What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 106 added, 217 removed, 533 unchanged (38% of the section changed)

42 unchanged sentences

(dollars in thousands except per share amounts)

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

(Unaudited) (Unaudited)

Restaurant operations $ 60,324 $ 67,326 $ 120,171 $ 137,280

11 unchanged sentences

Depreciation, depletion, and amortization 7,800 7,379 15,671 14,557

Interest expense 1,412 2,741

Interest expense on leases 1,385 1,537 2,797 3,157

Interest expense on note payable — — — 1,121

80,055 82,381 159,460 167,793

Investment gains 225 3,081

Investment gains (losses) ( 3,560 ) ( 1,150 ) ( 3,335 ) 1,931

Investment partnership gains (losses) ( 105,241 ) ( 34,191 ) ( 111,902 ) 47,575

4 unchanged sentences

Net earnings (loss) per equivalent Class A share * $ ( 244.37 ) $ ( 64.04 ) $ ( 244.29 ) $ 158.06

*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.

*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $( 48.87 ) and $( 48.86 ) for the second quarter and first six months of 2022, respectively, and $( 12.81 ) and $ 31.61 for the second quarter and first six months of 2021, respectively.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

(Unaudited) (Unaudited)

Net earnings (loss) $ ( 73,780 ) $ ( 20,737 ) $ ( 74,078 ) $ 50,970

5 unchanged sentences

(dollars in thousands)

First Quarter

First Six Months

Operating activities

22 unchanged sentences

Effect of exchange rate changes on cash ( 88 ) ( 24 )

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

Increase (decrease) in cash, cash equivalents and restricted cash ( 1,837 ) 1,209

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

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

First Quarter

Cash, cash equivalents and restricted cash at end of second quarter $ 41,850 $ 30,875

First Six Months

Cash and cash equivalents $ 40,512 $ 28,212

Restricted cash in other long-term assets 1,338 2,663

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

Cash, cash equivalents and restricted cash at end of second quarter $ 41,850 $ 30,875

See accompanying Notes to Consolidated Financial Statements.

12 unchanged sentences

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

Net earnings (loss) ( 73,780 ) ( 73,780 )

Other comprehensive loss ( 1,021 ) ( 1,021 )

Adjustment to treasury stock for holdings in investment partnerships ( 6,760 ) ( 6,760 )

Balance at June 30, 2022 $ 1,138 $ 381,788 $ 534,450 $ ( 3,159 ) $ ( 408,481 ) $ 505,736

Stock Additional

8 unchanged sentences

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

Net earnings (loss) ( 20,737 ) ( 20,737 )

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

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

June 30, 2022

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

13 unchanged sentences

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

As of March 31, 2022, Mr.

As of June 30, 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.

8 unchanged sentences

However, these shares are legally outstanding.

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

March 31, 2022 December 31, 2021

On June 8, 2022, The Lion Fund II, L.P.

transferred 83,465 shares of Biglari Holdings’ Class A common stock and 890,272 shares of Biglari Holdings’ Class B common stock to The Lion Fund, L.P.

The following table presents shares authorized, issued and outstanding on June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

Class A Class B Class A Class B

4 unchanged sentences

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.

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

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

There are no dilutive securities outstanding.

March 31, 2022 March 31, 2021

Second Quarter First Six Months

2022 2021 2022 2021

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

2 unchanged sentences

Investments net of deferred taxes is presented below.

March 31, 2022 December 31, 2021

2022 December 31,

Investments $ 71,771 $ 83,061

7 unchanged sentences

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

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

Investment losses for the second quarter and first six months of 2022 were $ 3,560 and $ 3,335 , respectively.

Investment losses in the second quarter of 2021 were $ 1,150 and investment gains in the first six months of 2021 were $ 1,931 .

Investment Partnerships

7 unchanged sentences

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

Investment Partnerships (continued)

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.

3 unchanged sentences

Investment partnership gains (losses) ( 144,748 ) ( 32,846 ) ( 111,902 )

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

Contributions (net of distributions) 19,886 19,886

Changes in proportionate share of Company stock held 6,630 ( 6,630 )

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

Investment Partnerships (continued)

Partnership interest at June 30, 2022 $ 349,339 $ 197,586 $ 151,753

Fair Value Company

4 unchanged sentences

Changes in proportionate share of Company stock held 1,977 ( 1,977 )

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

Partnership interest at June 30, 2021 $ 551,942 $ 240,064 $ 311,878

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

3 unchanged sentences

Carrying value of investment partnerships net of deferred taxes $ 135,969 $ 205,867

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 Company’s proportionate share of Company stock held by investment partnerships at cost was $ 408,481 and $ 401,851 at June 30, 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.

2 unchanged sentences

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

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Gains (losses) from investment partnerships $ ( 105,241 ) $ ( 34,191 ) $ ( 111,902 ) $ 47,575

Tax expense (benefit) ( 24,894 ) ( 7,996 ) ( 26,754 ) 11,121

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

Contribution to net earnings (loss) $ ( 80,347 ) $ ( 26,195 ) $ ( 85,148 ) $ 36,454

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.

