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Anyone Attending The SNS AGM?


Parsad
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So far I guess, no one is attending from here.  What a shame! 

 

Hopefully, we can get some color of the meeting from the news.  If anyone attends, please feel free to post your notes here.  Thanks!  Cheers!

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TMFcanuck of the late lamented MF paydirt site has just said he was going (on his own dime, as the Motley Fool successor service doesnt follow sns) & that he would post his notes there. his notes & commentary have been first rate in the past. i'm sure they will be again this time too. maybe Scotty & TMFCanuck will bump into each other & have a fruitful meeting of the minds  :)

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jeff at ragnarisapirate had said he would have his annual meeting notes up on his blog by monday at the latest. well, luckily for us, he out did himself, both in terms of timing & excellence. many thanks to him!

 

http://ragnarisapirate.blogspot.com/2009/04/steak-n-shake-annual-meeting-notes.html

 

 

 

 

 

I was just getting ready to post the hyperlink when I saw your link. I just made a few minor last minute edits.

 

Thank you, link.

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"

Old Locations: Apparently, stores that were opened before the turn of the century are preforming significantly better than ones opened after. It seems that this is due to a declining quality of the real estate that the locations were placed, as part of an 'expand at all costs' mentality. Of the stores that were opened before 1999, they were up an average of around 2.5%, whereas, stores opened after 1999 were down roughly 2.3%."

 

Does the 2.5% and 2.3% refer to op. income or sales or what??

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Those were some great notes which im glad to see because i was unable to make it to the meeting.  I hope to run into Sardar next weekend in Omaha and tell him to keep it up.  I have seen the new menu and i am very impressed by it.  Whoever designed it did a great job.  Its much easier to order off of compared to the older one that was a bit crowded and confusing.  Also just another note ..The two SNS that i tend to frequent have DRASTICALLY improved their drive thru times.  I only say this because i remember this being a good portion of the customer complaints in the past.  Also on the new Value menu there is a hot fudge sundae for $1.49 so of couse i had to try it.. wow it blows away dairy queen for about half the price! 

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"

Old Locations: Apparently, stores that were opened before the turn of the century are preforming significantly better than ones opened after. It seems that this is due to a declining quality of the real estate that the locations were placed, as part of an 'expand at all costs' mentality. Of the stores that were opened before 1999, they were up an average of around 2.5%, whereas, stores opened after 1999 were down roughly 2.3%."

 

Does the 2.5% and 2.3% refer to op. income or sales or what??

 

This is the one thing that I am unsure about, either I missed what was said, or they didn't clarify the statement. I would say that I missed it.

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jeff at ragnarisapirate had said he would have his annual meeting notes up on his blog by monday at the latest. well, luckily for us, he out did himself, both in terms of timing & excellence. many thanks to him!

 

http://ragnarisapirate.blogspot.com/2009/04/steak-n-shake-annual-meeting-notes.html

 

I was just getting ready to post the hyperlink when I saw your link. I just made a few minor last minute edits.

 

Thank you, link.

 

Ragnar,

 

Thanks for the detailed notes--your efforts are much appreciated.

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jeff at ragnarisapirate had said he would have his annual meeting notes up on his blog by monday at the latest. well, luckily for us, he out did himself, both in terms of timing & excellence. many thanks to him!

 

http://ragnarisapirate.blogspot.com/2009/04/steak-n-shake-annual-meeting-notes.html

 

I was just getting ready to post the hyperlink when I saw your link. I just made a few minor last minute edits.

 

Thank you, link.

 

Ragnar,

 

Thanks for the detailed notes--your efforts are much appreciated.

 

Link (and all other interested parties),

 

I accept cash, checks, money orders, credit cards, gold, and platinum...

 

;-)

 

 

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TMFCanuck (jim gilles) over at the now defunct but not forgotten paydirt site has posted his notes of the sns shareholder metting...many thanks to jim, as well as jeff for their generous sharing.

