Steak n Shake Co. (SNS)
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SNS Forum Topics
- All Comments on SNS
- General Discussion on SNS
- Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
- Steak n Shake: Watching and Waiting as Biglari Names Himself CEO [view article]
- Time To Start Nibbling at Restaurants? [view article]
- Changing Tides at Steak n Shake [view article]
- Buying 'Em Back at Western Sizzlin' [view article]
- Western Sizzlin's Secretive Quarter [view article]
- Letter to Steak n Shake Board of Directors [view article]
- Provocative Finding: Fast Food Doesn't Make You Fat [view article]
- Steak n Shake: No Plans for a Shakeup Despite Dismal Performance [view article]
- Raw Data Report: Fast Food Restaurants [view article]
- Wall Street Breakfast: Must-Know News [view article]
- Arbitrage Opportunity: Western Sizzlin/Steak 'n Shake Pair Trade [view article]
loading ...Recent SNS Articles
- Steak N Shake's New Direction Is Terrific News for Shareholders
- Steak n Shake: Watching and Waiting as Biglari Names Himself CEO
- Time To Start Nibbling at Restaurants?
- Changing Tides at Steak n Shake
- Western Sizzlin': 2008 Annual Meeting Notes
- Buying 'Em Back at Western Sizzlin'
- Provocative Finding: Fast Food Doesn't Make You Fat
- Letter to Steak n Shake Board of Directors
- Steak n Shake: No Plans for a Shakeup Despite Dismal Performance
- Raw Data Report: Fast Food Restaurants
- Full List of Articles »
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Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
Jeff,I am curious- did the Chairman make any mention of SNS defaults on their loan agreements at the shareholders meeting you attended?
Or any mention of the fact that the lenders had subsequently decreased SNS borrowing facilities by $15 Million?
How about the $20 million debt payment being accompanied by a decrease in net property, plant & eqpt. of over $35 million (with under $8m due to depn.)- thus decreasing Net Worth?.
I have a real problem reconciling the tone of your write-up and the facts reported in their 10Q filing, and will be very concerned with
Chairman Biglari's credibility if you indicate that he did not discuss any of the above at the meeting. Or are any of my observations incorrect?
Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
Jeff-Is it reasonable to leave Capital Lease Obligations (CLOs) out of the calculations? I do not believe we should.
Anyway, regardless of whether your or my opinion is correct, I believe that both Bank Agreements noted in the Company's latest 10Q have restrictions based on ratios where LTD is defined to include their CLOs. You can verify this.
While their approach is in agreement with mine (and I would argue, though debatably, most 'seasoned' financial analysts), it is particularly worrisome that both banks have reduced the available credit under their loan agreements while applying 'tighter' restrictions. This may be just a 'sign of the times'- but I wonder if it might indicate something of a lending 'squeeze' ( or skepticism of the new Chairman?).
In view of the extent to which the Company's Assets are already tied up in the existing Bank Agreements (see attachments to Company's latest 10Q), unless there is a rapid turnaround in their operations, I question what options will be available to the Company. I believe 'Operations' will be the key- and I wonder who is 'on board' to effect the required improvements.
Comments?
Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
Not figuring in capital lease obs. into the debt calculation. They work differently than straight debt. So they currently have less than $30mm in straight debt.SNS can operate negative working capital as well. Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
How do you calculate a current EV of "about $240mm"?And how come 'debt would be near zero after paying down $25mm worth', when the latest Balance sheet shows LTD alone in excess of $152mm and a very significant negative Net Current Asset position ?
Cannot follow your argument/figures.
Bert
Reply
Steak n Shake: Watching and Waiting as Biglari Names Himself CEO [view article]
ULH,You're right on with FRN margin debt. The investment was successful because he bought at a sufficiently low price. That's value investing. Often times if you buy at the right price, a nice franchise (Friendly' is a great ice cream franchise in the Northeast, where I live) will be bought cheaply by strategic and/or financial buyers. It's not "luck." Good decision making often leads to good results. Who are you to say what would have happened had FRN not received a bid?
WEST does indeed have operational management, the fella is named Bob Moore and he is the CEO of Western Sizzlin Franchise Corp, former CEO of Whataburger.
Since Biglari has gotten to WEST, he has pared down debt, sold off underperforming restaurant locations, created a solid ROIC business in the franchising arena, entered into an enourmously successful joint venture, made a successful stock investment in FRN, and turned a weak corporation into one run for cash flow maximization and the shareholders. Remember that no shareholder will lose more than he if WEST fails, so there is nothing in it for him to talk without results.
Why aren't institutions interested? Who could buy up at $41mm company? WEST is a micro cap. Let's say you wanted to put 10% of your assets in WEST, a pretty large position for any fund. At maximum, you could probably gobble up 10% of WEST, considering the public float. Let's even say you could get 15%. 15% of $41mm is a whopping $6.15mm. So if you put $6.15 of your $61.5mm in assets in WEST. Say you only can put 5% in WEST. That's a $123mm fund. What institutions are running $60-$120mm portfolios? WEST can't even make an impact on any reasonable portfolio. 15% is 412k shares. At a few thousand shares trading in total, every day, it would take you a year to accumulate that position without bidding the price all the way up. That's why the institutions aren't interested.
Whoever Sardar's "groupies" are, they've done pretty darn well so far.
If you held WEST since Biglari has taken over, you would have nearly doubled your investment by now; adjusted for splits, Biglari took over in 2005 between 7 and 8 per share. It is an extremely thinly traded stock to this day.
So his job isn't to "get the stock moving." He's also not "running a restaurant" (in the case of SNS, only out of necessity until the President is hired, and Bob Moore runs the restaurant operation at WEST, before that it was Jim Verney).