4 unchanged sentences

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

during the first quarters of 2022 and 2021.

during the first six months of 2022 and 2021.

Investment Partnerships (continued)

4 unchanged sentences

Lion Fund Lion Fund II

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 June 30, 2022 $ 251,812 $ 221,118

Total liabilities as of June 30, 2022 $ 13,235 $ 67,093

Revenue for the first six months of 2022 $ ( 43,115 ) $ ( 119,441 )

Earnings for the first six months of 2022 $ ( 43,237 ) $ ( 120,132 )

Biglari Holdings’ ownership interest as of June 30, 2022 87.9 % 88.9 %

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 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 for the first six months of 2021 $ 31,297 $ 100,466

Earnings for the first six months of 2021 $ 31,260 $ 100,192

Biglari Holdings’ ownership interest as of June 30, 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.

11 unchanged sentences

Property and equipment, net $ 343,878 $ 349,351

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.

Depletion expense related to oil and gas properties was $ 2,772 and $ 4,551 during the first six months of 2022 and 2021, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 559 in the first six months 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.

There were no impairments of property and equipment in 2022.

Goodwill and Other Intangible Assets

Goodwill consists of the excess of the purchase price over the fair value of the net assets acquired in connection with business acquisitions.

Goodwill and Other Intangible Assets (continued)

A reconciliation of the change in the carrying value of goodwill is as follows.

Goodwill at December 31, 2021

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

Goodwill at March 31, 2022

Change in foreign exchange rates during the first six months of 2022 ( 48 )

Goodwill at June 30, 2022

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

6 unchanged sentences

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

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

No impairment was recorded in the first six months 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 quarter of 2022 — ( 144 ) ( 144 )

Balance at March 31, 2022

Impairment to lease rights — ( 20 ) ( 20 )

Change in foreign exchange rates during the first six months of 2022 — ( 563 ) ( 563 )

Balance at June 30, 2022

$ 15,876 $ 7,004 $ 22,880

3 unchanged sentences

Restaurant operations revenues were as follows.

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Net sales $ 37,681 $ 49,403 $ 75,897 $ 104,353

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

2 unchanged sentences

We generate most of our revenue from our share of the franchise partners’ profits.

An initial franchise fee of ten thousand dollars is recognized when the operator becomes a franchise partner.

An initial franchise fee of ten thousand dollars is recognized during the year the operator becomes a franchise partner.

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

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.

During the second quarter of 2022 and 2021, restaurant operations recognized $ 5,057 and $ 3,734 , respectively, in franchise partner fees related to rental income.

During the first six months ended June 30, 2022 and June 30, 2021, restaurant operations recognized $ 9,831 and $ 6,634 , respectively, in franchise partner fees related to rental income.

Franchise Royalties and Fees

27 unchanged sentences

Lease obligations include the following.

Current portion of lease obligations March 31,

Current portion of lease obligations June 30,

2022 December 31,

9 unchanged sentences

Nature of Leases

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

Steak n Shake and Western Sizzlin operate restaurants that are located on sites owned by us or 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.

3 unchanged sentences

Total lease cost consists of the following.

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Finance lease costs:

5 unchanged sentences

Supplemental cash flow information related to leases is as follows.

First Quarter

First Six Months

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

14 unchanged sentences

Operating leases 7.0 %

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

Maturities of lease liabilities as of June 30, 2022 are as follows.

Year Operating

9 unchanged sentences

Total lease liabilities $ 44,362 $ 5,961

The components of lease income are as follows.

First Quarter

The components of lease income recorded in restaurant operations are as follows.

Second Quarter First Six Months

2022 2021 2022 2021

Operating lease income $ 3,945 $ 2,913 $ 7,652 $ 5,276

2 unchanged sentences

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.

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

Accumulated other comprehensive income decreased $ 1,021 and increased $ 115 during the second quarters of 2022 and 2021, respectively.

During the first six months of 2022, accumulated other comprehensive income decreased by $ 1,252 and decreased by $ 329 in the first six months of 2021.

There were no reclassifications from accumulated other comprehensive loss to earnings during the first six months 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 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.

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

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 second quarter of 2022 was $ 22,709 compared to an income tax benefit of $ 6,198 for the second quarter of 2021.

Income tax benefit for the first six months of 2022 was $ 22,880 compared to an income tax expense of $ 15,818 for the first six months 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 losses were $ 6,661 during the first quarter of 2022 compared to pretax gains of $ 81,766 during the first quarter of 2021.

Investment partnership pre-tax losses were $ 111,902 during the first six months of 2022 compared to pre-tax gains of $ 47,575 during the first six months of 2021.

Commitments and Contingencies

30 unchanged sentences

Fair Value of Financial Assets (continued)

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

March 31, 2022 December 31, 2021

As of June 30, 2022 and December 31, 2021, the fair values of financial assets were as follows.

June 30, 2022 December 31, 2021

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

16 unchanged sentences

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

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

The Company paid Biglari Enterprises $ 4,200 in service fees during the first six months of 2022 and 2021.

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

17 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 first quarters of 2022 and 2021 is presented in the tables which follow.