 

i think this link might be clickable to motley fool non members due to the fact that paydirt is no longer an active service:

 

http://boards.fool.com/Message.asp?mid=27650408

 

a sampling:

 

<<I'll try to rework my notes into some general topics of (assumed) interest:

 

Opening Monologue

========================

There was general talk about how shareholders had suffered under previous management. There was little love shown to the former management (frankly, do they deserve any?). The former regime was highlighted as mistakenly focused on short-term thinking: quarterly results, EPS (and presumably their lowball incentive bonuses).

 

New management (personified in Sardar – for he has become the face of this exercise) espoused a new vision. Knew that drastic changes and difficult decisions were needed, otherwise the turnaround of SNS was destined to fail, and the SNS would have been a footnote. Through hard work and adhering to their new vision, the turnaround effort at SNS is now starting to bear fruit for shareholders. Sardar praised the work of all of the folks at SNS who are making this happen.

 

Happily coinciding with the 75th anniversary celebrations of SNS has been the first positive SSS quarter in 14 (though the cynic might say that, well, they've been down so long, at some point that bar should be sufficiently low to step over).

 

 

On Capital Allocation

============================

There was the (presumably now expected) channelling of Buffett on the importance of capital allocation (and why, if Sardar continues to do what he says he's going to do, in my opinion, SNS is going to be a long-term winner for investors even at today's price).

 

Apologies if this is preaching to the choir, or considered somewhat repetitive, but here goes. The company will be run for the simple economic objective of maximizing intrinsic value per share. Cash flows, not earnings, are what is important to SNS - earnings are not real until they are cash. How SNS manages cash is fundamentally different that most other companies out there. The financial focus of the company has shifted to maximization of FCF and ROIC. They want ROIC > WACC in everything they do – all investment – in anything – will be judged on the basis of whether it's the place where they can get best return relative to risk. The goal is to grow FCF, and know that there will be bumps along the way. Last year, IV was shrinking. Now, it is growing.

 

They have prioritized capital allocation, but do not have a pre-determined capital allocation mindset. Every decision to be based on impact on intrinsic value and on the return on incremental capital as they allocate the capital that flows their way. They will allocate capital to create value, and will focus on having a balance sheet with more cash than debt.

 

They showed a slide of the capital allocation record of the prior decade (1999-2008) under previous management - cumulative CapEx of $546MM, versus cumulative pre-tax profit of $274MM. Thus, reiterated a moratorium on new store openings – they are focused on improving the unit economics of present stores.

 

They have positioned SNS with a very strong value proposition and like their product offering even though the American consumer is hurting. Sluggish demand is a problem for many, but SNS will never blame the economy, weather, et cetera for lack of success – they are in the restaurant business, not the excuse business.

 

For the first time I can remember, Sardar specifically said they were looking for "long-term shareholders as partners". Those of you up on your Buffett should recognize that motif. Part of me wonders if it wasn't something of a shot at Michael Dell's fund who owned a ton of SNS and sold it all off late last year to transition to DineEquity (yikes – there's a scary one!)

 

So if SNS is all about FCF now, obviously, the subject of what to do with that FCF arises – dividends, share repurchases, reinvestment for growth, acquisitions (note: the restaurant industry does not exactly have a great history of acquisitions - see aforementioned DineEquity). Sardar explicitly led folks down the road of share repurchases if necessary, but not necessarily share repurchases, saying "we understand our business more than our competitors' businesses".

 

If SNS can buy their own shares at a discount to intrinsic value they will, however they won't buy it at a level above its intrinsic business worth. Not saying that today’s price is there (above intrinsic value), but extrapolating sunshine and roses expectations versus previously dire forecasts can lead to equally divergent share prices from intrinsic value. Share repurchases would be ideal – but only at the right price. Right now repaying are paying down debt and will look at repurchases at the time.

 

Sardar believes that there are so many inefficiently-run restaurant chains – if we can see a value in an acquisition, we’ll do it (**cough** Jack-in-the-Box **cough**). Would consider stock only when evaluating how much value they give up versus value received in exchange (see Buffett playbook for this quote). Not going to do repurchases if SNS IV-to-price is less attractive than someone else’s IV-to-Price.>>

 

 

 

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I am just going to hijack this thread, my apologies in advance.  A colleague and I just come back from lunch at SNS; Last time I had gone, a year ago w/ the wife, we were both very disappointed in the food and my shake was so sugary I couldn't even finish half.

