What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 209 added, 302 removed, 541 unchanged (49% of the section changed)

3 unchanged sentences

(dollars in thousands)

September 30,

2022 December 31,

18 unchanged sentences

Current portion of lease obligations 17,057 16,898

Current portion of notes payable — 152,261

Total current liabilities 143,136 143,641

17 unchanged sentences

(dollars in thousands except per share amounts)

Third Quarter First Nine Months

2021 2020 2021 2020

(Unaudited) (Unaudited)

First Quarter

Restaurant operations $ 59,847 $ 69,954

1 unchanged sentence

Oil and gas 9,812 8,592

Media and licensing 863 1,719 2,695 3,209

Licensing and media 634 1,123

85,372 94,288

3 unchanged sentences

Oil and gas production costs 3,819 2,413

Media and licensing costs 880 548 1,749 1,491

Licensing and media costs 953 480

Selling, general and administrative 16,224 15,540

Impairments — 298

Depreciation and amortization 7,682 7,275 22,239 24,284

Interest expense on leases 1,462 1,593 4,619 4,679

Interest expense on notes payable — 2,150 1,121 6,973

Depreciation, depletion, and amortization 7,871 7,178

Interest expense 1,412 2,741

79,405 85,412

1 unchanged sentence

Investment partnership gains (losses) ( 6,661 ) 81,766

( 15,697 ) 27,572 33,809 ( 87,413 )

Total other income (expenses) ( 6,436 ) 84,847

Earnings (loss) before income taxes ( 469 ) 93,723

1 unchanged sentence

Net earnings (loss) $ ( 298 ) $ 71,707

Earnings per share

Net earnings (loss) per equivalent Class A share * $ ( 0.98 ) $ 223.29

*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $( 6.75 ) and $ 25.16 for the third quarter and first nine months of 2021, respectively, and $ 12.01 and $( 42.66 ) for the third quarter and first nine months of 2020, respectively.

*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $( 0.20 ) for the first quarter of 2022 and $ 44.66 for the first quarter of 2021.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

Third Quarter First Nine Months

2021 2020 2021 2020

(Unaudited) (Unaudited)

First Quarter

Net earnings (loss) $ ( 298 ) $ 71,707

5 unchanged sentences

(dollars in thousands)

First Nine Months

First Quarter

Operating activities

1 unchanged sentence

Adjustments to reconcile net earnings (loss) to operating cash flows:

Depreciation and amortization 22,239 24,284

Depreciation, depletion, and amortization 7,871 7,178

Provision for deferred income taxes ( 4,750 ) 23,350

1 unchanged sentence

Gains on disposal of assets ( 133 ) ( 958 )

Investment gains and investment partnership gains/losses ( 34,461 ) 87,413

Investment and investment partnership (gains) losses 6,436 ( 85,013 )

Distributions from investment partnerships 4,500 150,570

5 unchanged sentences

Proceeds from property and equipment disposals 109 2,749

Acquisition of business, net of cash acquired — ( 34,240 )

Purchases of limited partner interests ( 3,000 ) ( 3,000 )

Purchases of investments ( 50,086 ) ( 16,724 )

Redemptions of fixed maturity securities 74,678 241,223

Sales of investments and redemptions of fixed maturity securities 46,193 15,642

Net cash used in investing activities ( 16,077 ) ( 8,780 )

Financing activities

Proceeds from revolving credit facility — 500

Principal payments on long-term debt — ( 149,952 )

2 unchanged sentences

Effect of exchange rate changes on cash ( 23 ) ( 22 )

Increase (decrease) in cash, cash equivalents and restricted cash 792 ( 32,108 )

Increase in cash, cash equivalents and restricted cash 3,428 3,935

Cash, cash equivalents and restricted cash at beginning of year 43,687 29,666

Cash, cash equivalents and restricted cash at end of third quarter $ 30,458 $ 38,588

First Nine Months

Cash, cash equivalents and restricted cash at end of first quarter $ 47,115 $ 33,601

First Quarter

Cash and cash equivalents $ 45,777 $ 28,438

Restricted cash in other long-term assets 1,338 5,163

Cash, cash equivalents and restricted cash at end of third quarter $ 30,458 $ 38,588

Cash, cash equivalents and restricted cash at end of first quarter $ 47,115 $ 33,601

See accompanying Notes to Consolidated Financial Statements.

8 unchanged sentences

Balance at December 31, 2021 $ 1,138 $ 381,788 $ 608,528 $ ( 1,907 ) $ ( 401,851 ) $ 587,696

Net earnings 71,707 71,707

Other comprehensive loss ( 444 ) ( 444 )

Adjustment to treasury stock for holdings in investment partnerships 3,049 3,049

Balance at March 31, 2021 $ 1,138 $ 381,788 $ 644,757 $ ( 1,975 ) $ ( 386,568 ) $ 639,140

Net earnings (loss) ( 298 ) ( 298 )

Other comprehensive income 115 115

Adjustment to treasury stock for holdings in investment partnerships ( 5,026 ) ( 5,026 )

Balance at June 30, 2021 $ 1,138 $ 381,788 $ 624,020 $ ( 1,860 ) $ ( 391,594 ) $ 613,492

Net earnings (loss) ( 10,669 ) ( 10,669 )

Other comprehensive loss ( 231 ) ( 231 )

Adjustment to treasury stock for holdings in investment partnerships 130 130

Balance at September 30, 2021 $ 1,138 $ 381,788 $ 613,351 $ ( 1,909 ) $ ( 395,802 ) $ 598,566

Balance at March 31, 2022 $ 1,138 $ 381,788 $ 608,230 $ ( 2,138 ) $ ( 401,721 ) $ 587,297

Stock Additional

8 unchanged sentences

Balance at March 31, 2021 $ 1,138 $ 381,788 $ 644,757 $ ( 1,975 ) $ ( 386,568 ) $ 639,140

Net earnings 42,466 42,466

Other comprehensive income 802 802

Adjustment to treasury stock for holdings in investment partnerships 92 92

Balance at June 30, 2020 $ 1,138 $ 381,788 $ 515,620 $ ( 2,320 ) $ ( 373,676 ) $ 522,550

Net earnings (loss) 21,101 21,101

Other comprehensive income 344 344

Adjustment to treasury stock for holdings in investment partnerships ( 5,777 ) ( 5,777 )

Balance at September 30, 2020 $ 1,138 $ 381,788 $ 536,721 $ ( 1,976 ) $ ( 379,453 ) $ 538,218

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

(dollars in thousands, except share and per share data)

7 unchanged sentences

The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2021.

Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing, restaurants, and oil and gas.

Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, licensing and media, restaurants, and oil and gas.

The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants.

Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

The Company’s long-term objective is to maximize per-share intrinsic value.

Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized finance decision-making.

Operating decisions for the various business units are made by their respective managers.

All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr.

As of September 30, 2021, Mr.

Biglari beneficially owns shares of the Company that represent approximately 65.0 % of the economic interest and 70.3 % of the voting interest.

Overview of the Impact of COVID-19

The novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March of 2020.

Government and private sector responses to contain its spread began to affect our operating businesses significantly that same month.

The COVID-19 pandemic has adversely affected nearly all of our operations, although the effects are varying significantly.

The risks and uncertainties resulting from the pandemic may continue to affect our future earnings, cash flows and financial condition.

The extent of such effects over the long term cannot be reasonably estimated at this time.

Business Acquisition

On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company, and its agency, Southern Pioneer Insurance Agency, Inc.

(collectively “Southern Pioneer”).

Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance.

The financial results for Southern Pioneer are included from the date of acquisition.

As of March 31, 2022, Mr.

Biglari beneficially owns shares of the Company that represent approximately 66.3 % of the economic interest and approximately 70.4 % of the voting interest.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including Steak n Shake Inc., Western Sizzlin Corporation, First Guard Insurance Company, Maxim Inc., Southern Pioneer, and Southern Oil Company.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including Steak n Shake Inc., Western Sizzlin Corporation, First Guard Insurance Company, Maxim Inc., Southern Pioneer Property & Casualty Insurance Company, and Southern Oil Company.

Intercompany accounts and transactions have been eliminated in consolidation.

Change in Presentation

Gain on debt extinguishment of $ 0 and $ 5,713 during the third quarter and first nine months of 2020, respectively, have been reclassified from other income to selling, general and administrative expenses.

Loss and loss adjustment expenses and unearned premiums are reflected separately from accrued expenses on the consolidated balance sheet.

Earnings Per Share

4 unchanged sentences

However, these shares are legally outstanding.

Earnings Per Share (continued)

The following table presents shares authorized, issued and outstanding on September 30, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020

The following table presents shares authorized, issued and outstanding on March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

Class A Class B Class A Class B

1 unchanged sentence

Common stock issued and outstanding 206,864 2,068,640 206,864 2,068,640

On an equivalent Class A common stock basis, there were 620,592 shares outstanding as of September 30, 2021 and December 31, 2020.

Earnings Per Share (continued)

The Company has applied the “two-class method” of computing earnings per share as prescribed in Accounting Standards Codification (“ASC”) 260, “ Earnings Per Share ”.

The equivalent Class A common stock applied for computing earnings per share excludes the proportional shares of Biglari Holdings’ stock held by the investment partnerships.

The equivalent Class A common stock for the earnings per share calculation during the third quarters of 2021 and 2020 was 316,236 and 351,288 , respectively.

The equivalent Class A common stock for the earnings per share calculation during the first nine months of 2021 and 2020 was 320,377 and 348,396 , respectively.

Investments were $ 99,006 and $ 94,861 as of September 30, 2021 and December 31, 2020, respectively.

In the tabulation below is the equivalent Class A common stock for earnings per share.

There are no dilutive securities outstanding.

March 31, 2022 March 31, 2021

Equivalent Class A common stock outstanding 620,592 620,592

Proportional ownership of Company stock held by investment partnerships 316,020 299,453

Equivalent Class A common stock for earnings per share 304,572 321,139

Investments net of deferred taxes is presented below.

March 31, 2022 December 31, 2021

Investments $ 87,150 $ 83,061

Deferred tax liability related to investments ( 607 ) ( 845 )

Investments net of deferred taxes $ 86,543 $ 82,216

We classify investments in fixed maturity securities at the acquisition date as either available-for-sale or held-to-maturity and re-evaluate the classification at each balance sheet date.

2 unchanged sentences

Dividends earned on investments are reported as investment income by our insurance companies.

We consider investment income as a component of our aggregate insurance operating results.

We consider investment income as a component of our aggregate insurance operating result.

However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

Investment gains for the third quarter and first nine months of 2021 were $ 4,534 and $ 6,465 , respectively, which include a $ 5,047 gain on the sale of real estate.

The Company purchased 26 acres of land in Murfreesboro, Tennessee in 2014 for $ 2,145 and sold it in the third quarter of 2021.

Investment gains for the third quarter and first nine months of 2020 were $ 354 and $ 1,863 , respectively.

Investment gains for the first quarter of 2022 and 2021 were $ 225 and $ 3,081 , respectively.

Investment Partnerships

1 unchanged sentence

We record our proportional share of equity in the investment partnerships but exclude Company common stock held by said partnerships.

The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though they are legally outstanding.

The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding.

The Company records gains/losses from investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses on their securities) in the consolidated statements of earnings based on our carrying value of these partnerships.

2 unchanged sentences

Biglari Capital Corp.

(“Biglari Capital”) is the general partner of the investment partnerships and is an entity solely owned by Mr.

