Biglari Demanding Action Against Excessive Compensation at CCA

[Ballinvarosig Investors]

San Antonio money manager Sardar Biglari is putting the heat on management of CCA Industries Inc., a small New Jersey manufacturer and marketer of health and beauty products.

 

Two months ago, two Biglari entities disclosed owning a combined 6.3 percent stake in CCA. The holdings were disclosed in a 13D filing with the Securities and Exchange Commission, an indication the Biglari entities don't plan to be passive investors.

 

On Friday, Biglari sent a letter to CCA demanding access to its books to determine if the company's directors breached their fiduciary duties in approving the compensation arrangements of its two founders and executives

 

In the letter, Biglari said the compensation packages are “excessive by any standard and contain numbers provisions, including guaranteed payments following termination, change of control and even death.” The two founders are 79 and 78, according to the letter.

 

Read more: http://www.mysanantonio.com/default/article/Biglari-puts-heat-on-beauty-product-maker-1319014.php#ixzz1IZojEgtl

 

[OracleofCarolina]

anyone going to the BH meeting this week?

[SmallCap]

Pot, meet Kettle, Kettle, meet pot.

[Guest Bronco]

I own no BH stock but I would imagine that Biglari is a better deal with his current salary than these idiots at CCA mangagement.

 

Biglari is only outrageously paid when the company performs at a certain level - these idiots are paid no matter what the company does.

[ragnarisapirate]

I own no BH stock but I would imagine that Biglari is a better deal with his current salary than these idiots at CCA mangagement.

 

Biglari is only outrageously paid when the company performs at a certain level - these idiots are paid no matter what the company does.

 

Well put.

[goldendad]

Part of the reason I bought my stake in CCA was that the egregious compensation plan of the elders was about to be cut in half finally at the end of 2010 since the employment agreement finally ended.  Of course, now they are essentially retired "consultants" and still make half of what they did.  (I think that is $1MM for the elders together -- keep in mind on a company with 3.5MM shares, that is very meaningful.)  The whole compensation arrangement smelled bad to me, but I knew it when I bought and figured that was part of why I was able to buy at a discount.  My biggest concern is that the kids end up taking that half of the elders compensation for themselves since the family has a record of enriching themselves at shareholders' expense.  For the size and profitability of the operation, all members of the family have clearly been overpaid for a long time.

[OracleofCarolina]

Well after a terrible third quarter, CCA has a new CEO, major reorganization with layoffs and suspension of their dividend

 

http://finance.yahoo.com/news/cca-industries-inc-announces-appointment-211800092.html

 

 

[Morgan]

What is Biglari's angle here? He owns ~6.3% or has ~$1.5m invested in CAW. BH has $23m in cash and equivalents and $131m in investments. How will a double, triple or even a quadruple in CAW move the needle at BH? This doesn't really seem like a good use of time for Biglari.

 

Is he simply chasing sales? Add another $50m in sales to boost his ego? As arrogant as he can be, he's too smart for that.

 

The products the company sells seem to be low quality with poor ad/packaging designs, silly (although usually descriptive) names and almost a gimmick of a product (Mood Magic - "color changing lipstick works with women's body chemistry to create the perfect shade"). It would make more sense, I think, if Biglari wanted to buy the company, revamp the product line over the next few years and focus on creating global brands for the long haul. This might be a cheap way to get into that business. Surely he could seriously boost the margins in the meantime for the company. Proctor and Gamble, Colgate-Palmolive and Johnson & Johnson have ~10%-13% margins. If Biglari could get CAW to half of that, say 6%, CAW's NI would go up ~6x from ~500k to ~$3m. That seems like it might be interesting to Biglari. Especially if he thinks he can grow sales 10x-20x in the next 5-10 years. It could be a nice company to own.

[wescobrk]

"What is Biglari's angle here? He owns ~6.3% or has ~$1.5m invested in CAW. BH has $23m in cash and equivalents and $131m in investments. How will a double, triple or even a quadruple in CAW move the needle at BH? This doesn't really seem like a good use of time for Biglari."

 

Actually they have 100 million in cash,

They will have 195 if the special dividend is approved.

The investment is down in value about 45%.

Not sure why he went after something so small.

[Morgan]

Actually they have 100 million in cash,

They will have 195 if the special dividend is approved.

The investment is down in value about 45%.

Not sure why he went after something so small.

 

BH has $100m in cash? I just checked their latest 10-q (July 2013) and it says $22.358m in cash and equivalents. Have I been looking in the wrong place all this time?

 

I was unaware of the special dividend though, where did you find that info? Thanks!

[wescobrk]

"BH has $100m in cash? I just checked their latest 10-q (July 2013) and it says $22.358m in cash and equivalents. Have I been looking in the wrong place all this time?"

 

They raised 75.7 million in a rights offering.

The company received the funds 7-10 days after sept 16.

 

Special div info is in proxy filings for cracker barrell.

[Morgan]

"BH has $100m in cash? I just checked their latest 10-q (July 2013) and it says $22.358m in cash and equivalents. Have I been looking in the wrong place all this time?"

 

They raised 75.7 million in a rights offering.

The company received the funds 7-10 days after sept 16.

 

Special div info is in proxy filings for cracker barrell.

 

Ah, didn't see the rights offering. Don't follow BH too closely though. Or Cracker Barrell either. Good to know. Thanks wecobrk!