Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.
During year end control procedures, management identified a material weakness in our internal control over financial reporting related to the accounting for deferred tax assets. Specifically, the internal controls in place with respect to the calculation of state deferred taxes and the related income tax expense (benefit) were not designed appropriately. The material weakness existed as of December 27, 2023 and prior periods.
Management identified and reported this weakness to both our audit committee and Ernst & Young LLP, our independent registered public accounting firm, immediately upon identification. The nature of the material weakness is described as part of Management's Report on our Internal Control over Financial Reporting. See Item 8, Financial Statements and Supplementary Data.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under potential future conditions, regardless of how remote.
As a result of this discovery, our Chief Executive Officer and Chief Financial Officer have now concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of December 27, 2023, as a result of the material weakness identified in Management's Report on our Internal Control over Financial Reporting related to accounting for deferred tax assets as discussed below.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
For Management's Report on Internal Control over Financial Reporting, see Item 8, Financial Statements and Supplementary Data.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
For changes in internal control over financial reporting, see Item 8, Financial Statements and Supplementary Data.
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Item 9B. Other Information.
Rule 10b5-1 Trading Plans
Pursuant to Item 408(a) of Regulation S-K, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, terminated, or modified a “Rule 10b5-1 trading arrangement” in the fiscal year ended December 27, 2023 as follows:
Name Position
Action Adoption Date
Expiration Date Aggregate Numbers of Class A Common Stock to be Purchased/Sold
Jeff Flug Director Adoption 5/18/2023 8/16/2024 5,960 shares to be sold
Daniel Meyer Chairman of the Board of Directors Adoption 8/8/2023 4/30/2024 100,000 shares to be sold
Other than as disclosed above, no other officer or director adopted , terminated , or modified a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item with respect to our directors is incorporated by reference to the sections entitled “Nominees for Election as Class III Directors” and "Continuing Directors" in our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Shareholders (the “Proxy Statement”). The information required by this item with respect to our Code of Business Conduct and Audit Committee (including our “audit committee financial expert”) is incorporated by reference to the sections entitled “Code of Ethics” and “Audit Committee Report” in our Proxy Statement.
The information required by this item with respect to our executive officers is set forth under the section entitled “Information About Our Executive Officers” in Part I, Item 1 of this Annual Report on Form 10-K.
The information required by this item with respect to Section 16(a) of the Exchange Act is incorporated by reference to the section of the Proxy Statement entitled “Delinquent 16(a) Reports.”
Item 11. Executive Compensation.
The information required by this item with respect to director and executive officer compensation is incorporated by reference to the section entitled “Compensation Discussion and Analysis” in our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item with respect to security ownership of certain beneficial owners and management is incorporated by reference to the section entitled “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY INCENTIVE PLANS
The following table provides information about our compensation plans under which our Class A common stock is authorized for issuance, as of December 27, 2023:
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuances under equity compensation plans (2)
Equity compensation plans approved by security holders (1)
100,625 $ 21.71 2,509,212
(1) Includes awards granted and available to be granted under our 2015 Incentive Award Plan.
(2) This amount represents shares of common stock available for issuance under the 2015 Incentive Award Plan, which include stock options, performance stock units and restricted stock units.
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item with respect to transactions with related persons and director independence is incorporated by reference to the sections entitled “Certain Relationships and Related Party Transactions” and “Corporate Governance --Composition of our Board of Directors” in our Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by this item with respect to principal accountant’s fees and services is incorporated by reference to the sections entitled “Audit and Related Fees” and “Audit Committee Report” in our Proxy Statement.
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Part IV
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements
Page
Management's Report
76
Report of Independent Registered Public Accounting Firm
78
Consolidated Balance Sheets
83
Consolidated Statements of Income (Loss)
84
Consolidated Statements of Comprehensive Income (Loss)
85
Consolidated Statements of Stockholders' Equity
86
Consolidated Statements of Cash Flows
87
Notes to Consolidated Financial Statements
88
(2) Financial Statement Schedules
Page
Schedule I: Condensed Financial Information of Registrant
128
Schedule II: Valuation and Qualifying Accounts
136
All other financial statement schedules are omitted since they are not required or are not applicable, or the required information is included in the Consolidated Financial Statements or notes thereto.
(3) Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report and such Exhibit Index is incorporated herein by reference.
Item 16. Form 10-K Summary
None.
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EXHIBIT INDEX
Exhibit
Number
Incorporated by Reference Filed
Herewith
Exhibit Description Form Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation of Shake Shack Inc., effective February 4, 2015
8-K 3.1 2/10/2015
3.2
Second Amended and Restated Bylaws of Shake Shack Inc., dated October 1, 2019
8-K 3.1 10/4/2019
4.1
Form of Class A Common Stock Certificate
S-1/A 4.1 1/28/2015
4.2
Description of Securities
#
10.1
Third Amended and Restated Limited Liability Company Agreement of SSE Holdings, LLC, dated February 4, 2015 by and among SSE Holdings, LLC and its Members
8-K 10.3 2/10/2015
10.1.1
Amendment No. 1 to Third Amended and Restated Limited Liability Company Agreement of SSE Holdings, LLC, dated March 7, 2016, but effective as of February 4, 2015
POSAM 10.1.1 3/10/2016
10.1.2
Amendment No. 2 to Third Amended and Restated Limited Liability Company Agreement of SSE Holdings, LLC, dated February 6, 2017
10-K 10.1.2 3/13/2017
10.1.3
Amendment No. 3 to Third Amended and Restated Limited Liability Company Agreement of SSE Holdings, LLC, dated March 31, 2020
10-Q 10.1 7/31/2020
10.2
Amended and Restated Management Services Agreement, effective as of January 15, 2015, by and between SSE Holdings, LLC and USHG, LLC
S-1 10.13 12/29/2014
10.3
Tax Receivable Agreement, dated February 4, 2015, by and among Shake Shack Inc., SSE Holdings, LLC and each of the Members from time to time party thereto
8-K 10.1 2/10/2015
10.4
Registration Rights Agreement, dated February 4, 2015, by and among Shake Shack Inc. and each other person identified on the schedule of investors attached thereto
8-K 10.2 2/10/2015
10.4.1
Amendment No. 1 to Registration Rights Agreement, dated and effective as of October 8, 2015, by and among Shake Shack Inc., the Continuing SSE Equity Owners and affiliates of the Former SSE Equity Owners
10-Q 10.2 11/6/2015
10.5
Stockholders Agreement, dated February 4, 2015, by and among Shake Shack Inc., SSE Holdings, LLC, and the persons and entities listed on the schedules attached thereto
8-K 10.4 2/10/2015
10.5.1
Amendment No. 1 to Stockholders Agreement, dated and effective as of October 8, 2015, by and among Shake Shack Inc., SSE Holdings, LLC, the Meyer Stockholders, the LGP Stockholders and the SEG Stockholders
10-Q 10.1 11/6/2015
10.5.2
Amendment No. 2 to Stockholders Agreement, dated and effective as of May 11, 2017, by and among Shake Shack Inc., SSE Holdings, LLC, the Meyer Stockholders, the LGP Stockholders and the SEG Stockholders
10-Q 10.2 8/4/2017
10.5.3
Amendment No. 3 to Stockholders Agreement, dated and effective as of October 16, 2018, by and among Shake Shack Inc., SSE Holdings, LLC, the Meyer Stockholders, the LPG Stockholders and the SEG Stockholders
10-K 10.5.3 2/25/2019
10.5.4
Amendment No. 4 to Stockholders Agreement, dated and effective as of May 15, 2023, by and among Shake Shack Inc., SSE Holdings, LLC, the Meyer Stockholders and the LGP Stockholders.
8-K 10.2 5/16/2023
10.5.5
Amendment No. 5 to Stockholders Agreement, dated and effective as of May 15, 2023, by and among Shake Shack Inc., SSE Holdings, LLC and the Meyer Stockholders.
8-K 10.3 5/16/2023
10.6
Form of Indemnification Agreement entered into between Shake Shack Inc. and each of its directors and officers, effective February 4, 2015
S-1/A 10.21 1/20/2015
10.7
† Shake Shack Inc. 2015 Incentive Award Plan
S-8 4.4 1/30/2015
10.7.1
† Amendment No. 1 to the Shake Shack Inc. 2015 Incentive Award Plan, dated April 26, 2016
10-Q 10.1 5/16/2016
Shake Shack Inc. Form 10-K | 142
Exhibit
Number
Incorporated by Reference Filed
Herewith
Exhibit Description Form Exhibit Filing Date
10.7.2
† Amendment No. 2 to the Shake Shack Inc. 2015 Incentive Award Plan, dated February 5, 2019
10-Q 10.1 5/6/2019
10.7.3
† Form of Employee Option Agreement under the Shake Shack Inc. 2015 Incentive Award Plan, as amended
S-1/A 10.19 1/20/2015
10.7.4
† Form of Director Option Agreement under the Shake Shack Inc. 2015 Incentive Award Plan, as amended
S-1/A 10.20 1/20/2015
10.7.5
† Form of Performance Stock Unit Award Agreement under the Shake Shack Inc., 2015 Incentive Award Plan, as amended
10-Q 10.2 5/16/2016
10.7.6
† Form of Supplement to Performance Stock Unit Award Agreement under the Shake Shack Inc. 2015 Incentive Award Plan, as amended
10-Q 10.3 5/16/2016
10.7.7
† Form of Employee Restricted Stock Unit Award Agreement under the Shake Shack Inc. 2015 Incentive Award Plan as amended
10-K 10.9.6 2/25/2019
10.7.8
† Form of Employee Restricted Stock Unit Award Supplement under the Shake Shack Inc. 2015 Incentive Award Plan as amended
10-K 10.9.7 2/25/2019
10.7.9
† Form of Director Restricted Stock Unit Award Agreement under the Shake Shack Inc. 2015 Incentive Award Plan as amended
10-K 10.9.8 2/25/2019
10.8
† 2015 Senior Executive Bonus Plan
S-1 10.12 12/29/2014
10.9.1
† Amended and Restated Employment Agreement, effective January 5, 2017, by and among Zach Koff, Shake Shack Inc. and SSE Holdings, LLC
8-K 10.1 1/5/2017
10.9.2
Separation Agreement by and between Zachary Koff and Shake Shack Enterprises, LLC., executed August 2, 2023
8-K 10.1 8/3/2023
10.9.3
† Amended and Restated Employment Agreement, effective October 25, 2018, by and among Shake Shack Inc., SSE Holdings, LLC and Randy Garutti
8-K 10.1 10/26/2018
10.9.4
Transition and Advisory Agreement, dated January 26, 2024, by and among Randall Garutti, Shake Shack Inc. and SSE Holdings, LLC
8-K
10.10 1/26/2024
10.9.5
Employment Agreement, effective as of June 14, 2021, by and among Katherine Fogertey, Shake Shack Inc., SSE Holdings, LLC and Shake Shack Enterprises, LLC
8-K 10.1 6/9/2021
10.10
† Non-Employee Director Compensation Policy
10-K 10.19 2/26/2018
10.10.1
† Amended & Restated Non-Employee Director Compensation Policy, dated May 19, 2016
10-K 10.19.1 2/26/2018
10.10.2
† Second Amended & Restated Non-Employee Director Compensation Policy, dated March 17, 2017
10-K 10.19.2 2/26/2018
10.11
Credit Agreement, dated as of August 2, 2019, by and among SSE Holdings, LLC, the Guarantors party thereto, the Lenders referred to therein and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender
8-K 10.1 8/5/2019
10.11.1
First Amendment to Credit Agreement, dated as of May 4, 2020, by and among SSE Holdings, LLC, the Guarantors party thereto, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent
10-Q 10.3 5/4/2020
10.11.2
Second Amendment to Credit Agreement, dated as of March 1, 2021, by and among SSE Holdings, LLC, the Guarantors party thereto, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent
10-Q 10.1 5/7/2021
10.11.3
Third Amendment to Credit Agreement, dated as of March 5, 2021, by and among SSE Holdings, LLC, the Guarantors party thereto, the Lenders party thereto, and JPMorgan Chase Bank, National Association, as Administrative Agent
10-Q 10.2 5/7/2021
10.11.4
Fourth Amendment to Credit Agreement, dated as of June 29, 2023, by and among SSE Holdings, LLC, the Guarantors party hereto, the Lenders party hereto, and JPMorgan Chase Bank, National Association, as Administrative agent
10-Q 10.7 8/4/2023
10.12
Security and Pledge Agreement, dated as of August 2, 2019, by and among SSE Holdings, LLC, the other Obligors party thereto, and Wells Fargo Bank, National Association, as Administrative Agent
10-Q 10.2 11/4/2019
Shake Shack Inc. Form 10-K | 143
Exhibit
Number
Incorporated by Reference Filed
Herewith
Exhibit Description Form Exhibit Filing Date
10.13
Distribution Agreement, dated April 17, 2020, by and between Shake Shack Inc., J.P. Morgan Securities LLC, BofA Securities, Inc. and Wells Fargo Securities LLC
8-K 1.1 4/17/2020
10.14
Underwriting Agreement, dated April 17, 2020, by and between the Company and J.P. Morgan Securities LLC
8-K 1.1 4/21/2020
10.15
Cooperation Agreement, dated May 15, 2023, by and among Engaged Capital Flagship Master Fund, LP, Engaged Capital Co-Invest XV, LP, Engaged Capital Co-Invest XV-A, LP, Engaged Capital Flagship Fund, LP, Engaged Capital Flagship Fund, Ltd., Engaged Capital, LLC, Engaged Capital Holdings, LLC, Glenn W. Welling and Shake Shack Inc.
8-K 10.1 5/16/2023
10.16
Letter Agreement by and between Jeffrey D. Lawrence and Shake Shack Inc., dated May 15, 2023
8-K 10.4 5/16/2023
10.17
Letter Agreement by and between Charles J. Chapman III and Shake Shack Inc., executed July 1, 2023
8-K 10.1 7/10/2023
21
Subsidiaries of Shake Shack Inc.
*
23
Consent of Independent Registered Public Accounting Firm
*
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
32
Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
#
97
D odd-Frank Clawback Policy
*
101.INS XBRL Instance Document *
101.SCH XBRL Taxonomy Extension Schema Document *
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB XBRL Taxonomy Extension Label Linkbase Document *
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
*
† Indicates a management contract or compensatory plan or arrangement.
# Furnished herewith.
Shake Shack Inc. Form 10-K | 144
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Shake Shack Inc.
(Registrant)
By: /s/ Katherine I. Fogertey
Katherine I. Fogertey
Date: February 29, 2024 Chief Financial Officer
Shake Shack Inc. Form 10-K | 145
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Randy Garutti Chief Executive Officer and Director February 29, 2024
Randy Garutti (Principal Executive Officer)
/s/ Katherine I. Fogertey
Chief Financial Officer
February 29, 2024
Katherine I. Fogertey
(Principal Financial and Accounting Officer)
/s/ Daniel Meyer Chairman of the Board of Directors February 29, 2024
Daniel Meyer
/s/ Sumaiya Balbale Director February 29, 2024
Sumaiya Balbale
/s/ Lori George
Director February 29, 2024
Lori George
/s/ Charles J. Chapman III
Director February 29, 2024
Charles J. Chapman III
/s/ Anna Fieler Director February 29, 2024
Anna Fieler
/s/ Jeff Flug Director February 29, 2024
Jeff Flug
/s/ Jeffrey D. Lawrence
Director February 29, 2024
Jeffrey D. Lawrence
/s/ Jenna Lyons Director February 29, 2024
Jenna Lyons
/s/ Joshua Silverman Director February 29, 2024
Joshua Silverman
/s/ Jonathan D. Sokoloff Director February 29, 2024
Jonathan D. Sokoloff
/s/ Robert Vivian Director February 29, 2024
Robert Vivian
/s/ Tristan Walker Director February 29, 2024
Tristan Walker
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