The fair value and adjustment for Company common stock held by the investment partnerships to determine the carrying value of our partnership interest is presented below.

is the general partner of the investment partnerships and is an entity solely owned by Mr.

The fair value and adjustment for Company common stock held by the investment partnerships to determine the carrying value of our partnership interest are presented below.

Fair Value Company

3 unchanged sentences

Distributions (net of contributions) ( 1,500 ) ( 1,500 )

Increase in proportionate share of Company stock held 6,185 ( 6,185 )

Partnership interest at September 30, 2021 $ 533,996 $ 260,907 $ 273,089

Changes in proportionate share of Company stock held ( 130 ) 130

Partnership interest at March 31, 2022 $ 471,792 $ 229,424 $ 242,368

Investment Partnerships (continued)

4 unchanged sentences

Distributions (net of contributions) ( 147,570 ) ( 147,570 )

Decrease in proportionate share of Company stock held 4,596 ( 4,596 )

Partnership interest at September 30, 2020 $ 514,599 $ 130,929 $ 383,670

Changes in proportionate share of Company stock held ( 3,049 ) 3,049

Partnership interest at March 31, 2021 $ 554,274 $ 197,479 $ 356,795

The carrying value of the investment partnerships net of deferred taxes is presented below.

September 30,

2022 December 31, 2021

2 unchanged sentences

Carrying value of investment partnerships net of deferred taxes $ 202,852 $ 205,867

The Company’s proportionate share of Company stock held by investment partnerships at cost is $ 395,802 and $ 389,617 at September 30, 2021 and December 31, 2020, respectively, and is recorded as treasury stock.

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 401,721 and $ 401,851 at March 31, 2022 and December 31, 2021, respectively, and was recorded as treasury stock.

The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock.

Fair value of our partnership interests is assessed according to our proportional ownership interest of the fair value of investments held by the investment partnerships.

Fair value of our partnership interest is assessed according to our proportional ownership interest of the fair value of investments held by the investment partnerships.

Unrealized gains and losses on marketable securities held by the investment partnerships affect our net earnings.

Gains/losses from investment partnerships recorded in the Company’s consolidated statements of earnings are presented below.

Third Quarter First Nine Months

2021 2020 2021 2020

Gains (losses) on investment partnership $ ( 20,231 ) $ 27,218 $ 27,344 $ ( 89,276 )

First Quarter

Gains (losses) from investment partnerships $ ( 6,661 ) $ 81,766

Tax expense (benefit) ( 1,860 ) 19,117

Contribution to net earnings $ ( 4,801 ) $ 62,649

On December 31 of each year, the general partner of the investment partnerships, Biglari Capital, will earn an incentive reallocation fee for the Company’s investments equal to 25 % of the net profits above an annual hurdle rate of 6 % over the previous high-water mark.

On December 31 of each year, the general partner of the investment partnerships, Biglari Capital Corp., will earn an incentive reallocation fee for the Company’s investments equal to 25 % of the net profits above an annual hurdle rate of 6 % over the previous high-water mark.

Our policy is to accrue an estimated incentive fee throughout the year.

The total incentive reallocation from Biglari Holdings to Biglari Capital includes gains on the Company’s common stock.

Gains and losses on the Company’s common stock and the related incentive reallocations are eliminated in our consolidated financial statements.

There were no incentive reallocations from Biglari Holdings to Biglari Capital during the first nine months of 2021 and 2020.

The total incentive reallocation from Biglari Holdings to Biglari Capital Corp.

includes gains on the Company’s common stock.

Gains and losses on the Company’s common stock and the related incentive reallocations are eliminated in our financial statements.

There were no incentive reallocations from Biglari Holdings to Biglari Capital Corp.

during the first quarters of 2022 and 2021.

Investment Partnerships (continued)

4 unchanged sentences

Lion Fund Lion Fund II

Total assets as of September 30, 2021 $ 132,351 $ 583,989

Total liabilities as of September 30, 2021 $ 1,490 $ 101,956

Revenue for the first nine months of 2021 $ 35,639 $ 94,078

Earnings for the first nine months of 2021 $ 35,584 $ 93,548

Biglari Holdings' ownership interest as of September 30, 2021 62.4 % 93.9 %

Total assets as of March 31, 2022 $ 123,634 $ 533,454

Total liabilities as of March 31, 2022 $ 20,162 $ 101,230

Revenue for the first quarter of 2022 $ 969 $ ( 1,249 )

Earnings for the first quarter of 2022 $ 926 $ ( 1,581 )

Biglari Holdings’ ownership interest as of March 31, 2022 62.5 % 93.9 %

Total assets as of December 31, 2021 $ 114,749 $ 564,022

Total liabilities as of December 31, 2021 $ 7,763 $ 130,417

Revenue for the first nine months of 2020 $ ( 18,941 ) $ ( 119,644 )

Earnings for the first nine months of 2020 $ ( 18,992 ) $ ( 120,849 )

Biglari Holdings' ownership interest as of September 30, 2020 66.2 % 95.3 %

Revenue in the above summarized financial information of the investment partnerships includes investment income and unrealized gains and losses on investments.

Revenue for the first quarter of 2021 $ 18,016 $ 105,347

Earnings for the first quarter of 2021 $ 17,998 $ 105,274

Biglari Holdings’ ownership interest as of March 31, 2021 61.3 % 94.0 %

Revenue in the financial information of the investment partnerships, summarized above, includes investment income and unrealized gains and losses on investments.

Property and Equipment

Property and equipment is composed of the following.

September 30,

2022 December 31,

6 unchanged sentences

745,407 742,102

Less accumulated depreciation and amortization ( 388,244 ) ( 376,231 )

Less accumulated depreciation, depletion, and amortization ( 397,798 ) ( 392,751 )

Property and equipment, net $ 347,609 $ 349,351

Depletion expense related to oil and gas properties was $ 5,875 and $ 9,249 during the first nine months of 2021 and 2020, respectively, and is included in depreciation and amortization within the consolidated statement of earnings.

