Nnejad Posted December 14, 2009 Share Posted December 14, 2009 The link to the 2009 shareholder letter is up: http://www.steaknshake.com/chairman2009.pdf Q4 Traffic up 20%, sales up 10.1%. Q4 sales of 163 mil, vs 142 mil last year. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted December 14, 2009 Share Posted December 14, 2009 you forgot to mention that there is also a TON of cash! Link to comment Share on other sites More sharing options...
Zorrofan Posted December 14, 2009 Share Posted December 14, 2009 The 1-for-20 consolidation is interesting too! cheers Zorro Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted December 14, 2009 Share Posted December 14, 2009 Most of the $51 million in cash equivalents is held at the parent company level and is earmarked for redeployment to acquire businesses or to purchase securities we believe could achieve high risk-adjusted returns. Cash returns are currently unremunerative. But they never burn a hole in our pockets. Our current financial posture permits us to exploit favorable opportunities as they arise. If cash is king, valuation is its queen. I think our conservative, opportunistic value approach is the most sensible way to earn a satisfactory return.I don't own SNS, but even I'm excited to see where Biglari is going to deploy this capital! Since WEST/SNS already own ~10% of ITEX/FMMH; could we see Biglari make further inroads into his stakes with these companies? What do people reckon? Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted December 14, 2009 Share Posted December 14, 2009 http://www.sec.gov/Archives/edgar/data/93859/000114420409064464/v168846_10k.htm 10k here. At first glance, SNS still looks a little overpriced to me. Either the return to 2006/2007 income or the Biglari factor is being priced into the stock. Link to comment Share on other sites More sharing options...
Parsad Posted December 14, 2009 Share Posted December 14, 2009 Extraordinary quarterly sales numbers for the 4th quarter! If some of you ever wondered why I set up a seperate tab for Steak'n Shake and Biglari, I believe what he has done in the last year should provide an answer...an absolutely remarkable case study for all MBA and CFA classes in my opinion! Remember, this is a quarter where even McDonald's suffered. Cheers! Link to comment Share on other sites More sharing options...
Nnejad Posted December 14, 2009 Author Share Posted December 14, 2009 Some fact-finding from the 10-k: 19. Noncontrolling Interest During the fourth quarter of 2009, Steak n Shake finalized an agreement with a former employee to operate three Steak n Shake locations in the Tallahassee, Florida market. A new company, Steak n Shake of Tallahassee, a majority owned subsidiary of the registrant, was formed and Steak n Shake contributed the net assets of the three store locations. Capital totaling $727 was contributed by our former employee, of which $577 was financed through a 20-year note payable to Steak n Shake. The note receivable by Steak n Shake is not reflected in the balance sheet as it is a direct offset to the former employee’s noncontrolling interest. In exchange for his contribution and managerial services, our former employee received a 27% ownership interest in the new company and will be entitled to receive cash profit distributions equal to 49% of the profits earned by the three locations, as defined by the terms of the agree ment. Additionally, we have the option of purchasing the noncontrolling interest for a price equal to the former employees initial cash contribution plus any principal payments made on the note. And... Subsequent to year end, the Company determined to suspend, indefinitely, all future stock option grants under the 2008 Plan. Additionally, we terminated the 2009 Employee Stock Option Plan, under which no options had been granted to date. Link to comment Share on other sites More sharing options...
OracleofCarolina Posted December 14, 2009 Share Posted December 14, 2009 My favorite part of the letter was the part about a free milkshake coupon in all the annual reports!! Link to comment Share on other sites More sharing options...
NormR Posted December 15, 2009 Share Posted December 15, 2009 That's a remarkable letter. I can see why people might be excited about Biglari. Link to comment Share on other sites More sharing options...