First Quarter

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

Second Quarter First Six Months

2022 2021 2022 2021

Operating Businesses:

11 unchanged sentences

$ 92,367 $ 90,787 $ 177,739 $ 185,075

Table of Content

Business Segment Reporting (continued)

Earnings (Losses) Before Income Taxes

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Operating Businesses:

14 unchanged sentences

Corporate and other ( 3,052 ) ( 2,843 ) ( 6,464 ) ( 5,293 )

Investment gains 225 3,081

Investment gains (losses) ( 3,560 ) ( 1,150 ) ( 3,335 ) 1,931

Investment partnership gains (losses) ( 105,241 ) ( 34,191 ) ( 111,902 ) 47,575

9 unchanged sentences

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

As of March 31, 2022, Mr.

As of June 30, 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.

1 unchanged sentence

Amounts are recorded after deducting income taxes.

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Operating businesses:

9 unchanged sentences

$ (73,780) $ (20,737) $ (74,078) $ 50,970

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

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 560 company-operated and franchise restaurants as of June 30, 2022.

Steak n Shake Western Sizzlin

7 unchanged sentences

Net restaurants opened (closed) (5) — (12) — — (17)

Total stores as of March 31, 2022

Total stores as of June 30, 2022

176 177 166 3 38 560

3 unchanged sentences

Net restaurants opened (closed) (1) — (8) — (1) (10)

Total stores as of March 31, 2021

Total stores as of June 30, 2021

230 131 186 3 38 588

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

As of June 30, 2022, 41 of the 176 company-operated Steak n Shake stores were closed.

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

1 unchanged sentence

Restaurant operations are summarized below.

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

Net sales $ 37,681 $ 49,403 $ 75,897 $ 104,353

18 unchanged sentences

Income tax expense (benefit) 1,005 1,061 2,173 2,491

Contribution to net earnings $ 3,262 $ 4,118

Contribution to net earnings (loss) $ 3,006 $ 2,543 $ 6,268 $ 6,661

Cost of food, restaurant operating costs, and occupancy costs are expressed as a percentage of net sales.

4 unchanged sentences

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.

Net sales for the second quarter and first six months of 2022 were $37,681 and $75,897, respectively, representing a decrease of $11,722 or 23.7% and $28,456 or 27.3%, compared to the second quarter and first six months of 2021, respectively.

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)

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:

underwriting and investing.

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

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.

First Quarter

Underwriting gain attributable to:

First Guard $ 732 $ 2,131

Southern Pioneer (337) 413

Pretax underwriting gain 395 2,544

Income tax expense 83 534

Net underwriting gain $ 312 $ 2,010

Earnings of our insurance operations are summarized below.

First Quarter

Premiums earned $ 14,169 $ 13,690

Insurance losses 9,588 7,021

Underwriting expenses 4,186 4,125

Pretax underwriting gain 395 2,544

Other income and expenses

Investment income 213 166

Other income (expenses) 756 527

Total other income 969 693

Earnings before income taxes 1,364 3,237

Income tax expense 320 706

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.

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

First Guard’s insurance products are marketed primarily through direct response methods via the Internet or by telephone.

First Guard’s cost-efficient direct response marketing methods enable it to be a low-cost insurer.

A summary of First Guard’s underwriting results follows.

First Quarter

Amount % Amount %

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

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

Underwriting expenses 1,811 20.7 % 1,944 24.1 %

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

Pretax underwriting gain $ 732 $ 2,131

Southern Pioneer

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.

First Quarter

Amount % Amount %

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

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

Underwriting expenses 2,375 43.7 % 2,181 38.9 %

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

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

Insurance - Investment Income

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

First Quarter

Interest, dividends and other investment income:

First Guard $ 74 $ 17

Southern Pioneer 139 149

Pretax investment income 213 166

Income tax expense 45 35

Net investment income $ 168 $ 131

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

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.

First Quarter

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

Oil and gas production costs 3,819 2,413

Depreciation, depletion and accretion 1,519 2,378

General and administrative expenses 553 762

Earnings before income taxes 3,921 3,039

Income tax expense 997 684

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

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

Earnings before income taxes (336) 623

Income tax expense (benefit) (85) 143

Contribution to net earnings $ (251) $ 480

We acquired Maxim with the idea of transforming its business model.

The magazine developed the Maxim brand, a franchise we are utilizing to generate nonmagazine revenue, notably through licensing, a cash-generating business related to consumer products, services, and events.

Investment Gains and Investment Partnership Gains

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.

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

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

First Quarter

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

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

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

Investment partnership gains include gains/losses from changes in market values of underlying investments and dividends earned by the partnerships.

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

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 in the Company’s consolidated financial results.

Interest Expense

The Company’s interest expense is summarized below.

First Quarter

Interest expense on notes payable $ — $ 1,121

Tax benefit — 280

Interest expense net of tax $ — $ 841

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

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

Corporate and Other

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 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.

March 31, 2022 December 31,

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

Investments 87,150 83,061

Fair value of interest in investment partnerships 471,792 474,201

Total cash and investments 604,719 599,611

portion of Company stock held by investment partnerships (229,424) (223,802)

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

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

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 franchise partner units.

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