment appoints JPMorgan Bank, N.A. as administrative agent under the Revolving Credit Facility. In addition, the Third Amendment, among other things, extends the maturity date of the Revolving Credit Facility from September 2022 to March 2026. As of March 31, 2021 and December 30, 2020, no amounts were outstanding under the Revolving Credit Facility.
The obligations under the Revolving Credit Facility are secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors. The obligations under the Revolving Credit Facility are guaranteed by each of SSE Holdings' direct and indirect subsidiaries (with certain exceptions).
The Revolving Credit Facility requires us to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios. We are not subject to these coverage ratios for a period of time due to the Second Amendment to the Revolving Credit Facility described above. In addition, the Revolving Credit Facility contains other customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit our ability to incur debt; incur liens; make investments; engage in mergers, consolidations, liquidations or acquisitions; dispose of assets; make distributions on or repurchase equity securities; engage in transactions with affiliates; and prohibits us, with certain exceptions, from engaging in any line of business not related to our current line of business. As of March 31, 2021, we were in compliance with all covenants.
As of March 31, 2021, the Revolving Credit Facility had unamortized deferred financing costs of $110, and was included in Other assets on the Condensed Consolidated Balance Sheet. Total interest expense related to the Revolving Credit Facility were $368 and $52 for the thirteen weeks ended March 31, 2021 and March 25, 2020, respectively. Total interest expense for the thirteen weeks ended March 31, 2021 primarily included write-off of previously capitalized costs on the Revolving Credit Facility.
Convertible Notes
In March 2021, we issued $225,000 aggregate principal amount of 0% Convertible Senior Notes due 2028 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. We granted an option to the initial purchasers to purchase up to an additional $25,000 aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $250,000 aggregate principal amount of Convertible Notes. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, we pay or deliver, as the case may be, cash, shares of Shake Shack’s Class A common stock or a combination of cash and shares of Shake Shack’s Class A common stock, at our election.
The Convertible Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2027, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock, par value $0.001 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if we call such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; and (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after December 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances.
The Convertible Notes had an initial conversion rate of 5.8679 shares of Shake Shack’s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $170.42 per share of Shake Shack’s Class A common stock.
We may not redeem the Convertible Notes prior to March 6, 2025. We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after March 6, 2025 if the last reported sale price of Shake Shack’s Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30
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consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.
In addition, if we undergo a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption in respect of some or all of the Convertible Notes, we will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert our Convertible Notes in connection with such a corporate event or convert our Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.
Contemporaneously with the issuance of the Convertible Notes, Shake Shack Inc. entered into an intercompany note with SSE Holdings, LLC (“Intercompany Note”). SSE Holdings promises to pay Shake Shack, Inc., for value received, the principal amount with interest of the Intercompany Note in March 2028. Shake Shack Inc. will exercise its right to convert the Intercompany Note to maintain at all times a one-to-one ratio between the number of common units, directly or indirectly, by Shake Shack Inc and the aggregate number of outstanding shares of common stock.
As of March 31, 2021, the Convertible Notes had a gross principal balance of $250,000 and a balance of $242,875, net of unamortized discount and debt issuance costs of $7,125. As of March 31, 2021, the unamortized balance of discount and debt issuance costs was recorded as a contra-liability and netted with Long-term debt on the Condensed Consolidated Balance Sheets and was being amortized as interest expense using the effective interest method. Total amortization expense was $86 for the thirteen weeks ended March 31, 2021 and was included in Interest expense in the Condensed Consolidated Statements of Income (Loss). In connection with the Convertible Notes, we also incurred costs of $236, including consulting and advisory fees, in the thirteen weeks ended March 31, 2021 and was included in General and administrative expense in the Condensed Consolidated Statements of Income (Loss).
At March 31, 2021, the fair value of the Convertible Notes was approximately $248,125, based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.
NOTE 7: LEASES
Nature of Leases
We currently lease all of our domestic Company-operated Shacks, our home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2037. We evaluate contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract. We evaluate whether we control the use of the asset, which is determined by assessing whether we obtain substantially all economic benefits from the use of the asset, and whether we have the right to direct the use of the asset. If these criteria are met and we have identified a lease, we account for the contract under the requirements of Accounting Standards Codification Topic 842 ("ASC 842").
Upon the possession of a leased asset, we determine its classification as an operating or finance lease. Our real estate leases are classified as operating leases and most of our equipment leases are classified as finance leases. Generally, our real estate leases have initial terms ranging from 10 to 15 years and typically include two five-year renewal options. Renewal options are generally not recognized as part of the right-of-use assets and lease liabilities as it is not reasonably certain at commencement date that we would exercise the options to extend the lease. Our real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds. When the achievement of such sales thresholds are deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period. Fixed minimum rent payments are recognized on a straight-line basis over the lease term from the date we take possession of the leased property. Lease expense incurred before a Shack opens is recorded in Pre-opening costs on the Condensed Consolidated Statements of Income (Loss). Once a domestic Company-operated Shack opens, we record the straight-line lease
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expense and any contingent rent, if applicable, in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss). Many of our leases also require us to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).