During the first nine months of 2021, the Company recorded impairment charges of $ 559 related to closed stores.

The Company recorded impairment charges of $ 18,117 in the first nine months of 2020.

Depletion expense related to oil and gas properties was $ 1,380 and $ 2,244 during the first quarter of 2022 and 2021, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 298 in the first quarter of 2021 related to underperforming stores.

The fair value of the long-lived assets was determined based on Level 3 inputs using a discounted cash flow model and quoted prices for the properties.

There were no impairments in 2022.

Goodwill and Other Intangible Assets

3 unchanged sentences

Goodwill at December 31, 2021

Change in foreign exchange rates during the first nine months of 2021 ( 36 )

Goodwill at September 30, 2021

Change in foreign exchange rates during the first quarter of 2022 ( 12 )

Goodwill at March 31, 2022

We evaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred.

Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value.

The valuation methodology and underlying financial information included in our determination of fair value require significant management judgments.

We use both market and income approaches to derive fair value.

GAAP allows entities testing for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit for the goodwill impairment test.

We use both qualitative and quantitative assessments.

The valuation methodology and underlying financial information included in our quantitative determination of fair value require significant management judgments.

We use both market and income approaches to derive fair value of reporting units utilizing a quantitative assessment.

The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows.

Changes in such estimates or the application of alternative assumptions could produce significantly different results.

In response to the adverse effects of the COVID-19 pandemic, during 2020 we considered whether goodwill needed to be evaluated for impairment for certain restaurant reporting units.

We considered the available facts and made qualitative assessments and judgments for what we believed represented reasonably possible outcomes.

No impairment charges for goodwill were recorded in the first nine months of 2021 or 2020.

No impairment was recorded in the first quarter of 2022 or 2021.

Western Sizzlin has experienced a decline in its franchised units for several years.

5 unchanged sentences

$ 15,876 $ 7,587 $ 23,463

Change in foreign exchange rates during the first nine months of 2021 — ( 446 ) ( 446 )

Balance at September 30, 2021

Change in foreign exchange rates during the first quarter of 2022 — ( 144 ) ( 144 )

Balance at March 31, 2022

$ 15,876 $ 7,443 $ 23,319

During the first nine months of 2020, the Company recorded impairment charges of $ 3,700 on lease rights related to our international restaurant operations.

Intangible assets with indefinite lives consist of trade names and lease rights.

Fair values were determined using Level 3 inputs and available market data.

1 unchanged sentence

Restaurant operations revenues were as follows.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Net sales $ 38,216 $ 54,950

6 unchanged sentences

Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.

Restaurant Operations Revenues (continued)

Franchise Partner Fees

4 unchanged sentences

The Company recognizes franchise partner fees monthly as underlying restaurant sales occur.

The Company leases or subleases property and equipment to franchisees under lease arrangements.

Both real estate and equipment rental payments are charged to franchisees and are recognized in accordance with ASC 842, "Leases".

During the third quarter of 2021 and 2020, restaurant operations recognized $ 4,277 and $ 1,606 , respectively, in franchise partner fees related to rental fees.

During the nine months ended September 30, 2021, and September 30, 2020, restaurant operations recognized $ 10,910 and $ 3,617 , respectively, in franchise partner fees related to rental fees.

Restaurant Operations Revenues (continued)

The Company leases or subleases property and equipment to franchise partners under lease arrangements.

Both real estate and equipment rental payments are charged to franchise partners and are recognized in accordance with ASC 842, “ Leases ”.

During the first quarter of 2022 and 2021, restaurant operations recognized $ 4,774 and $ 2,900 , respectively, in franchise partner fees related to rental income.

Franchise Royalties and Fees

4 unchanged sentences

Restaurant operations sells gift cards to customers which can be redeemed for retail food sales within our stores.

Gift cards are recorded as deferred revenue when issued and are subsequently recorded as net sales upon redemption.

Gift cards are recorded as a liability when issued and are subsequently recorded as net sales upon redemption.

Restaurant operations estimates breakage related to gift cards when the likelihood of redemption is remote.

3 unchanged sentences

Accounts payable and accrued expenses include the following.

September 30,

2022 December 31,

Accounts payable $ 34,946 $ 36,684

Gift card liability 21,174 21,822

Gift card and other marketing 17,548 19,244

Insurance accruals 5,108 6,428

5 unchanged sentences

Accounts payable and accrued expenses $ 99,761 $ 100,467

Notes Payable and Lease Obligations

Notes Payable

Steak n Shake Credit Facility

1 unchanged sentence

The term loan was scheduled to mature on March 19, 2021.

As of December 31, 2020, $ 152,506 was outstanding.

The Company repaid Steak n Shake's outstanding balance in full on February 19, 2021.

Notes Payable and Lease Obligations (continued)

The Company repaid the balance of Steak n Shake’s term facility on February 19, 2021.

Lease Assets and Obligations

Lease obligations include the following.

Current portion of lease obligations September 30,

Current portion of lease obligations March 31,

2022 December 31,

6 unchanged sentences

Finance obligations 62,327 63,119

Operating leases liabilities 38,007 36,463

Operating lease liabilities 33,808 36,013

Total long-term lease obligations $ 101,156 $ 104,479

Leased Assets and Lease Commitments

Nature of Leases

The Company operates restaurants that are located on sites owned by us and leased from third parties.

In addition, the Company owns sites and leases sites from third parties that are leased and/or subleased to franchisees.

Company as Lessee

Steak n Shake and Western Sizzlin operate restaurants that are located on sites owned by us and leased from third parties.

In addition, they own sites and lease sites from third parties that are leased and/or subleased to franchise partners and franchisees.

A significant portion of our operating and finance lease portfolio includes restaurant locations.

Operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

We recognize fixed lease expense for operating leases on a straight-line basis over the lease term.

