Biglari On Biglari

| About: Biglari Holdings (BH)

The Biglari (NYSE:BH)/Cracker Barrel (CRBL) restaurant proxy battle continues. Now both the 2011 Biglari annual management letter and 10K are both out, providing an additional glimpse into the BH track record to date, with its restaurant holdings. This may be helpful in assessing his future Cracker Barrel plans should he ever gain control.

In 2011, Steak N Shake borrowed $110M to pay $83M in dividends: one item that caught our eye was that a Steak N Shake $110M long term debt issuance was worked in September 2011, which funded an $83M dividend back to Biglari Holdings. The BH management letter and 10K notes it was secured debt, but also noted that BH itself has no debt. The interest rate was 5.5%.

BH Restaurant Cash Flows flat in 2011...we roughed out BH major restaurant holdings free cash flow from the 10K (418 Steak N Shake (SNS) units and 5 Western Sizzlin are included). Restaurant free cash flows on a per unit basis were flat in 2011 v. 2011, and up 24% from its first full year of BH operation, 2009.

Biglari Restaurant Holdings Metrics, Per Unit Basis





2011v. 2009, Change

BH Restaurant Free Cash Flow/Unit





BH/SNS LT Debt per unit





Memo: LT Debt/Total





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BH faces 2012 hurdles ahead: Other than via additional massive revenue increases, BH may have problems in showing another restaurant free cash flow uptick in 2012, given the additional interest expense going forward. If viewed on an after cost of capital basis is used to value the cash flows (such as an EVA-like metric), the burden becomes even greater, since the additional cost of the capital logically should be allocated to Steak N Shake.

Has the Biglari effect already been realized? Steak N Shake has been revitalized since its 2008 BH acquisition, and scored one of the highest same store sales pops since the great recession began in 2008. It has new prototype units about ready to go and has new franchising in mind. But so does everyone else. The burger/better burger sector is really crowded. One wonders if the maximum “Biglari effect” has been realized already.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.