KFRCanuk Posted December 15, 2009 Share Posted December 15, 2009 Subsequent to year end, the Company determined to suspend, indefinitely, all future stock option grants under the 2008 Plan. Additionally, we terminated the 2009 Employee Stock Option Plan, under which no options had been granted to date. Let's hope the employees will be able to participate in a stock purchase plan. My favorite part of the letter was the part about a free milkshake coupon in all the annual reports!! Haha! I'll have to spend atleast $500 to redeem my coupons! Link to comment Share on other sites More sharing options...
bargainman Posted December 15, 2009 Share Posted December 15, 2009 "To attract knowledgeable long-term owners, we will initiate a reverse stock split. A reverse stock split of 1-for-20, effective on December 18, 2009, will reduce the number of outstanding common shares of Steak n Shake from the present figure of roughly 28.8 million to 1.4 million. Thus, for every twenty shares you now own, you will end up with one. In no way does your wealth alter nor does that of the company’s intrinsic business value. The economic pie is the same; it just will be sliced into bigger pieces. This change, we hope, will dissuade speculators from participating in our stock. We are attempting to eliminate those who erroneously think that it is easier for a $10 stock to go to $20 than a $200 one to go to $400" Well this sucks! No more selling puts and covered calls on SNS. :-( Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted December 15, 2009 Share Posted December 15, 2009 The R/S implemented by Mr. Biglari is most interesting considering its timing while concurring on its underlying principles as to "unchanged value" making stock more scarce to "owners" who value it dearly instead of trading whores. To me, it was strange that Cramer would recommend shorting this name while tying it to a strategy related to the much larger, much more well endowed, McDonald's corp. A "Cramer Cabal Put (CCP)"? ;D If so, it couldn't happen to a nicer crew. Link to comment Share on other sites More sharing options...
CONeal Posted December 15, 2009 Share Posted December 15, 2009 Does anyone know how partial shares will be treated during the reverse split? After the conversion I will have a .5 share, will this be paid out in cash or will I be allowed to hold the .5 share? Thanks, Link to comment Share on other sites More sharing options...
Parsad Posted December 15, 2009 Share Posted December 15, 2009 I think almost certainly that will be paid out in cash. Cheers! Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted December 15, 2009 Share Posted December 15, 2009 Does anyone know how partial shares will be treated during the reverse split? After the conversion I will have a .5 share, will this be paid out in cash or will I be allowed to hold the .5 share? Thanks, I think that is part of why the shares are up today (other part being very good results). They will have to buy out partials, typically a fairness opinion is needed for this and typically they are bought out at a slight premium to market price. Link to comment Share on other sites More sharing options...
valuecfa Posted December 16, 2009 Share Posted December 16, 2009 Gotta love that 5,275 shares that went for 11.80 in after hours. :P I was recently invested in a company that traded for a fat finger premium of around 200% above the close in the afterhours on no news to the tune of several million shares. Kind of makes me wonder if i should put in ridiculous GTC + After hours orders on all my stocks. Link to comment Share on other sites More sharing options...
netnet Posted December 16, 2009 Share Posted December 16, 2009 At first glance, SNS still looks a little overpriced to me. Either the return to 2006/2007 income or the Biglari factor is being priced into the stock. might I point out that the negative cash flow numbers for those years '06 and 07, with capex in excess of depreciation of 52 million and 36 million in those years, those years were not pretty, in fact they were pretty horrible. Sanjeev may be right Biglari may be the real deal. If he is, then it is still time to buy. Link to comment Share on other sites More sharing options...
omagh Posted December 16, 2009 Share Posted December 16, 2009 Ballinvarosig...Cash is what counts in valuation. The statement of cash flows is about all you need to look at for evidence of the "Biglari factor". He produced the first ounce of free cash flow at SNS since 2004. The first thing to look at in the annual report is the statement of cash flows to see how much cash was generated and then look at the balance sheet to see how much invested capital it took to generate that cash. You'll see that cash flows are up significantly and invested capital is down slightly. http://www.prnewswire.com/news-releases/the-steak-n-shake-company-reports-full-year-and-fiscal-fourth-quarter-2009-results-79256527.html -O http://www.sec.gov/Archives/edgar/data/93859/000114420409064464/v168846_10k.htm 10k here. At first glance, SNS still looks a little overpriced to me. Either the return to 2006/2007 income or the Biglari factor is being priced into the stock. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted December 16, 2009 Share Posted December 16, 2009 I don't doubt that Biglari undestands that SNS/WEST needs to redeploy capital better (as he's clearly demonstrated this by closing poorly performing stores, selling land/buildings). However, I am not completely convinced that with this cash, that he is going to be able to allocate well enough to justify the premium that is attached to SNS. Although he's done very well to turn WEST/SNS around, I think that he still made a mistake to invest his money (and that of the Lion Fund too)this way. Also, if you believe in Biglari, why not just invest in the stocks that he has bought (ITEX/FMMH)? That way you get the stocks he thinks are undervalued, without any of the premium of SNS restaurant business. Link to comment Share on other sites More sharing options...
JAllen Posted December 16, 2009 Share Posted December 16, 2009 I don't doubt that Biglari undestands that SNS/WEST needs to redeploy capital better (as he's clearly demonstrated this by closing poorly performing stores, selling land/buildings). However, I am not completely convinced that with this cash, that he is going to be able to allocate well enough to justify the premium that is attached to SNS. Although he's done very well to turn WEST/SNS around, I think that he still made a mistake to invest his money (and that of the Lion Fund too)this way. Also, if you believe in Biglari, why not just invest in the stocks that he has bought (ITEX/FMMH)? That way you get the stocks he thinks are undervalued, without any of the premium of SNS restaurant business. Ballin- Can you help me understand the premium you posit SNS has priced in currently? I only ask because I would like to hear other's valuations so I don't own an over/fairly priced stock! Thanks For me, it seems as if he should be able to get back to a few years agos earnings, somewhere in the $35-50 range which implies a fair valuation of 9-10 times currently and not expecting much improvement with respect to growth or the redeployment of any of the current cash. I say these numbers mostly from memory having been out of town for a while and only glancing at the press release so please forgive me in advance if I have made a major mistake. Perhaps this should go in the SNS valuation thread? Link to comment Share on other sites More sharing options...
DCG Posted December 16, 2009 Share Posted December 16, 2009 While the results are good compared to a loss last year, is a profit of only $3.4 million on $160 million in revenue for the quarter and profit of only $6 million on $627 million in revenue annually really good? While being profitable is of course better than losing millions of dollars, their profit margin for the year is only 1%. At around $14.10 a share, that puts the current P/E at 67. I understand the cash flow side, but keep in mind that they also have a large chunk of debt. Link to comment Share on other sites More sharing options...
omagh Posted December 16, 2009 Share Posted December 16, 2009 This quote by Biglari could be applied to trailing 12-month P/E ratios... Biglari: "Because metrics are proxies for performance, managing by a single metric causes the tail to wag the dog. Using just one metric is akin to taking a picture of a two-ton elephant: No single angle can capture the “big picture.” -O While the results are good compared to a loss last year, is a profit of only $3.4 million on $160 million in revenue for the quarter and profit of only $6 million on $627 million in revenue annually really good? While being profitable is of course better than losing millions of dollars, their profit margin for the year is only 1%. At around $14.10 a share, that puts the current P/E at 67. I understand the cash flow side, but keep in mind that they also have a large chunk of debt. Link to comment Share on other sites More sharing options...
Parsad Posted December 16, 2009 Share Posted December 16, 2009 However, I am not completely convinced that with this cash, that he is going to be able to allocate well enough to justify the premium that is attached to SNS. The one argument I would make that people always negate when it comes to smart people and their overvalued company stock prices, is that they can always issue overvalued stock and acquire companies that are trading at a larger discount to intrinsic value. Biglari isn't stupid. He's not going to issue undervalued stock...in fact he does the complete opposite...and he'll issue overvalued stock if he finds something worth buying that is accretive to shareholder value. People should only buy Steak'n Shake at a level they are comfortable at, and allocate only a portion of their portfolio that they are also comfortable with. We haven't sold a single share that we've bought at an average cost of $4.94. We plan on holding our stock for years and years going forward. That being said, we aren't adding any more right now either. Cheers! Link to comment Share on other sites More sharing options...
valuecfa Posted December 16, 2009 Share Posted December 16, 2009 That being said, people should only buy Steak'n Shake at a level they are comfortable at, and allocate only a portion of their portfolio that they are also comfortable with. We haven't sold a single share that we've bought at an average cost of $4.94. We plan on holding our stock for years and years going forward. That being said, we aren't adding any more right now either. Cheers! You snagged the bottom tick on this one huh. Link to comment Share on other sites More sharing options...
Parsad Posted December 16, 2009 Share Posted December 16, 2009 You snagged the bottom tick on this one huh. Yeah, we snagged it right at the bottom. We bought a ton of the $2.50 and $5 options when it was trading in the $3-4 range right around end of November 2008. So the $4.94 is with the option premiums included, otherwise the average cost would have been even lower. Cheers! Link to comment Share on other sites More sharing options...
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