For finance leases, we recognize amortization expense on the right-of-use asset and interest expense on the lease liability over the lease term.

Total lease cost consists of the following.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Finance lease costs:

1 unchanged sentence

Interest on lease liabilities 115 147

Operating lease costs * 240 2,096 1,403 8,321

Operating and variable lease costs 3,612 3,765

Sublease income ( 4,069 ) ( 2,655 )

Total lease costs $ 21 $ 1,676

*Includes short-term leases, variable lease costs and sublease income.

Leased Assets and Lease Commitments (continued)

Supplemental cash flow information related to leases is as follows.

First Nine Months

First Quarter

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating cash flows from operating leases $ 3,067 $ 4,186

Right-of-use assets obtained in exchange for lease obligations:

Operating lease liabilities $ — $ 73

Lease Assets and Obligations (continued)

Supplemental balance sheet information related to leases is as follows.

September 30,

2022 December 31,

2 unchanged sentences

Weighted-average lease terms and discount rates are as follows.

September 30,

Weighted-average remaining lease terms:

4 unchanged sentences

Operating leases 6.9 %

Maturities of lease liabilities as of September 30, 2021 are as follows.

Maturities of lease liabilities as of March 31, 2022 are as follows.

Year Operating

9 unchanged sentences

Total lease liabilities $ 44,518 $ 6,339

Leased Assets and Lease Commitments (continued)

Company as Lessor

The components of lease income are as follows.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Operating lease income $ 4,724 $ 2,363

1 unchanged sentence

Total lease income $ 5,037 $ 3,212

The following table displays the Company's future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2021.

Lease Assets and Obligations (continued)

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of March 31, 2022.

Franchise partner leases and subleases are short-term leases and have been excluded from the table.

5 unchanged sentences

Accumulated Other Comprehensive Income

Accumulated other comprehensive loss increased $ 49 and decreased $ 344 during the third quarters of 2021 and 2020, respectively.

During the first nine months of 2021, accumulated other comprehensive loss increased by $ 378 and decreased by $ 834 during the first nine months of 2020.

As of September 30, 2021 and 2020, the balances in accumulated other comprehensive loss were $ 1,909 and $ 1,976 , respectively.

There were no reclassifications from accumulated other comprehensive loss to earnings during the first nine months of 2021 and 2020.

Accumulated other comprehensive income decreased $ 231 and $ 444 during the first quarters of 2022 and 2021, respectively.

There were no reclassifications from accumulated other comprehensive loss to earnings during the first quarters of 2022 and 2021.

All changes in accumulated other comprehensive loss were due to foreign currency translation adjustments.

In determining the quarterly provision for income taxes, the Company used a discrete effective tax rate method based on statutory tax rates for the first nine months of 2021 and 2020.

Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and underlying income tax rates applicable to the various taxing jurisdictions.

Income tax benefit for the third quarter of 2021 was $ 4,274 compared to an income tax expense of $ 5,617 for the third quarter of 2020.

Income tax expense for the first nine months of 2021 was $ 11,544 compared to a benefit of $ 23,449 for the first nine months of 2020.

In determining the quarterly provision for income taxes, the Company used an estimated annual effective tax rate for the first quarter of 2022 and a discrete effective tax rate method based on statutory tax rates for the first quarter of 2021.

Our periodic effective income tax rate is affected by the relative mix of pretax earnings or losses and underlying income tax rates applicable to the various taxing jurisdictions.

Income tax benefit for the first quarter of 2022 was $ 171 compared to an income tax expense of $ 22,016 for the first quarter of 2021.

The variance in income taxes between 2022 and 2021 is attributable to taxes on income generated by the investment partnerships.

Investment partnership pretax gains were $ 27,344 during the first nine months of 2021 compared to pretax losses of $ 89,276 during the first nine months of 2020.

Investment partnership pretax losses were $ 6,661 during the first quarter of 2022 compared to pretax gains of $ 81,766 during the first quarter of 2021.

Commitments and Contingencies

6 unchanged sentences

The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

Fair Value of Financial Assets (continued)

The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

10 unchanged sentences

Cash equivalents:

Cash equivalents primarily consist of money market funds which are classified within Level 1 of the fair value hierarchy.

Cash equivalents primarily consist of money market funds which are classified as Level 1 of the fair value hierarchy.

Equity securities:

The Company’s investments in equity securities are classified within Levels 1 and 2 of the fair value hierarchy.

The Company’s investments in equity securities are classified as Levels 1 and 2 of the fair value hierarchy.

The Company’s investments in bonds consist of both corporate and government debt.

Bonds are classified within Level l or Level 2 of the fair value hierarchy.

Bonds are classified as Level l or Level 2 of the fair value hierarchy.

Non-qualified deferred compensation plan investments:

The assets of the non-qualified plan are set up in a rabbi trust.

They represent mutual funds and publicly traded securities, each of which are classified within Level 1 of the fair value hierarchy.

They represent mutual funds and publicly traded securities, each of which are classified as Level 1 of the fair value hierarchy.

Derivative instruments:

Options related to equity securities are marked to market each reporting period and are classified within Level 2 of the fair value hierarchy depending on the instrument.

Options related to equity securities are marked to market each reporting period and are classified as Level 2 of the fair value hierarchy depending on the instrument.

Fair Value of Financial Assets (continued)

As of September 30, 2021 and December 31, 2020, the fair values of financial assets were as follows.

September 30, 2021 December 31, 2020

As of March 31, 2022 and December 31, 2021, the fair values of financial assets were as follows.

March 31, 2022 December 31, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

3 unchanged sentences

Insurance 134 — — 134 6,513 — — 6,513

Technology 2,878 — — 2,878 2,887 — — 2,887

Government 66,413 — — 66,413 54,584 — — 54,584

7 unchanged sentences

The Company is party to a service agreement with Biglari Enterprises LLC and Biglari Capital Corp.

