Posts Tagged → Steak N Shake
Highlights from Steak N Shake(SNS) Chairman Sardar Biglari’s 2009 Letter
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Steak N Shake(SNS) has posted the annual letter from Chairman Sardar Biglari. Biglari has made great progress with the company since taking over, swinging from a loss of $23 million in 2008 to a profit of $6 million in 2009. The capital structure has been greatly strengthened. After beginning the year with just $6.9 million in cash and $30.7 million in debt, the year ended with $54.4 million in cash and investments, and just $18.6 million in debt. The swing in cash was largely driven by a decrease in capital expenditure to $5.7 million, down from $31.4 million 2008 and $68.6 million in 2007.
The fear when slashing capital expenditure is a decrease in sales, but Q4 featured a 20% increase in customer traffic and a 10.1% increase in same store sales, the best quarter yet in the recent reversal of a multi-year tend of declining sales.
Biglari also announced a 1 for 20 reverse split, effective December 18, in order to discourage speculation in the stock, marking an interesting counter to Buffett’s recent decision to split Berkshire Hathaway B shares as part of the Burlington Northern acquisition.
Biglari reitierated that increasing intrinsic value is his only goal, and promised that “Rest assured, we
will fire ourselves if we fail to create value over time.” Towards this end, we are told again of the holding company structure and Biglari as the sole authority on allocating capital.
Biglari provides a brief history of his involvement with Western Sizzlin(WEST) and the upcoming merger, but does not mention his most recent move, the acquisition of a 9.9% stake in Fremont Michigan Insurance Corp(FMMH)
Biglari has produced impressive results in his short career, and it would appear that he is poised to build on his success and continue to deliver superior returns on capital.
Disclosure: I own shares in WEST,SNS, BRKB,and FMMH
Steak N Shake($SNS) Looks To Invest Excess Cash
The Steak N Shake Company(SNS) filed an 8-k this afternoon disclosing that it has amended its credit agreement to “permit the Company to use up to $10.0 million of surplus cash to make investments of any lawful nature, so long as no event of default exists.”
In addition, the Company has granted “Chief Executive Officer, Sardar Biglari, full power and authority to make all investment and capital allocation decisions on behalf of the Company”
Biglari, through the Lion Fund, Western Sizzlin(WEST) and other affiliated parties controls 10.1% of Steak N Shake’s outstanding stock. After taking control of WEST, Mr. Biglari gained approval to invest cash and has made various investments including SNS. His operating strategy of halting new company-owned stores, refranchising others and focusing on increasing sales and profitability of existing stores seems to be paying off as SNS earlier this week reported impressive same-store sales gains in a very difficult environment for casual dining. SNS is now doing sufficiently well, that Mr. Biglari and the board believe that cash might be deployed for a better return outside of its core business.
Though Mr. Biglari has shown a soft spot for casual dining stocks(he held a significant stake in Friendly’s prior to WEST and SNS, and at one time attempted a tender for part of JBX), he has also purchased a financial adviser, tendered for ITEX, a bartering company, and purchased real estate for development. It will be interesting to see where and when Mr. Biglari decides to invest this excess cash.
Disclosure: I have a position in SNS and WEST
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