His job is to make capital decisions that benefit shareholders. Everything outside of SNS has worked out great. It remains to be seen whether SNS will work out, so in the end the results will lie where they may.
Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
I know that SNS can't buy back shares yet. However, I'll bet those credit lines are #1 in line to be paid off with all of their restrictive covenants now in place. This should happen in the next 2 quarters or so. At that point, the buying can, and most likely will, begin. I started the buyback scenario in 2009 if you look above:"Given $45mm in annual free cash flow, the company would then generate $90mm in free cash flow in the 2009-2010 period.
Let’s say the company takes $65mm of that to buy back shares, again likely given Biglari’s penchant for share buybacks, and the rest to reduce debt. Assuming an average buy price of $8.50, the company could buy back about $7.6mm shares, bringing the share count down to about $20.6mm from the current $28.2mm. " Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
I think it may be difficult to buy back as many shares as you are suggesting at $8.50 average if they have the solid cash flow that you suggest and I expect.One things for sure, there are a lot of folks SHORT SNS and they will have to cover at some point.
I do wish he would arrange for a "webcast" of his Investor days and allow questions in advance from folks unable to attend. At least with a conference call, everyone has equal access to the information. With "investor days", thats just not the case for folks who cant drop everything and fly to "investor day". And are his investor days for the shareholders or aimed at attracting new money ? The big apple is not the cheapest place for a shareholder day as he did with WEST.
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Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
sns' debt instruments dont allow share buy backs ReplySteak N Shake's New Direction Is Terrific News for Shareholders [view article]
debt instruments dont allow share buybacks ReplySteak N Shake's New Direction Is Terrific News for Shareholders [view article]
Free cash flow, as you're defining it, was depressed because previous management had an issue with capital spending. The newly placed Chairman and CEO has already stated that from next quarter forward, capital expenditures will halted to a maintenance level, $10mm or less as I stated above.Secondly, property sales are flowing through the cash flow statement under "proceeds from property and equipment disposal." Those aren't being included in my free cash flow number, one I defined above as (operating cash flow - maintenance capex). The cash from selling stores and land isn't in there.
Thus, they generated a normalized level of $30mm in free cash flow assuming a run rate at last quarter's level of operating cash flow minus future maintenance capital spend. Free cash flow may have been "about zero," but you're looking in the rear view instead of the windshield, I think. Reply
Steak N Shake's New Direction Is Terrific News for Shareholders [view article]
For the trailing twelve months, SNS's free cash flow is about zero. So your projections look like a pipe dream. The company is raising cash by selling and leasing back properties, which provides a one-time boost to cash flow, but results in a higher operating expense on a continuing basis. The reality is that this is a company that is generating losses, showing decreasing revenue and has a fair amount of debt - usually the recipe for bankruptcy. Replyr
Steak n Shake: Watching and Waiting as Biglari Names Himself CEO [view article]
Biglari was not that far on margin with the FRN investment -- there was some margin for a short while, but cash from insurance proceeds were on the way so he effectively only borrowed against that.I do however agree with most of the rest of User 71887's post. Aside from performance at the Lion Fund, Biglari's single most positive action was the investment in FRN, and it isn't clear what portion of that was luck vs. skill. Aside from that, all he has provided is coining a lot of phrases from Buffett and talking about a strategic plan. Now he's got two large resturant companies without operational management, and probably has his hands full.
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Steak n Shake: Watching and Waiting as Biglari Names Himself CEO [view article]
"My gut says this guy had a little money from some entreprenurial gigs, started a one man "hedge fund" rolled all into WEST, didn't accomplish much operationally there but did leverage their cash + PR, rolled most if not all his "hedge fund" $ and WEST's money into FRN...went deep into margin so his ass was on the line...and LUCKED OUT on FRN. Had FRN gone bankrupt, we'd no longer be hearing about Sardar as he ans his "hedge fund" would have been wiped out...So, he got lucky on FRN (as most of us have with an investment)... his wallet went to his head and he bet similar/big on SNS. Got in way too high (do you start to question his financial acumen???), company is in need of an operator and he doesn't have one, know of one given all his vast "restaurant experience"????..... "You are blessed with a remarkably imaginative, talkative Gut. Most people gut say things like "Ugg" or at the most " something doesn't feel right". You might wanna get a checkup. You may contain some kind of advance symbiotic parasite, like in Stargate. Reply
Brochstein
Time To Start Nibbling at Restaurants? [view article]
By full-service, I meant service at the table, not quick-serve or cafeteria - yes. I left off BUCA intentionally due to its very small size ($9mm market cap). BWLD from what I could tell isn't full service. I left off MSSR, MRT and RUTH because they aren't "casual", but probably the same arguments suggest looking at them. CASA isn't in my database. DAVE and DENN could have been included. ELXS is less than micro-cap. GCFB and JAX fell below my minimum market cap, while GRIL isn't in the database. Nor is SHLL. Another I intentionally omitted was KONA. Thanks for the heads-up on these names! ReplyTime To Start Nibbling at Restaurants? [view article]
"These companies, all of which I believe are "full-service&quo... restaurants, are hopefully an inclusive list - please let me know if I have omitted one."I'm just guessing that by "full-service&quo... you mean to exclude quick-service, buffet, cafeteria and take-out, leaving "casual service."
So this might suggest the inclusion of BUCA, BWLD, CASA, DAVE, DENN, ELXS (but you get sewage equipment, which isn't necessarily appetizing, in the bargain), GCFB, GRIL, JAX, MRT, MSSR, RUTH, or SHLL. In addition ARKR operates both casual and quick service restaurants. Reply