Lea Cabrerra

Sonic Corporation F3Q09 (Qtr End 05/31/09) Earnings Call Transcript

Sonic has major service issues, pricing issues as well as food quality issues.

To be brief, sonic is becoming notorious for 20 minute wait times on a simple drink order (coke, limeade).

Many Sonics have a hip hop culture. Many of the employees dress like thugs (i.e dreadlocks, saggin' pants, hat turned sideways on their heads, tatoos, etc) Furthermore friends of employees hang out on the premises and play the thump thump bass music. It's common to see the employees hangin with their friends or trying to pick up customers. This certainly contributes to slow wait times on drinks. In short the employees dress and act as though their employer (sonic) is simply a place to chill and hang out.

Sonic has pricing issues. $2 for a simple soft drink is appalling. Nevermind the fact the soft drink is overloaded with ice (90%).

Sonic's food quality has suffered greatly. Sonic used to be the premiere name when you wanted a coney, hamburger, onion rings or tator tots. They have changed food vendors and their onion rings and chili dog is the worst in the industry. The breakfast is attrocious.

Management has destroyed the menu by overloading it with everything under the sun. They have sacrificed quality for quanity. Im sure the large menu also contributes to delays and wait times as well.

Management made a $700m capital finance blunder in 2006-2007 when the share price was at an all time high of $35 and 30p/e. Management issued $700m in debt to buyback shares.

The stock now sits around $10 and the company has a negative book value.

Current management has and continues to destroy shareholder value.

Bank Nationalization and the TARP

Words do indeed mean something and so do labels. I have provided DICTIONARY.COM's definition of socialist and socialism below. These definitions certainly apply to Krugman and Obama, so Im on firm ground in calling them socialist.

As for McCarthy calling Hollywood communist, he may have had a point.

I would encourage you not to subordinate your mind to political correctness. All your sucking up may get you a "that a boy," but thats a small consolation for the hole you suck through your throat. Do-gooders usually end up being done real good!

Thanks for responding to my post though.

so⋅cial⋅ist   [soh-shuh-list] Show IPA
–noun
1. an advocate or supporter of socialism.
2. (initial capital letter) a member of the U.S. Socialist party.
–adjective
3. socialistic.

so⋅cial⋅ism   [soh-shuh-liz-uhm] Show IPA
–noun
1. a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
2. procedure or practice in accordance with this theory.
3. (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles.
On Mar 02 09:54 AM anarchist wrote:

> Cabrerra, are you you old enough to remember the McCarthy era where
> all one had to do to discredit a person you disagreed with was to
> call them a "communist"? 'Tricky Dick Nixon' did really well with
> that technique. Now the catch word for defaming is "socialist",
> Obama is a socialist? Krugman is a socialist? Get off it!

Bank Nationalization and the TARP

You said, "Even Paul Krugman is saying 'Nationalize'!"

Why does this surprise you?

Paul Krugman is a socialist. He is the anti-thesis of economic reasoning. To call him an economist is an oxymoron.

Bad Now? It Was a Lot Worse in the Early '80s

We'll get there.

The Federal Reserve has destroyed U.S savings by keeping interest rates artificially low for so long.

If we are ever to recover as a country we must restore our savings. One way or the other, interest rates are going higher and so is the unemployment rate. Logic says substantially higher.

Finally, we as a country have to come to the realization that we must destroy the central banks before they destroy the country.

The sole purpose of the Democrats and Republicans is to split the country so as to avoid placing blame where it is properly do -- at the feet of the Federal Reserve.

The Really Scary Thing is the Debt Itself

One must ask the question: Had we never adopted central banking and its fractional reserves mechanism of alchemy, could we have avoided the malaise we face? Could any of this have ever been possible without a belief in defying the laws of financial physics?

There is no bigger oxymoron than to equate central banking with free markets. In short, they interrupt the equilibrium of interest rates that would otherwise be maintained by the competitive forces of free-markets and its inner relations between savers and borrowers.

Since 1982, the central bankers have undercut the savers by offering money to banks and borrowers at rates below what would otherwise have to be paid to the savers.

This has created massive misallocations of capital and the continual attempts at financial wizardry will only serve to make the matter worse.

Capitalism in Jeopardy?

Very heartening to see people agree and understand the destructive capacity of central bankers.

The Fed plays a game of Russian Roullete with our economy. The game is called "PICK THE RIGHT INTEREST RATE." The game is a needless game.

If they pick the wrong rate (a rate other than what the competive forces of free markets would otherwise set) the result is economic adjustment, the degree dependant on how wrong the choice of rate and how long that wrong choice remains in effect.

If they pick the right rate (the rate the competive forces of free markets would otherwise set) economic activity will continue along the same path it would have continued had rates been set by the competitive forces of free markets.

Given the right rate is the rate set by the competive forces of 300 million free market participants, why do we need 12 people trying to figure out the right rate.

