Shake Shack Inc., Form 8-K, results of operations and other events (filed Apr. 17, 2020)

Summary

Shake Shack Inc.'s current report on Form 8-K dated April 17, 2020, signed by President and Chief Financial Officer Tara Comonte. Under Item 2.02 the company furnishes a Business Update press release of that date as Exhibit 99.1, with preliminary unaudited results for the first quarter ended March 25, 2020, current trends, and a financial liquidity update. Under Item 8.01 it incorporates those sections and supplements the risk factors in its Form 10-K for the fiscal year ended December 25, 2019 and its Form 8-K of March 16, 2020, with a new risk factor on net operating loss carryforwards of approximately $105 million federal and $67 million state as of December 25, 2019, subject to Section 382 limits, and another on acceleration of its credit facility debt. A second press release, Exhibit 99.2, announces an at-the-market equity offering program.

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UNITED
 STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

FORM 8-K

CURRENT
REPORT

Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934

April 17, 2020

Date
of Report (Date of earliest event reported)

SHAKE
SHACK INC.

(Exact
name of registrant as specified in its charter)

Delaware | 001-36823 | 47-1941186
(State
 or other jurisdiction of incorporation
 or organization) | (Commission File
 Number) | (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)

Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:

¨ | Written
 communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ | Soliciting
 material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ | Pre-commencement
 communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ | Pre-commencement
 communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 $0.001 | SHAK | New
 York Stock Exchange

Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR
 §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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. ¨

Item
2.02 Results of Operations and Financial Condition.

On
April 17, 2020, Shake Shack Inc. (the “Company”) issued a press release (the “Business Update Press
Release”), the full text of which is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by
reference herein.

Item
8.01 Other Events.

On
April 17, 2020, the Company issued the Business Update Press Release referred to in Item 2.02 above, the following sections
of which are incorporated by reference into this Item 8.01: “Preliminary Unaudited Results for the First Quarter Ended
March 25, 2020”, “Current Trends and Business Update”, “Financial Liquidity Update”,
“Preliminary Financial Information”, “Forward-Looking Statements”, and “Non-GAAP Financial
Measures”.

The
Company is also filing this Current Report on Form 8-K for the purpose of supplementing the risk factors disclosed in Item 1A
of its Annual Report on Form 10-K for the fiscal year ended December 25, 2019 and the Current Report on Form 8-K dated March 16,
2020. Accordingly, the Company’s risk factor disclosure is hereby supplemented as follows:

Our
ability to use our net operating loss carryforwards may be subject to limitation.

As
of December 25, 2019, our federal and state net operating loss (“NOL”) carryforwards, for income tax purposes were
approximately $105 million and $67 million, respectively. If not utilized, approximately $53 million of our federal NOLs can be
carried forward indefinitely, and the remainder will begin to expire in 2035. If not utilized, approximately $6 million of our
state NOL carryforwards can be carried forward indefinitely, and the remainder will begin to expire in 2023. Federal NOLs incurred
in taxable years beginning after December 31, 2017 can be carried forward indefinitely, but the deductibility of federal NOLs
in taxable years beginning after December 31, 2020, is subject to certain limitations.

In
addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a
corporation undergoes an “ownership change,” its ability to use its pre-change NOLs to offset its post-change income
may be limited. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders
who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage
within a rolling three-year period. Similar rules may apply under state tax laws. We have not conducted a Section 382 study to
determine whether the use of our NOLs is limited. We may have experienced ownership changes in the past, and we may experience
ownership changes in the future, including as a result of this offering or subsequent changes in our stock ownership, some of
which are outside our control. This could limit the amount of NOLs that we can utilize annually to offset future taxable income
or tax liabilities. Subsequent statutory or regulatory changes in respect of the utilization of NOLs for federal or state purposes,
such as suspensions on the use of NOLs or limitations on the deductibility of NOLs carried forward, or other unforeseen reasons,
may result in our existing NOLs expiring or otherwise being unavailable to offset future income tax liabilities.

If
we are unable to maintain compliance with the covenants contained in our current credit facility, we may be unable to make additional
borrowings on any undrawn amounts and may be required to repay our then outstanding debt under the facility. In addition, global
economic conditions may make it more difficult to access new credit facilities.

Our
liquidity position is, in part, dependent upon our ability to borrow under our current credit facility. As previously disclosed,
on August 2, 2019, we entered into a credit facility with Wells Fargo Bank, National Association (“Wells Fargo”),
providing for a $50.0 million senior secured revolving credit facility with the ability to increase available borrowings under
the credit facility by up to an additional $100.0 million through incremental term and/or revolving credit commitments, subject
to the satisfaction of certain conditions set forth in the facility. In March 2020, we drew down the full $50.0 million available
to us under the credit facility to increase liquidity and enhance financial flexibility given the uncertain market conditions
as a result of the COVID-19 outbreak. We are required to comply with maximum net lease adjusted leverage and minimum fixed charge
coverage ratios, in addition to 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 December 25, 2019, we were in compliance with all covenants. However, as a result of the COVID-19 outbreak,
our total revenues have decreased significantly and we have implemented certain operational changes in order to address the evolving
challenges presented by the global pandemic on our domestic and licensed operations. While we expect to be in compliance with
the financial covenants for the first quarter, due to the impacts of COVID-19, our financial performance in the first quarter
was, and in future fiscal quarters will be, negatively impacted. As a result, it is likely that we will be unable to continue
to comply with certain covenants contained in the credit facility, potentially as early as the second quarter compliance date.
We are in discussions with Wells Fargo regarding potential modifications to our covenants, and/or temporary waivers, but there
is no guarantee that we will be able to reach any such agreement. A failure to comply with the financial covenants under our credit
facility would give rise to an event of default under the term of the credit facility, allowing the lenders to refuse to lend
additional available amounts to us and giving them the right to terminate the facility and accelerate repayment of any outstanding
debt under the credit facility. As a result, we may need to access other capital to address our liquidity needs rather than relying
on our credit facility. As of April 16, 2020, we had approximately $112.0 million in cash and marketable securities on hand, excluding
foreign currency and certain reconciling items such as deposits in transit. Our cash resources and liquidity would be substantially
impaired by an acceleration of the debt under our credit facility.

On
April 17, 2020, the Company also issued a press release announcing the establishment of an “at-the-market” equity
offering program, the full text of which is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by
reference herein.

Item
9.01 Financial Statements and Exhibits.

(d) | Exhibits
Exhibit Number | Exhibit
 Description
99.1 | Shake
 Shack Inc. press release dated April 17, 2020 (Business Update)
99.2 | Shake
 Shack Inc. press release dated April 17, 2020 (ATM Program)
104 | Cover
 Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

Shake
 Shack Inc.
(Registrant)
By: | /s/ Tara
 Comonte
Tara
 Comonte
Date:
 April 17, 2020 | President
 and Chief Financial Officer

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