UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 27, 2018
OR
o | 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
(Exact name of registrant as specified in its charter)
Delaware | 47-1941186 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
225 Varick Street, Suite 301 New York, New York | 10014 |
(Address of principal executive offices) | (Zip Code) |
(646) 747-7200
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 and post 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 filer | þ | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
Emerging growth company | o | |||
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No
As of July 25, 2018, there were 29,214,077 shares of Class A common stock outstanding and 7,818,921 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. All statements other than statements of historical fact are forward-looking statements. Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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," "outlook," "potential," "project," "projection," "plan," "intend," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.
While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and it is impossible to anticipate all factors that could affect our actual results. 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 Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 27, 2017 filed with the U.S. Securities and Exchange Commission (the "SEC") under the heading "Risk Factors."
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. 
Form 10-Q | 1
Form 10-Q | 1PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Page | |
2 | Shake Shack Inc. Form 10-Q
Form 10-QSHAKE SHACK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
June 27 2018 | December 27 2017 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | $ | |||||||
Marketable securities | |||||||||
Accounts receivable | |||||||||
Inventories | |||||||||
Prepaid expenses and other current assets | |||||||||
Total current assets | |||||||||
Property and equipment, net | |||||||||
Deferred income taxes, net | |||||||||
Other assets | |||||||||
TOTAL ASSETS | $ | $ | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | $ | |||||||
Accrued expenses | |||||||||
Accrued wages and related liabilities | |||||||||
Other current liabilities | |||||||||
Total current liabilities | |||||||||
Deemed landlord financing | |||||||||
Deferred rent | |||||||||
Liabilities under tax receivable agreement, net of current portion | |||||||||
Other long-term liabilities | |||||||||
Total liabilities | |||||||||
Commitments and contingencies | |||||||||
Stockholders' equity: | |||||||||
Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of June 27, 2018 and December 27, 2017. | |||||||||
Class A common stock, $0.001 par value—200,000,000 shares authorized; 28,106,331 and 26,527,477 shares issued and outstanding as of June 27, 2018 and December 27, 2017, respectively. | |||||||||
Class B common stock, $0.001 par value—35,000,000 shares authorized; 8,924,592 and 10,250,007 shares issued and outstanding as of June 27, 2018 and December 27, 2017, respectively. | |||||||||
Additional paid-in capital | |||||||||
Retained earnings | |||||||||
Accumulated other comprehensive income (loss) | ( | ) | |||||||
Total stockholders' equity attributable to Shake Shack Inc. | |||||||||
Non-controlling interests | |||||||||
Total equity | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. Form 10-Q | 3
Form 10-Q | 3SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share amounts)
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||
June 27 2018 | June 28 2017 | June 27 2018 | June 28 2017 | ||||||||||||||
Shack sales | $ | $ | $ | $ | |||||||||||||
Licensing revenue | |||||||||||||||||
TOTAL REVENUE | |||||||||||||||||
Shack-level operating expenses: | |||||||||||||||||
Food and paper costs | |||||||||||||||||
Labor and related expenses | |||||||||||||||||
Other operating expenses | |||||||||||||||||
Occupancy and related expenses | |||||||||||||||||
General and administrative expenses | |||||||||||||||||
Depreciation expense | |||||||||||||||||
Pre-opening costs | |||||||||||||||||
Loss on disposal of property and equipment | |||||||||||||||||
TOTAL EXPENSES | |||||||||||||||||
OPERATING INCOME | |||||||||||||||||
Other income, net | |||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
INCOME BEFORE INCOME TAXES | |||||||||||||||||
Income tax expense | |||||||||||||||||
NET INCOME | |||||||||||||||||
Less: net income attributable to non-controlling interests | |||||||||||||||||
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC. | $ | $ | $ | $ | |||||||||||||
Earnings per share of Class A common stock: | |||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||