We have seen what happens when they are wrong.

Just as the monetarist replaced the keynsians, the Austrian school of economic thought must replace the monetarist. Such a school of thought will strip politicians and elites of their tools to manage our lives.

Capitalism in Jeopardy?

If you are against central planning (collectivism, socialsim, etc) then consider that the Federal Reserve is the most gross form of central planning known to mankind.

The 12 appointed (not elected) governers manipulate economic activity in their war against the business cycle in an effort to impose their social and economic ideals on the 300 million people that make up the free market place.

Why anyone believes that the wisdom of 12 Federal Reserve governers is superior to the collective concsious of 300 million market participants is sheepish.

These people and thier ability to counterfeit money and loan it to us at rates below what the free markets would otherwise charge has proven dangerous.

Yes, their abilty to bring about credit expansion creates an intial boom and perceived prosperity, but the facade ultimately gives way to the reality of inflation, misallocation of capital, and deflationary bust.

The Federal Reserve's survival is insured by the useful idiots that are Republicans and Democrats as they point the finger at each other during each economic crises. Patisanship spares the Federal Reserve and thus it survives another day to play with our economy.

Indeed, our elected leaders meddle and reak havok on our markets. But the extent by which they can inact their policies is limited only by the willingness of the Federal Reserve to finance it with its printing presses. WIthout the Federal Reserve, FNMA and Freddie Mac never could have become what it did.

Chesapeake Bites McLendon

CHK bought tons of Haynesville acreage at inflated prices.

Given the fact no one can drill that acreage profitably at current prices, and if those prices don't rise to profitable levels over the next year, CHK will have to sell those expiring assets (leases) at substantial losses.

Folks, CHK has problems. In the oil and gas world, what Aubrey has done to CHK is not too different than what the managements of Bear Sterns Lehman and Merrill did in the world of banking.

The default of one counterparty to a CHK hedge could impair CHK's financial condition and create doubt among other counter parties that cause them to not contract with CHK. Such a scenerio would spell a chain of events that could lead CHK into a death spiral.

The investment banks fell like smoke thru a keyhole. Don't think for a minute that a leveraged natural gas company cant go the same way. They fell like dominoes in the 1980's and leases that once fetched $1000 could not even be given away.

It happens folks and it happens quickly.

Again, if CHK goes, Aubrey McCLendon is unimpaired as he continues to own all his working interest in all of CHK wells. Instead of being a partner with CHK shareholders, he will be a partner with CHK creditors.

It will certainly make for another great book about how the once mighty, fell.

Chesapeake Bites McLendon

Mmarrkk,

You must be Mark Lester an officer of the company.

Defend the the FWPP all you want but it will become scandalous and just another, "i told you so."

By the way, I think your down 60% or more on the shares you claimed to be buying about 3 months ago. Shit, you must be down substantialy on every share of CHK you've bought.

Aubrey's own purchases of CHK shares was the impotous for everyone else to overlook the leverage and negative cash flow and pile into the stock. Aubrey has sold out all these shareholders. OUCH! Aubrey sold every damn share he had. He would not even keep a round lot of 100 for memory sake. He sold em all. What confidence.

Keep drinking the cool aid.

At current gas prices, Natural Gas companies cant make money on drilling. Meantime, those leases become expiring assets. If prices stay depressed very long, the highly leverage companies will be toast. CHK is near the top of the highly leveraged.

Just like the highly leveraged investment banks went to zero, so will the highly leveraged in all indutries.

Keep drinking the cool-aid Mmarrk!

Chesapeake Bites McLendon

Mmarrkk,

How you can continue to defend the FOUNDERS WELL PARTICIPATION PROGRAM and the lack of disclosure of the benefits Aubrey receives and shareholders forego is mind boggling.

If CHK goes bankrupt today, Aubrey McClendon is unimpaired as he has a working interest in all of CHK's wells. Shareholders interest in those wells are subject to the creditors and thus CHK shareholder will have nothing.

Would you rather own CHK stock or a working interest in thier wells? Shareholders don't enjoy that privilidged choice, only Aubrey McClendon.

If the FOUNDERS WELL PARTICIPATION PROGRAM is so good for shareholders, then managment must prove it and disclose the benefits Mr. McClendon receives from the program.

Its that simple. Disclosure, disclosure, disclosure!

I think you would agree that given the choice of protecting the privacy of a CEO of a publicly traded company and providing disclosure to that CEO's shareholders the shareholders should prevail.

If CHK were to go bankrupt and the detail of this program come to light, Aubrey would be consider in the same light as Dick Grasso, Angelo Mozilo, Robert Nardelli, etc

Chesapeake Bites McLendon

Mmarrkk,

CHK has working interest partners in many of their wells. CHK, like all oil and gas firms, has ongoing disputes with its working interest partners, royalty owners, etc. That is why the firm, at shareholder expense, employs a team of attorneys to litigate these disputes.