 

Today, the experience started off great.  "wait to be seated", nice booths, a kid in the next booth that has a SNS little paper hat that I found really cool, nice menus...  Once we got the food however, deception started.  Our burgers were just so-so; I still don't like these tiny fries (but that's me); the colleague's shake was very sugary again.  Waitress was nice and another employee passed by at the end and noticed my coke was empty so offered to refill (and asked if I wanted a to-go cup along w/ refill).

 

 

All in all, experience decent (and good pricing if you stay within 4for$4, decent if not) but food is really the weak link in both our opinions, the bun in particular.  Yes it is a seat-in, yes we have real plates, yes they have shakes... but I still don't get it.  To me, Whataburger or even McDonald's taste better - not to mention some small burger joints like you find in most areas.

 

 

Thoughts?

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Today, the experience started off great.  "wait to be seated", nice booths, a kid in the next booth that has a SNS little paper hat that I found really cool, nice menus...  Once we got the food however, deception started.  Our burgers were just so-so; I still don't like these tiny fries (but that's me); the colleague's shake was very sugary again.  Waitress was nice and another employee passed by at the end and noticed my coke was empty so offered to refill (and asked if I wanted a to-go cup along w/ refill).

 

You know, my roommate weren't that taken back by Steak N Shake either. It's actually something we often wonder about -- especially me since I'm invested in the company. Like you, we both prefer Whataburger. I'm happy to hear that prices have come down though, that was the biggest issue we had with them.

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You know, my roommate weren't that taken back by Steak N Shake either. It's actually something we often wonder about -- especially me since I'm invested in the company. Like you, we both prefer Whataburger. I'm happy to hear that prices have come down though, that was the biggest issue we had with them.

 

The one thing I learned is that my preferences have very little to do with whether something will make a good business or not.  McDonalds does not make very good food, but it is consistent, their restaurants are clean, the prices are cheap and their execution is impeccable.  If I think about many of the things that I enjoy, they are often poor businesses. 

 

Many things that I think have superior quality to their competitors often trail simply because of management's vision and capabilities...think Krispy Kreme donuts here!  You don't have to like Steak'n Shake's food for it to be a great business.  I think Dairy Queen's food is quite inferior to many other fast food restaurants, yet they do perfectly well.  If you can somehow combine quality and execution, then you really have something special...See's or Chik-Fil-A come to mind.

 

With Steak'n Shake, Sardar has the history and the commodity.  He can tweak it, improve it, and vary it, but it will all come down to execution and value for the money.  Over time, the food quality will get slightly better, but his execution should continue to improve markedly through the years...and that's where the real money is.  Cheers! 

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The one thing I learned is that my preferences have very little to do with whether something will make a good business or not.  McDonalds does not make very good food, but it is consistent, their restaurants are clean, the prices are cheap and their execution is impeccable.  If I think about many of the things that I enjoy, they are often poor businesses. 

 

 

Well stated.

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Basically what Parsad is saying is that the unwashed masses have no taste buds. Haha :)

 

I don't think that is what he is saying at all.  No one (OK, almost no one) will tell you that McDonalds is their favorite food or even their favorite burgers, yet McDonalds is an excellent business. Who here has never eaten there?  If you're in a hurry, especially if your in a strange place and in a hurry, you can pull into any McDonalds and know exactly almost 100% what to expect.  That is their moat and it is a deep-wide one.  For all their talk, people don't really like surprises and they value predictability especially when it comes to food.

 

When I started investing about 11 years ago I made the mistake of thinking that all a company needed was an excellent product and the rest would take care of itself, i.e. if you build it they will come.  But what I've learned is that, while excellent management can make up for a mediocre product, an excellent product is not enough to make up for poor management.  Which, of course, is the reason that many times companies that make things you enjoy are not good investments.  It has nothing to do with the tastes (or lack there of) of the great unwashed.

 

--Eric

 

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