(collectively, the “Biglari Entities”) under which the Biglari Entities provide services to the Company.

(collectively, the “Biglari Entities”) under which the Biglari Entities provide business and administrative related services to the Company.

The Biglari Entities are owned by Mr.

The service agreement has a five-year term, effective on October 1, 2017.

The Company paid Biglari Enterprises $ 6,300 in service fees during the first nine months of 2021 and 2020.

The Company paid Biglari Enterprises $ 2,100 in service fees during the first quarter of 2022 and 2021.

The service agreement does not alter the hurdle rate connected with the incentive reallocation paid to Biglari Capital Corp.

The Biglari Entities are owned by Mr.

Incentive Agreement

16 unchanged sentences

The tabular information that follows shows data of our reportable segments reconciled to amounts reflected in the consolidated financial statements.

Table of Content

Business Segment Reporting (continued)

A disaggregation of our consolidated data for the third quarters and first nine months of 2021 and 2020 is presented in the tables that follow.

Third Quarter First Nine Months

2021 2020 2021 2020

A disaggregation of our consolidated data for the first quarters of 2022 and 2021 is presented in the tables which follow.

First Quarter

Operating Businesses:

6 unchanged sentences

Southern Pioneer 5,438 5,613

Investment income and other 910 929

Total Insurance Operations 15,079 14,619

2 unchanged sentences

$ 85,372 $ 94,288

Table of Content

Business Segment Reporting (continued)

Earnings (Losses) Before Income Taxes

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Operating Businesses:

4 unchanged sentences

Insurance Operations:

Underwriting:

First Guard 732 2,131

Southern Pioneer ( 337 ) 413

Investment income and other 969 693

Total Insurance Operations 1,364 3,237

3 unchanged sentences

Total Operating Businesses 9,379 11,326

Corporate and Investments:

Corporate and other ( 3,412 ) ( 2,450 )

1 unchanged sentence

Investment partnership gains (losses) ( 6,661 ) 81,766

Total Corporate and Investments ( 18,999 ) 24,915 25,214 ( 95,106 )

$ ( 469 ) $ 93,723

1 unchanged sentence

(dollars in thousands except per share data)

Biglari Holdings Inc.

is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, licensing and media, restaurants, and oil and gas.

The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants.

Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

The Company’s long-term objective is to maximize per-share intrinsic value.

Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized finance decision-making.

Operating decisions for the various business units are made by their respective managers.

All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr.

As of September 30, 2021, Mr.

As of March 31, 2022, Mr.

Biglari beneficially owns shares of the Company that represent approximately 66.3% of the economic interest and 70.4% of the voting interest.

On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company and its agency, Southern Pioneer Insurance Agency, Inc.

(collectively “Southern Pioneer”).

The Company's financial results include the results of Southern Pioneer from the date of acquisition.

Net earnings (loss) attributable to Biglari Holdings shareholders are disaggregated in the table that follows.

Amounts are recorded after deducting income taxes.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Operating businesses:

2 unchanged sentences

Oil and gas 2,924 2,355

Media and licensing (43) 885 662 1,236

Brand licensing (251) 480

Interest expense — (841)

Total operating businesses 3,752 1,851 20,885 (2,085)

Corporate and other (2,651) (1,999)

Total operating businesses 4,328 6,644

Investment gains 175 2,414

1 unchanged sentence

$ (298) $ 71,707

Restaurant businesses include Steak n Shake Inc.

and Western Sizzlin Corporation.

Steak n Shake and Western Sizzlin are engaged in the ownership, operation, and franchising of restaurants.

Insurance businesses are composed of First Guard Insurance Company ("First Guard") and Southern Pioneer.

First Guard is a direct underwriter of commercial trucking insurance, selling physical damage and nontrucking liability insurance to truckers.

Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance.

Oil and gas business is composed of Southern Oil Company ("Southern Oil").

Media and licensing business is composed of Maxim Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Steak n Shake and Western Sizzlin comprise 581 company-operated and franchise restaurants as of September 30, 2021.

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 575 company-operated and franchise restaurants as of March 31, 2022.

Steak n Shake Western Sizzlin

7 unchanged sentences

Net restaurants opened (closed) (3) — 1 — — (2)

Total stores as of September 30, 2021

Total stores as of March 31, 2022

184 171 179 3 38 575

3 unchanged sentences

Net restaurants opened (closed) (1) — (5) — (1) (7)

Total stores as of September 30, 2020

Total stores as of March 31, 2021

253 108 189 3 38 591

As of September 30, 2021, 42 of the 221 company-operated Steak n Shake stores were temporarily closed.

As of March 31, 2022, 40 of the 184 company-operated Steak n Shake stores were closed.

We plan to refranchise a majority of our closed company-operated restaurants.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Earnings of our restaurant operations are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

Restaurant operations are summarized below.

First Quarter

Net sales $ 38,216 $ 54,950

15 unchanged sentences

Depreciation and amortization (6,214) (4,710)

Gain on debt extinguishment — — — 5,713

Interest on finance leases and obligations (1,412) (1,620)

4 unchanged sentences

General and administrative, marketing and other expenses are expressed as a percentage of total revenue.

The novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March of 2020.

Government and private sector responses to contain its spread began to affect our operating businesses significantly that same month.

The COVID-19 pandemic has adversely affected our restaurant operations, as our restaurants were required to close their dining rooms during the first quarter of 2020.

The majority of Steak n Shake’s dining rooms remained closed through the end of 2020.

Steak n Shake has been reopening its dining rooms this year, and in doing so has implemented a self-service model.

The transformation has resulted in higher capital expenditures in 2021 as compared to 2020.

In the first nine months of 2021, Steak n Shake spent $29,708 in capital expenditures related to the conversion of table-service restaurants to self-service restaurants.