As there are no explicit rates provided in our leases, we use our incremental borrowing rate in determining the present value of future lease payments. The discount rate used to measure the lease liability is derived from the average of the yield curves obtained from using the notching method and the recovery rate method. The most significant assumption in calculating the incremental borrowing rate is our credit rating and is subject to judgment. We determined our credit rating based on a comparison of the financial information of SSE Holdings to other public companies and then used their respective credit ratings to develop our own.
We expend cash for leasehold improvements to build out and equip our leased premises. Generally, a portion of the leasehold improvements and building costs are reimbursed by our landlords as landlord incentives pursuant to agreed-upon terms in our lease agreements. If obtained, landlord incentives usually take the form of cash, full or partial credits against our future minimum or contingent rents otherwise payable by us, or a combination thereof. In most cases, landlord incentives are received after we take possession of the property, as we meet required milestones during the construction of the property. We include these amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset.
A summary of finance and operating lease right-of-use assets and liabilities as of March 31, 2021 and December 30, 2020 is as follows:
ClassificationMarch 31
2021
December 30
2020
Finance leasesProperty and equipment, net$6,315 $5,409 
Operating leasesOperating lease assets312,087 306,317 
Total right-of-use assets$318,402 $311,726 
Finance leases:
Other current liabilities$2,445 $1,998 
Other long-term liabilities4,056 3,586 
Operating leases:
Operating lease liabilities, current37,275 35,657 
Long-term operating lease liabilities349,670 343,736 
Total lease liabilities$393,446 $384,977 
The components of lease expense for the thirteen weeks ended March 31, 2021 and March 25, 2020 was as follows:
Thirteen Weeks Ended
ClassificationMarch 31
2021
March 25
2020
Finance lease cost:
Amortization of right-of-use assetsDepreciation expense$613 $577 
Interest on lease liabilitiesInterest expense54 55 
Operating lease costOccupancy and related expenses
Pre-opening costs
General and administrative expenses
12,330 10,742 
Short-term lease costOccupancy and related expenses82 124 
Variable lease costOccupancy and related expenses
Pre-opening costs
General and administrative expenses
2,851 3,730 
Total lease cost$15,930 $15,228 
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As of March 31, 2021, future minimum lease payments for finance and operating leases consisted of the following:
Finance LeasesOperating Leases
2021$2,023 $35,013 
20222,183 53,111 
20231,326 56,121 
2024689 55,896 
2025438 54,853 
Thereafter289 246,023 
Total minimum payments6,948 501,017 
Less: imputed interest447 114,072 
Total lease liabilities$6,501 $386,945 
As of March 31, 2021 we had additional operating lease commitments of $55,964 for non-cancelable leases without a possession date, which will begin to commence in 2021. These lease commitments are consistent with the leases that we have executed thus far.
A summary of lease terms and discount rates for finance and operating leases as of March 31, 2021 and December 30, 2020 is as follows:
March 31
2021
December 30
2020
Weighted-average remaining lease term (years):
Finance leases5.55.2
Operating leases9.69.7
Weighted-average discount rate:
Finance leases3.5 %3.6 %
Operating leases3.9 %4.2 %
Supplemental cash flow information related to leases for the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases54 $55 
Operating cash flows from operating leases11,825 11,329 
Financing cash flows from finance leases602 559 
Right-of-use assets obtained in exchange for lease obligations:
Finance leases1,518 716 
Operating leases11,095 28,035 
NOTE 8: NON-CONTROLLING INTERESTS
We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. We report a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement, as further amended, (the "LLC Agreement") of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or
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exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. Changes in our ownership interest in SSE Holdings while we retain our controlling interest in SSE Holdings will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Interests in SSE Holdings by the other members of SSE Holdings will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.
The following table summarizes the ownership interest in SSE Holdings as of March 31, 2021 and December 30, 2020.
March 31, 2021December 30, 2020
LLC InterestsOwnership%LLC InterestsOwnership %
Number of LLC Interests held by Shake Shack Inc.39,103,239 93.0 %38,717,790 92.9 %
Number of LLC Interests held by non-controlling interest holders2,921,588 7.0 %2,951,188 7.1 %
Total LLC Interests outstanding42,024,827 100.0 %41,668,978 100.0 %
The weighted average ownership percentages for the applicable reporting periods are used to attribute Net income (loss) and Other comprehensive income (loss) to Shake Shack Inc. and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the thirteen weeks ended March 31, 2021 and March 25, 2020 was 7.0% and 8.4%, respectively.
The following table summarizes the effects of changes in ownership of SSE Holdings on our equity during the thirteen weeks ended March 31, 2021 and March 25, 2020.
Thirteen Weeks Ended
March 31
2021
March 25
2020
Net income (loss) attributable to Shake Shack Inc.$1,309 $(960)
Transfers (to) from non-controlling interests:
Increase in additional paid-in capital as a result of the redemption of LLC Interests36 195 
Increase (decrease) in additional paid-in capital as a result of activity under stock compensation plans and the related income tax effect3,359 424 
Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.$4,704 $(341)
The following table summarizes redemptions of LLC Interests activity during the thirteen weeks ended March 31, 2021 and March 25, 2020.
Thirteen Weeks Ended
March 31
2021
March 25
2020
Redemption and acquisition of LLC Interests
Number of LLC Interests redeemed by non-controlling interest holders29,600 28,195 
Number of LLC Interests received by Shake Shack Inc.29,600 28,195 
Issuance of Class A common stock
Shares of Class A common stock issued in connection with redemptions of LLC Interests29,600 28,195 
Cancellation of Class B common stock
Shares of Class B common stock surrendered and canceled29,600 28,195 
During the thirteen weeks ended March 31, 2021 and March 25, 2020, we received an aggregate of 355,849 and 77,903 LLC Interests, respectively, in connection with the activity under our stock compensation plan.
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NOTE 9: EQUITY-BASED COMPENSATION
A summary of equity-based compensation expense recognized during the thirteen weeks ended March 31, 2021 and March 25, 2020 is as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Stock options$20 $261 
Performance stock units414 413 
Restricted stock units1,247 626 
Equity-based compensation expense$1,681 $1,300 
Total income tax benefit recognized related to equity-based compensation$67 $36 
Equity-based compensation expense is included in General and administrative expenses and Labor and related expenses on the Condensed Consolidated Statements of Income (Loss) during the thirteen weeks ended March 31, 2021 and March 25, 2020 as follows:
Thirteen Weeks Ended
March 31
2021
March 25
2020
General and administrative expenses$1,541 $1,214 
Labor and related expenses140 86 
Equity-based compensation expense$1,681 $1,300 
NOTE 10: INCOME TAXES
We are the sole managing member of SSE Holdings and, as a result, consolidate the financial results of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, SSE Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc. We are also subject to withholding taxes in foreign jurisdictions.
Our effective income tax rates for the thirteen weeks ended March 31, 2021 and March 25, 2020 were 105.5% and (8.8)%, respectively. The increase was primarily driven by lower pre-tax book income resulting in a loss, causing tax credits and windfall tax benefits related to equity-based compensation to have an increasing effect on the tax rate, as well as a reduction of a valuation allowance. Additionally, an increase in our ownership interest in SSE Holdings increases our share of the taxable income (loss) of SSE Holdings. Our weighted-average ownership interest in SSE Holdings was 93.0% and 91.6% for the thirteen weeks ended March 31, 2021 and March 25, 2020, respectively.
Deferred Tax Assets and Liabilities
During the thirteen weeks ended March 31, 2021, we acquired an aggregate of 385,449 LLC Interests in connection with the redemption of LLC Interests, and activity relating to our stock compensation plan. We recognized a deferred tax asset in the amount of $10,204 associated with the basis difference in our investment in SSE Holdings upon acquisition of these LLC Interests. As of March 31, 2021, the total deferred tax asset related to the basis difference in our investment in SSE Holdings was $142,867. However, a portion of the total basis difference will only reverse upon the eventual sale of our interest in SSE Holdings, which we expect would result in a capital loss. As of March 31, 2021, the total valuation allowance established against the deferred tax asset to which this portion relates was $1,260.
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During the thirteen weeks ended March 31, 2021, we also recognized $300 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments. See "Tax Receivable Agreement," herein for more information.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of March 31, 2021, we concluded, based on the weight of all available positive and negative evidence, that all of our deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon eventual sale of our interest in SSE Holdings, New York City UBT credits and certain foreign tax credits) are more likely than not to be realized. As such, no additional valuation allowance was recognized.
Tax Receivable Agreement
Pursuant to our election under Section 754 of the Internal Revenue Code (the "Code"), we expect to obtain an increase in our share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings. We plan to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs. We intend to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On February 4, 2015, we entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by us 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 (i) increases in our share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax 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 member of SSE Holdings that is a party to the Tax Receivable Agreement, are assignable to transferees of their respective LLC Interests.
During the thirteen weeks ended March 31, 2021, we acquired an aggregate of 29,600 LLC Interests in connection with the redemption of 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 an additional liability in the amount of $1,094 for the TRA Payments due to the redeeming members, representing 85% of the aggregate tax benefits we expect to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on our estimates of future taxable income. During the thirteen weeks ended March 31, 2021 and March 25, 2020, payments of $0 and $6,569, inclusive of interest, were made to the parties to the Tax Receivable Agreement, respectively. As of March 31, 2021, the total amount of TRA Payments due under the Tax Receivable Agreement, was $234,048. See Note 13, Commitments and Contingencies, for more information relating to our liabilities under the Tax Receivable Agreement.
NOTE 11: EARNINGS (LOSS) PER SHARE
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock (in thousands, except per share amounts) for the thirteen weeks ended March 31, 2021 and March 25, 2020.
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Thirteen Weeks Ended
March 31
2021
March 25
2020
Numerator:
Net income (loss) attributable to Shake Shack Inc.—basic$1,309 $(960)
Reallocation of net loss attributable to non-controlling interests from the assumed conversion of Class B shares(734) 
Net income (loss) attributable to Shake Shack Inc.—diluted$575 $(960)
Denominator:
Weighted-average shares of Class A common stock outstanding—basic38,948 34,444 
Effect of dilutive securities:
Stock options232  
Performance stock units53  
Restricted stock units164  
Convertible Notes451  
Shares of Class B common stock2,941  
Weighted-average shares of Class A common stock outstanding—diluted42,789 34,444 
Earnings (loss) per share of Class A common stock—basic$0.03 $(0.03)
Earnings (loss) per share of Class A common stock—diluted$0.01 $(0.03)
Shares of our Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented. However, shares of our Class B common stock outstanding for the period are considered potentially dilutive shares of Class A common stock under application of the if-converted method and are included in the computation of diluted earnings (loss) per share, except when the effect would be antidilutive.
The following table presents potentially dilutive securities, as of the end of the period, excluded from the computations of diluted earnings (loss) per share of Class A common stock for the thirteen weeks ended March 31, 2021 and March 25, 2020.
Thirteen Weeks Ended
March 31
2021
March 25
2020
Stock options1,698 (1)847,207 (3)
Performance stock units51,974 (2)179,253 (3)
Restricted stock units 264,431 (3)
Shares of Class B common stock 3,117,002 (3)
(1)    Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the exercise price of the stock options exceeded the average market price of our Class A common stock during the period ("out-of-the-money").
(2)    Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the performance conditions associated with these awards were not met assuming the end of the reporting period was the end of the performance period.
(3)    Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive.
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NOTE 12: SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth supplemental cash flow information for the thirteen weeks ended March 31, 2021 and March 25, 2020:
Thirteen Weeks Ended
March 31
2021
March 25
2020
Cash paid for:
Income taxes, net of refunds$388 $801 
Interest, net of amounts capitalized70 61 
Non-cash investing activities:
Accrued purchases of property and equipment12,949 13,715 
Capitalized equity-based compensation9 13 
Non-cash financing activities:
Revolving Credit Facility amendment-related accrual
112  
Convertible Notes issuance-related accrual312  
Establishment of liabilities under tax receivable agreement1,094 310 
NOTE 13: COMMITMENTS AND CONTINGENCIES
Lease Commitments
We are obligated under various operating leases for Shacks and our home office space, expiring in various years through 2037. Under certain of these leases, we are liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for our proportionate share of real estate taxes, common area maintenance costs and other occupancy costs. See Note 7, Leases.
As security under the terms of one of our leases, we are obligated under a letter of credit totaling $130 as of March 31, 2021, which expires in February 2026. Additionally, in September 2017, we entered into a letter of credit in conjunction with our new home office lease in the amount of $603, which expires in August 2021 and renews automatically for one-year periods through January 31, 2034.
Purchase Commitments
Purchase obligations include legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. These obligations are generally short-term in nature and are recorded as liabilities when the related goods are received or services rendered. We also enter into long-term, exclusive contracts with certain vendors to supply us with food, beverages and paper goods, obligating us to purchase specified quantities.
Legal Contingencies
In March 2020, a claim was filed against Shake Shack alleging certain violations of the Fair Labor Standards Act. At a mediation between the parties, we agreed to settle the matter with the plaintiff and other employees who elect to participate in the settlement for $595. As of March 31, 2021, an accrual in the amount of $595 was recorded for this matter and related expenses.

In February 2018, a claim was filed against Shake Shack in California state court alleging certain violations of the California Labor Code. At a mediation between the parties, we agreed to settle the matter with the plaintiff and all other California employees who elect to participate in the settlement for $1,200. As of March 31, 2021, an accrual in the amount of $1,180 was recorded for this matter and related expenses.

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We are subject to various legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. As of March 31, 2021, the amount of the ultimate liability with respect to these matters was not material.
Liabilities under Tax Receivable Agreement
As described in Note 10, Income Taxes, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay certain of the members of SSE Holdings