The question that naturally arises, "is CHK as vigililant in its dealings with Aubrey McLendon as it is in its dealings with outside royalty owners and working interest partners?" Do you think the legal team treats the man that signs their checks in the same manner they treat outside parties?

CHK does not benefit from Aubrey being a working interest partner in CHK wells. CHK is foregoing revenue by granting him this exclusive privilige. The revenue CHK is foregoing is estimated at $100-$250 million per year. Aubrey is piggy-backing off CHK's reputation and ability to go to credit markets and purchase large leaseholds and exclusive counter-party relationships.

The very fact that CHK attorneys are arguing on behalf of Aubrey that he does not have to disclose the benefits he receives from this exclusive program is illustrative of such conflict. Do shareholders not have a right to know of the benefits he receives from this program? Without such disclosure, shareholders have no way to determine whether this program is in thier best interest.

Should they every find out that Aubrey is pocketing a couple of hundred million (and growing) from this program they will run his ass out the door. Its been hidden from them because CHK attorneys, who are supposed to represent the shareholders, are aligned with the man that signs thier checks.

CHK is a highly leveraged company that has cash flow problems. How much better would CHK's financials and stock price be at that moment had CHK not given Aubrey 2.5% of the Gross Income (not net income, gross income) over the last 10 years?

We don't know because the numbers are hidden from us. These numbers are hidden because of the huge conflict that exists.

Chesapeake Bites McLendon

Mmarrkk,

You've been drinking the CHK cool-aid for some time.

A couple of months ago, I warned you that CHK was PRECARIOUSLY LEVERAGED. I believe CHK was trading in the 50's. You threw a tantrum over my article. Mmarrkk, CHK is down 60% since I wrote my article.

A big reason why its down is Aubrey put downside pressure on the stock price as he dumped over 33 million shares in just a couple of days.

Thanks Aubrey.

Chesapeake Bites McLendon

Aubrey McClendon is a reckless CEO.

His reckless use of leverage has cost himself and his shareholders billions.

Its curious that Aubrey did not simply pony up the cash to meet his margin call and preserve his position.

Could it be that CHK's leveraged position has brought the company itself to the brink of liquidation.

Aubrey certainly has nothing to lose now, and given the fact Aubrey has a 2.5% working interest in every of CHK's well, his financial status will be unimpaired regardless of what happens to CHK. The FOUNDER WELL PARTICIPATION PROGRAM that allows Aubrey to be an owner in such well puts him in conflict with CHK shareholders.

His reckless use of leverage on behalf of shareholders and in his own personal life raises the question? Should he be running the company?

Four Myths About the Free Market and Its 'Demise'

Are you for real?

It is government meddling in free markets that causes the very distortions that require the consequential corrections.

In a truly free-market, the only monopolies that exist are those that curry the favor of government intervention (see FNMA and FREDDIE MAC, FEDERAL RESERVE).

Free-markets are only free when they are free of government manipulation. Government manipulates free-markets with legislation and the Federal Reserve manipulates free markets by injecting counter-feit money at interest rate below free-market rates.

Such manipulation distorts the perfectly functioning organism we call the economy by distorting the imbalances between those that save and those that consume.

This bailout is nothing more than a continuation of policy maker's war against the eventual consequences of their policies of free-market intervention. Furthermore, it is a war against those in society that have chosen thrift and savings over consumption. The bailout is designed to manipulate us into more credit and consumption.

On Board the 'U.S.S. Titanic'

Well said. The survival of the monetary theory of economics is at stake, and thus the relevance of central bankers.

Just about every major financial panic in our history was preceded by a period of central bankers flooding the free-markets at interest rates below the rate set by the markets.

It is the banks who distribute this money on behalf of central bankers and it is the banks and their executives who profit the most during these periods of easy money. Simply consider the net-worth of top Goldman exec' John Corzine, Robert Rubin, and Hank Paulson. Each walked out of Goldman Sachs with over $500 million. Funny how they end up in Washington to eventually clean up the mess that ultimately ensues. Their cure is always another tax-payer bailout or more easy money.

The game plan is simple for these banks. Create leverage of such size and scope that they become "too big to fail," and thus their survival is guaranteed by the ramifications of their failure.

These bankers dine and carouse with the very central bankers that finance such leverage via artificially cheap and counter-fit money. Without a central bank and its printing press, these jokers would be nothing more than a local used car salesmen.

Quoting Lord Acton, "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."

Later is now. It is the people versus the banks. To be more clear, it is the people versus the central bank. They imply to have a gun to our head and are asking for another $700 billion.

If "this sucker goes down", Alan Greenspan, Ben Bernanke, Robert Rubin, John Corzine, Hank Paulson, Anthony Mozillo, Franklin Raines and a number of others who have enriched themselves courtesy of the Federal Reserve will be more hunted than Osama Bin Ladin,