Weighted-average shares of Class A common stock outstanding: | |||||||||||||||||
Basic | |||||||||||||||||
Diluted | |||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4 | Shake Shack Inc. Form 10-Q
Form 10-QSHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||
June 27 2018 | June 28 2017 | June 27 2018 | June 28 2017 | ||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||
Available-for-sale securities(1): | |||||||||||||||||
Change in net unrealized holding gains (losses) | ( | ) | ( | ) | ( | ) | |||||||||||
Less: reclassification adjustments for net realized losses included in net income | |||||||||||||||||
Net change | ( | ) | |||||||||||||||
OTHER COMPREHENSIVE INCOME | ( | ) | |||||||||||||||
COMPREHENSIVE INCOME | |||||||||||||||||
Less: comprehensive income attributable to non-controlling interest | |||||||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAKE SHACK INC. | $ | $ | $ | $ | |||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. Form 10-Q | 5
Form 10-Q | 5SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands, except share amounts)
Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non- Controlling Interest | Total Equity | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
BALANCE, DECEMBER 27, 2017 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
Cumulative effect of accounting changes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||
Net change related to available-for-sale securities | ||||||||||||||||||||||||||||||||||
Equity-based compensation | ||||||||||||||||||||||||||||||||||
Activity under stock compensation plans | — | |||||||||||||||||||||||||||||||||
Redemption of LLC Interests | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis | ||||||||||||||||||||||||||||||||||
Distributions paid to non-controlling interest holders | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
BALANCE, JUNE 27, 2018 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
6 | Shake Shack Inc. Form 10-Q
Form 10-QSHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Twenty-Six Weeks Ended | ||||||||||||
June 27 2018 | June 28 2017 | |||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income (including amounts attributable to non-controlling interests) | $ | $ | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation expense | ||||||||||||
Equity-based compensation | ||||||||||||
Deferred income taxes | ||||||||||||
Non-cash interest expense | ||||||||||||
Loss on sale of marketable securities | ||||||||||||
Loss on disposal of property and equipment | ||||||||||||
Unrealized loss on available-for-sale securities | ||||||||||||
Net loss on sublease | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | ||||||||||||
Inventories | ( | ) | ||||||||||
Prepaid expenses and other current assets | ||||||||||||
Other assets | ( | ) | ( | ) | ||||||||
Accounts payable | ||||||||||||
Accrued expenses | ||||||||||||
Accrued wages and related liabilities | ( | ) | ||||||||||
Other current liabilities | ( | ) | ( | ) | ||||||||
Deferred rent | ( | ) | ||||||||||
Other long-term liabilities | ||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||||||
Purchases of marketable securities | ( | ) | ( | ) | ||||||||
Sales of marketable securities | ||||||||||||
NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from deemed landlord financing | ||||||||||||
Payments on deemed landlord financing | ( | ) | ( | ) | ||||||||
Distributions paid to non-controlling interest holders | ( | ) | ( | ) | ||||||||
Payments under tax receivable agreement | ( | ) | ||||||||||
Proceeds from stock option exercises | ||||||||||||
Employee withholding taxes related to net settled equity awards | ( | ) | ||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. Form 10-Q | 7
Form 10-Q | 7SHAKE SHACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
Page | ||
8 | Shake Shack Inc. Form 10-Q
Form 10-QNOTE 1: NATURE OF OPERATIONS
Shake Shack Inc. ("we," "us," "our," "Shake Shack" and the "Company") 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 June 27, 2018 we owned 75.9 % 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.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 27, 2017 ("2017 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. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The accompanying Condensed Consolidated Balance Sheet as of December 27, 2017 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our 2017 Form 10-K.
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 June 27, 2018 and December 27, 2017, the net assets of SSE Holdings were $217,822 and $197,301 , respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreements. See Note 8 for more information.
Shake Shack Inc. Form 10-Q | 9
Form 10-Q | 9We adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal 2018.
Accounting Standards Update (“ASU”) | Description | Date Adopted |
Revenue from Contracts with Customers and related standards (ASU’s 2014-09, 2015-14, 2016-08, 2016-10, 2016-12, 2016-20) | This standard supersedes the existing revenue recognition guidance and provides a new framework for recognizing revenue. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard also requires significantly more comprehensive disclosures than the existing standard. Guidance subsequent to ASU 2014-09 has been issued to clarify various provisions in the standard, including principal versus agent considerations, identifying performance obligations, licensing transactions, as well as various technical corrections and improvements. See Note 3 for more information. | December 28, 2017 |
Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01) | For public business entities, this standard requires: (i) certain equity investments to be measured at fair value with changes in fair value recognized in net income; (ii) a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) elimination of the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) separate presentation of financial assets and liabilities by measurement category and form of financial asset in the financial statements; and (vii) an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The adoption of this standard did not have a material impact to our consolidated financial statements. | December 28, 2017 |
Statement of Cash Flows: Classification of Certain Cash Receipts and Payments (ASU 2016-15) | This standard provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice. The adoption of this standard did not have a material impact to our consolidated financial statements. | December 28, 2017 |
Recently Issued Accounting Pronouncements
Accounting Standards Update (“ASU”) | Description | Expected Impact | Effective Date |
Leases (ASU's 2016-02, 2018-01, 2018-10, 2018-11) | This standard establishes a new lease accounting model, which introduces the recognition of lease assets and liabilities for those leases classified as operating leases under previous GAAP. It should be applied using a modified retrospective approach applied either at the beginning of the earliest period presented, or at the adoption date, with the option to elect various practical expedients. Early adoption is permitted. | We are currently evaluating the provisions of the standard, including optional practical expedients. We are assessing the impact to our accounting policies, processes, disclosures and internal control over financial reporting. We plan to adopt the standard on December 27, 2018. It is likely that the adoption will have a significant impact to our consolidated balance sheet given the number of real estate leases we have. We are still evaluating the expected impact to our consolidated statements of income and cash flows. | December 27, 2018 |
10 | Shake Shack Inc. Form 10-Q
Form 10-QNOTE 3: REVENUE
On December 28, 2017 we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts which were not completed as of December 28, 2017. We elected a practical expedient to aggregate the effect of all contract modifications that occurred before the adoption date, which did not have a material impact to our consolidated financial statements. Results for reporting periods beginning on or after December 28, 2017 are presented under Accounting Standards Codification Topic 606 ("ASC 606"). Prior period amounts were not revised and continue to be reported in accordance with ASC Topic 605 ("ASC 605"), the accounting standard then in effect.
Upon transition, on December 28, 2017, we recorded a decrease to opening equity of $1,574 , net of tax, of which $1,135 was recognized in retained earnings and $439 in non-controlling interest, with a corresponding increase of $1,769 in other long-term liabilities, a decrease of $68 in other current liabilities, and an increase of $100 to accounts receivable.
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 in exchange for those goods or services.
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 restaurant opening fees are received either in advance of or upon opening the related restaurant. These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.
Revenue from sales-based royalties is recognized as the related sales occur.
Prior to the adoption of ASC 606, Shack opening fees were recorded as deferred revenue when received and proportionate amounts were recognized as revenue when a licensed Shack opened and all material services and conditions related to the fee were substantially performed. Territory fees were recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the term of the license agreement, which generally began upon execution of the contract.
Shake Shack Inc. Form 10-Q | 11
Form 10-Q | 11Thirteen Weeks Ended June 27, 2018 | Twenty-Six Weeks Ended June 27, 2018 | ||||||||||||||||||||||
As reported under ASC 606 | If reported under ASC 605 | Increase (decrease) | As reported under ASC 606 | If reported under ASC 605 | Increase (decrease) | ||||||||||||||||||
Shack sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Licensing revenue | ( | ) | ( | ) | |||||||||||||||||||
Total revenue | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||
June 27 2018 | June 28 2017 | June 27 2018 | June 28 2017 | ||||||||||||
Shack sales | $ | $ | $ | $ | |||||||||||
Licensing revenue: | |||||||||||||||
Sales-based royalties | |||||||||||||||
Initial territory and opening fees | |||||||||||||||
Total revenue | $ | $ | $ | $ | |||||||||||
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of June 27, 2018 is $10,557 . We expect to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 10 to 20 years with renewals. This amount excludes any variable consideration related to sales-based royalties.
Contract Balances
June 27 2018 | December 28 2017 | |||||||
Shack sales receivables | $ | $ | ||||||
Licensing receivables | ||||||||
Gift card liability | ||||||||
Deferred revenue, current | ||||||||
Deferred revenue, long-term | ||||||||
Thirteen Weeks Ended June 27 2018 | Twenty-Six Weeks Ended June 27 2018 | ||||||
Gift card liability | $ | $ | |||||
Deferred revenue, current | |||||||
Shake Shack Inc. Form 10-Q | 12
Form 10-Q | 12NOTE 4: FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis as of June 27, 2018 and December 27, 2017, and indicate the classification within the fair value hierarchy.
Cash, Cash Equivalents and Marketable Securities
June 27, 2018 | ||||||||||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Marketable Securities | |||||||||||||||||||
Cash | $ | $ | — | $ | — | $ | $ | $ | — | |||||||||||||||
Level 1: | ||||||||||||||||||||||||
Money market funds | — | — | — | |||||||||||||||||||||
Mutual funds | ( | ) | — | |||||||||||||||||||||
Level 2: | ||||||||||||||||||||||||
Corporate debt securities(1) | — | |||||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
December 27, 2017 | ||||||||||||||||||||||||
Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Marketable Securities | |||||||||||||||||||
Cash | $ | $ | — | $ | — | $ | $ | $ | — | |||||||||||||||
Level 1: | ||||||||||||||||||||||||
Money market funds | — | — | — | |||||||||||||||||||||
Mutual funds | ( | ) | — | |||||||||||||||||||||
Level 2: | ||||||||||||||||||||||||
Corporate debt securities(1) | ( | ) | — | |||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
(1) |
On December 28, 2017, we adopted ASU 2016-01, which requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. Net unrealized losses on available-for-sale equity securities totaling $23 and $61 were included on the Condensed Consolidated Statements of Income during the thirteen and twenty-six weeks ended June 27, 2018, respectively. Net unrealized losses on available-for-sale securities totaling $74 were included in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheet as of December 27, 2017.
Shake Shack Inc. Form 10-Q | 13
Form 10-Q | 13June 27, 2018 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
Money market funds | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Mutual funds | ( | ) | ( | ) | ||||||||||||||||||||
Corporate debt securities | ||||||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
December 27, 2017 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
Money market funds | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Mutual funds | ( | ) | ( | ) | ||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
June 27 2018 | June 28 2017 | June 27 2018 | June 28 2017 | |||||||||||||
Available-for-sale securities: | ||||||||||||||||
Dividend income | $ | $ | $ | $ | ||||||||||||
Interest income | ||||||||||||||||
Realized gain (loss) on sale of investments | ( | ) | ( | ) | ( | ) | ||||||||||
Unrealized gain (loss) on available-for-sale equity securities | ( | ) | ( | ) | ||||||||||||
Total other income, net | $ | $ | $ | $ | ||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
June 27 2018 | June 28 2017 | June 27 2018 | June 28 2017 | |||||||||||||
Available-for-sale securities: | ||||||||||||||||
Gross proceeds from sales and redemptions | $ | $ | $ | $ | ||||||||||||
Cost basis of sales and redemptions | ||||||||||||||||
Gross realized gains included in net income | ||||||||||||||||
Gross realized losses included in net income | ( | ) | ( | ) | ( | ) | ||||||||||
Amounts reclassified out of accumulated other comprehensive loss | ||||||||||||||||
14 | Shake Shack Inc. Form 10-Q
Form 10-QRealized gains and losses are determined on a specific identification method and are included in other income, net on the Condensed Consolidated Statements of Income.
We periodically review our marketable securities for other-than-temporary impairment. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. As of June 27, 2018 and December 27, 2017, the declines in the market value of our marketable securities investment portfolio were considered to be temporary in nature.
Other Financial Instruments
The carrying value of our other financial instruments, including accounts receivable, accounts payable, and accrued expenses as of June 27, 2018 and December 27, 2017 approximated their fair value due to the short-term nature of these financial instruments.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
NOTE 5: INVENTORIES
June 27 2018 | December 27 2017 | ||||||
Food | $ | $ | |||||
Wine | |||||||
Beer | |||||||
Beverages | |||||||
Retail merchandise | |||||||
Inventories | $ | $ | |||||
NOTE 6: PROPERTY AND EQUIPMENT
June 27 2018 | December 27 2017 | ||||||
Leasehold improvements | $ | $ | |||||
Landlord funded assets | |||||||
Equipment | |||||||
Furniture and fixtures | |||||||
Computer equipment and software | |||||||
Construction in progress (includes landlord funded assets under construction) | |||||||
Property and equipment, gross | |||||||
Less: accumulated depreciation | |||||||
Property and equipment, net | $ | $ | |||||
Shake Shack Inc. Form 10-Q | 15
Form 10-Q | 15NOTE 7: SUPPLEMENTAL BALANCE SHEET INFORMATION