The novel coronavirus (“COVID-19”), declared a pandemic by the World Health Organization in March 2020, caused governments to impose restrictive measures to contain its spread.

The COVID-19 pandemic adversely affected our restaurant operations and financial results.

Our restaurants were required to close their dining rooms during the first quarter of 2020.

The majority of Steak n Shake’s dining rooms were reopened during 2021, and in doing so a self-service model has been implemented.

Net sales for 2022 were $38,216, representing a decrease of $16,734 or 30.5% compared to 2021.

The decrease in revenue of company-owned restaurants is primarily due to the shift of company units to franchise partner units.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue.

Because we derive most of our revenue from our share of the profits, revenue will continue to decline as we transition from company-operated units to a franchise partner units.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net sales for the third quarter and first nine months of 2021 were $41,916 and $146,269, respectively, representing a decrease of $25,701 or 38.0%, and $95,563 or 39.5%, compared to the third quarter and first nine months of 2020, respectively.

The year-over-year decrease in revenue of company-operated restaurants is primarily due to the shift of company units to franchise partner units.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurants’ profits, along with certain fees, are recorded as revenue.

Because we derive most of our revenue from our share of the profits, revenue will continue to decline with each transition of a company-operated unit to a franchise partner unit.

Franchise partner fees were $11,508 during the third quarter of 2021, compared to $6,894 during the third quarter of 2020.

Franchise partner fees were $31,744 during the first nine months of 2021, compared to $14,775 during the first nine months of 2020.

As of September 30, 2021, there were 140 franchise partner units, compared to 69 franchise partner units as of September 30, 2020.

The cost of food during the third quarter and first nine months of 2021 was $13,123, and $43,404, respectively, compared to $19,508, and $70,880 in the third quarter and first nine months of 2020, respectively.

Restaurant operating costs during the third quarter of 2021 were $24,496, compared to $30,451 in the third quarter of 2020.

Restaurant operating costs during the first nine months of 2021 were $71,751, compared to $110,903 in the first nine months of 2020.

The decreases in cost of food and operating costs are mainly attributable to the transitioning of company-operated units to franchise partner units.

The increase in operating costs as a percentage of net sales is mainly attributable to increasing wages.

The Company expects to increase menu prices in the fourth quarter to improve margins.

General and administrative costs during the third quarter and first nine months of 2021 were $9,255 and $27,416, respectively, compared to $12,059 and $30,146 in the third quarter and first nine months of 2020, respectively.

The year-over-year general and administrative costs were lower in 2021 primarily because of legal and professional fees incurred during the third quarter of 2020.

Marketing expenses during the third quarter and first nine months of 2021 were $2,302 and $10,212, respectively, compared to $3,891 and $18,406 during the third quarter and first nine months of 2020, respectively.

Marketing expenses decreased primarily due to the decision to shift to a digital marketing strategy.

Our restaurants recorded an impairment to long-lived assets of $0 and $3,698 in the third quarters of 2021 and 2020, respectively, and $559 and $21,817 in the first nine months of 2021 and 2020, respectively.

The 2021 impairments are primarily attributable to Steak n Shake store closures.

The 2020 impairments were connected to dining room closures during the pandemic.

Franchise partner fees were $15,624 during 2022, as compared to $7,853 during 2021.

As of March 31, 2022, there were 171 franchise partner units, compared to 108 franchise partner units as of March 31, 2021.

For a franchise partner to be awarded a restaurant, he or she must demonstrate the gold standard in service.

The franchise royalties and fees generated by the traditional franchising business were $5,146 during 2022, as compared to $5,135 during 2021.

The cost of food in 2022 was $10,960 or 28.7% of net sales, as compared to $15,554 or 28.3% of net sales in 2021.

The decrease in cost was due to a reduction in the number of company-operated stores.

Restaurant operating costs during 2022 were $20,032 or 52.4% of net sales, as compared to $25,197 or 45.9% of net sales in 2021.

General and administrative costs increased by $970 in 2022 compared to 2021, primarily because of an increase in personnel costs.

Marketing expenses were relatively flat as a percentage of total revenue in 2022 as compared to 2021.

The Company recorded impairment charges of $298 in the first quarter of 2021 related to underperforming stores.

There were no impairments in 2022.

We view our insurance businesses as possessing two activities:

1 unchanged sentence

Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari.

Business units are operated under separate local management.

Our business units are operated under separate local management.

Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer.

Underwriting results of our insurance operations are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Underwriting gain attributable to:

1 unchanged sentence

Southern Pioneer (337) 413

Pre-tax underwriting gain 3,229 2,137 9,433 6,724

Pretax underwriting gain 395 2,544

Income tax expense 83 534

Net underwriting gain $ 312 $ 2,010

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Earnings of our insurance operations are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

Premiums written $ 13,901 $ 13,427 $ 41,166 $ 35,590

First Quarter

Premiums earned $ 14,169 $ 13,690

Insurance losses 9,588 7,021

Underwriting expenses 4,186 4,125

Pre-tax underwriting gain 3,229 2,137 9,433 6,724

Pretax underwriting gain 395 2,544

Other income and expenses

Investment income and commissions 646 817 2,033 2,749

Other expenses (33) (284) (68) (822)

Investment income 213 166

Other income (expenses) 756 527

Total other income 969 693

2 unchanged sentences

Contribution to net earnings $ 1,044 $ 2,531

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.

3 unchanged sentences

A summary of First Guard’s underwriting results follows.

Third Quarter First Nine Months

2021 2020 2021 2020

Amount % Amount % Amount % Amount %

Premiums written $ 8,458 100.0 % $ 7,505 100.0 % $ 24,760 100.0 % $ 22,195 100.0 %

First Quarter

Amount % Amount %

Premiums earned $ 8,731 100.0 % $ 8,077 100.0 %

Insurance losses 6,188 70.9 % 4,002 49.5 %

1 unchanged sentence

Total losses and expenses 7,999 91.6 % 5,946 73.6 %

Pre-tax underwriting gain $ 2,832 $ 2,077 $ 7,922 $ 6,953

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Pretax underwriting gain $ 732 $ 2,131

Southern Pioneer

Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance.

The financial results for Southern Pioneer are from the date of acquisition March 9, 2020.

Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance.

A summary of Southern Pioneer’s underwriting results follows.

Third Quarter First Nine Months

2021 2020 2021 2020

Amount % Amount % Amount % Amount %

Premiums written $ 5,443 100.0 % $ 5,922 100.0 % $ 16,406 100.0 % $ 13,395 100.0 %

First Quarter

Amount % Amount %

Premiums earned $ 5,438 100.0 % $ 5,613 100.0 %

Insurance losses 3,400 62.5 % 3,019 53.8 %

1 unchanged sentence

Total losses and expenses 5,775 106.2 % 5,200 92.7 %

Pre-tax underwriting gain $ 397 $ 60 $ 1,511 $ (229)

Pretax underwriting gain (loss) $ (337) $ 413

Insurance - Investment Income

A summary of net investment income attributable to our insurance operations follows.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Interest, dividends and other investment income:

1 unchanged sentence

Southern Pioneer 139 149

Pre-tax investment income 195 196 652 1,067

Pretax investment income 213 166

Income tax expense 45 35

2 unchanged sentences

However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.

Earnings for Southern Oil are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Oil and gas revenue $ 9,812 $ 8,592

5 unchanged sentences

Contribution to net earnings $ 2,924 $ 2,355

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The COVID-19 pandemic caused oil demand to significantly decrease in early 2020, creating oversupplied markets that resulted in lower commodity prices and margins.

However, crude oil prices increased in mid-2020 in response to the lifting of COVID-19 restrictions.

Media and Licensing

Maxim's business lies principally in media and licensing.

Earnings of our media and licensing operations are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

Media and licensing revenue $ 863 $ 1,719 $ 2,695 $ 3,209

Media and licensing costs 880 548 1,749 1,491

Brand Licensing

Maxim’s business lies principally in licensing and media.

Earnings of operations are summarized below.

First Quarter

Licensing and media revenue $ 634 $ 1,123

Licensing and media costs 953 480

General and administrative expenses 17 20

5 unchanged sentences

Investment Gains and Investment Partnership Gains

Investment gains net of tax for the third quarter and first nine months of 2021 were $3,390 and $4,896, respectively.

Investment gains net of tax were $276 and $1,468 during the third quarter and first nine months of 2020, respectively.

Investment gains during the third quarter of 2021 included a gain from the sale of real estate of $3,785, net of tax.

Dividends earned on investments are reported as other income by our insurance companies.

Investment gains net of tax for the first quarter of 2022 and 2021 were $175 and $2,414, respectively.

Dividends earned on investments are reported as investment income by our insurance companies.

We consider investment income as a component of our aggregate insurance operating results.

1 unchanged sentence

Earnings (loss) from our investments in partnerships are summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Investment partnership gains (losses) $ (6,661) $ 81,766

3 unchanged sentences

Dividend income has a lower effective tax rate than income from capital gains.

Changes in the market values of investments can be highly volatile.

These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The investment partnerships hold the Company’s common stock as investments.

The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding.

Gains and losses on Company common stock included in the earnings of the partnerships are eliminated.

Investments affect our reported quarterly earnings based on their carrying value.

We do not regard the quarterly or annual fluctuations in our investments to be meaningful in understanding the operating results of our businesses.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Gains and losses on Company common stock included in the earnings of the partnerships are eliminated in the Company’s consolidated financial results.

Interest Expense

The Company’s interest expense is summarized below.

Third Quarter First Nine Months

2021 2020 2021 2020

First Quarter

Interest expense on notes payable $ — $ 1,121

2 unchanged sentences

Steak n Shake’s term loan was scheduled to mature on March 19, 2021.

As of December 31, 2020, $152,506 was outstanding.

The Company repaid Steak n Shake’s outstanding balance in full on February 19, 2021.

Corporate and Other

Corporate expenses exclude the activities in the restaurant, media and licensing, insurance, and oil and gas businesses.

Corporate net losses during the third quarter and first nine months of 2021 were relatively flat compared to the same period during 2020.

Income tax benefit for the third quarter of 2021 was $4,274 compared to an income tax expense of $5,617 for the third quarter of 2020.

Income tax expense for the first nine months of 2021 was $11,544 compared to a benefit of $23,449 for the first nine months of 2020.

Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses.

Corporate and other net losses during the first quarter of 2022 were relatively flat compared to the same period during 2021.

Income tax benefit for the first quarter of 2022 was $171 compared to an income tax expense of $22,016 for the first quarter of 2021.

The variance in income taxes between 2022 and 2021 is attributable to taxes on income generated by the investment partnerships.

Investment partnership pretax gains were $27,344 during the first nine months of 2021 compared to pretax losses of $89,276 during the first nine months of 2020.

Investment partnership pretax losses were $6,661 during the first quarter of 2022 compared to pretax gains of $81,766 during the first quarter of 2021.

Financial Condition

Consolidated cash and investments are summarized below.

September 30,

2021 December 31,

March 31, 2022 December 31,

Cash and cash equivalents $ 45,777 $ 42,349

4 unchanged sentences

Carrying value of cash and investments on balance sheet $ 375,295 $ 375,809

Our balance sheet continues to maintain significant liquidity.

Consolidated cash flow activities are summarized below.

First Nine Months

Net cash provided by operating activities $ 211,245 $ 106,367

Net cash used in investing activities (55,782) (112,081)

Net cash used in financing activities (154,586) (26,381)

Effect of exchange rate changes on cash (85) (13)

Increase (decrease) in cash, cash equivalents and restricted cash $ 792 $ (32,108)

Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements