What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-05 · 63 added, 44 removed, 152 unchanged (41% of the section changed)

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

Franchise partner fees were $16,425 during the second quarter of 2022, as compared to $12,383 during the second quarter of 2021.

Franchise partner fees were $32,049 and $20,236 during the first six months of 2022 and 2021, respectively.

As of June 30, 2022, there were 177 franchise partner units, compared to 131 franchise partner units as of June 30, 2021.

Franchise partner fees were $15,880 during the third quarter of 2022, as compared to $11,508 during the third quarter of 2021.

Franchise partner fees were $47,929 and $31,744 during the first nine months of 2022 and 2021, respectively.

As of September 30, 2022, there were 171 franchise partner units, compared to 140 franchise partner units as of September 30, 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 $5,237 during the second quarter of 2022, as compared to $4,594 during the second quarter of 2021.

Franchise royalties and fees during the first six months of 2022 were $10,383 compared to $9,729 during the first six months of 2021.

The cost of food during the second quarter and first six months of 2022 was $11,365, or 30.2% of net sales, and $22,325, or 29.4% of net sales, respectively, as compared to $14,727, or 29.8% of net sales, and $30,281, or 29.0% of net sales, during the second quarter and first six months of 2021, respectively.

The increase in cost of food as a percentage of net sales during 2022 compared to 2021 was attributable to higher commodity costs for Western Sizzlin.

Steak n Shake’s cost of food as a percentage of net sales was unchanged.

Restaurant operating costs during the second quarter of 2022 were $20,350, or 54.0% of net sales, as compared to $22,058, or 44.6% of net sales, in the second quarter of 2021.

Restaurant operating costs during the first six months of 2022 were $40,382, or 53.2% of net sales, as compared to $47,255, or 45.3% of net sales, in the first six months of 2021, respectively.

The increase in restaurant operating costs as a percentage of net sales during 2022 compared to 2021 was primarily related to higher labor costs.

General and administrative costs during the second quarter and first six months of 2022 were $10,121 and $18,771, respectively, compared to $10,481 and $18,161 in the second quarter and first six months of 2021.

The decrease in expenses during the second quarter of 2022 compared to 2021 was primarily because of lower legal and professional fees.

Marketing expenses during the second quarter and first six months of 2022 were $3,087 and $6,831, respectively, as compared $3,287 and $7,910 during the second quarter and first six months of 2021, respectively.

The Company recorded impairment charges of $20 in the second quarter and first six months of 2022.

Impairment charges were $261 and $559 in the second quarter and first six months of 2021, respectively.

The franchise royalties and fees generated by the traditional franchising business were $5,089 during the third quarter of 2022, as compared to $4,865 during the third quarter of 2021.

Franchise royalties and fees during the first nine months of 2022 were $15,472 compared to $14,594 during the first nine months of 2021.

The cost of food as a percentage of net sales during the third quarter and first nine months of 2022 was 30.3% and 29.7%, respectively, as compared to 31.3% and 29.7% of net sales during the third quarter and first nine months of 2021, respectively.

Cost of food as a percentage of net sales were lower during the third quarter of 2022 compared to 2021 primarily because of higher menu prices.

Restaurant operating costs as a percentage of net sales during the third quarter of 2022 were 55.4%, as compared to 58.4% of net sales in the third quarter of 2021.

Restaurant operating costs during the first nine months of 2022 were 53.9% of net sales, as compared to 49.1% of net sales in 2021.

The increase during the first nine months was primarily the result of higher wages.

Selling, general and administrative costs during the third quarter and first nine months of 2022 were $11,489 and $36,775, respectively, compared to $12,889 and $39,894 in the third quarter and first nine months of 2021, respectively.

Steak n Shake recorded gains on the disposal of assets of $1,084 and $1,749 in the third quarter and first nine months of 2022, respectively.

The Company recorded no impairment charges in the third quarter and $20 in the first nine months of 2022.

The Company recorded no impairment charges in the third quarter and $559 in the first nine months of 2021, respectively.

Impairments during 2021 are related to underperforming stores.

5 unchanged sentences

Underwriting results of our insurance operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

7 unchanged sentences

Earnings of our insurance operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

15 unchanged sentences

A summary of First Guard’s underwriting results follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

8 unchanged sentences

A summary of Southern Pioneer’s underwriting results follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

8 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

9 unchanged sentences

Earnings for Southern Oil are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

5 unchanged sentences

Income tax expense 1,564 657 4,613 2,031

Contribution to net earnings (loss) $ 6,369 $ 2,336 $ 9,293 $ 4,691

Contribution to net earnings $ 5,231 $ 2,325 $ 14,524 $ 7,016

Abraxas Petroleum

Abraxas Petroleum operates oil and gas properties in the Permian Basin.

Earnings for Abraxas Petroleum from the date of acquisition on September 14, 2022 are summarized below.

Third Quarter

Oil and gas revenue $ 1,692

Oil and gas production costs 606

Depreciation, depletion and accretion 360

General and administrative expenses 280

Earnings before income taxes 446

Income tax expense 103

Contribution to net earnings 343

Earnings attributable to noncontrolling interests 34

Net earnings attributable to Biglari Holdings Inc.

shareholders $ 309

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

Brand Licensing

1 unchanged sentence

Earnings of operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

2 unchanged sentences

General and administrative expenses 26 39 114 79

Earnings before income taxes 501 300 165 923

Income tax expense 126 75 41 218

Earnings (loss) before income taxes 1,534 (56) 1,699 867

Income tax expense (benefit) 384 (13) 425 205

Contribution to net earnings (loss) $ 1,150 $ (43) $ 1,274 $ 662

1 unchanged sentence

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.

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

Investment Gains

Investment losses net of tax for the second quarter of 2022 and 2021 were $2,805 and $908, respectively.

Investment losses net of tax for the first six months of 2022 were $2,630 compared to investment gains net of tax for the first six months of 2021 of $1,506.

Investment losses net of tax for the third quarter of 2022 were $657 compared to investment gains net of tax for the third quarter of 2021 of $3,390.

Investment losses net of tax for the first nine months of 2022 were $3,287 compared to investment gains net of tax for the first nine months of 2021 of $4,896.

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

3 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

8 unchanged sentences

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

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

Interest Expense

The Company’s interest expense is summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2022 2021 2022 2021

2 unchanged sentences

Interest expense net of tax $ 52 $ — $ 52 $ 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 second quarter and first six months of 2022 were relatively flat compared to the same period in 2021.

Income tax benefit for the second quarter of 2022 was $22,709 compared to $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.

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

Income tax expense for the third quarter of 2022 was $9,598 compared to an income tax benefit of $4,274 for the third quarter of 2021.

Income tax benefit for the first nine months of 2022 was $13,282 compared to an income tax expense of $11,544 for the first nine 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 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.

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

Investment partnership pre-tax gains were $29,658 during the third quarter of 2022 compared to pre-tax losses of $20,231 during the third quarter of 2021.

Investment partnership pre-tax losses were $82,244 during the first nine months of 2022 compared to pre-tax gains of $27,344 during the first nine months of 2021.

Financial Condition

Consolidated cash and investments are summarized below.

September 30,

2022 December 31,

6 unchanged sentences

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

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

Our balance sheet continues to maintain significant liquidity.

Consolidated cash flow activities are summarized below.

First Six Months

First Nine Months

Net cash provided by operating activities $ 99,754 $ 211,245

Net cash used in investing activities (102,464) (55,782)

Net cash used in financing activities (3,134) (153,136)

Net cash provided by (used in) financing activities 25,353 (154,586)

Effect of exchange rate changes on cash (150) (85)

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

Increase in cash, cash equivalents and restricted cash $ 22,493 $ 792

Cash provided by operating activities was $99,754 during 2022 compared to $211,245 in 2021.

2 unchanged sentences

Cash used in investing activities during 2022 was $102,464 compared to $55,782 in 2021.

Capital expenditures were lower during 2022 by $10,425 compared to 2021 as Steak n Shake incurred higher capital expenditures during 2021 for its transition to a self-service model.

The lower capital expenditures were primarily offset by higher purchases of limited partner interests of $14,586 during 2022.

Cash used in financing activities was $3,134 in 2022 compared to $153,136 in 2021.

Capital expenditures were lower during 2022 by $23,049 compared to 2021.

Steak n Shake incurred higher capital expenditures during 2021 for its transition to a self-service model.

Cash provided by financing activities was $25,353 in 2022 compared to $154,586 used in 2021.

The Company repaid Steak n Shake’s debt during 2021.

1 unchanged sentence

We continually review available financing alternatives.

Biglari Holdings Line of Credit

On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000.

The line of credit will be available on a revolving basis until September 12, 2024.

The line of credit includes customary covenants, as well as financial maintenance covenants.

As of September 30, 2022, we were in compliance with all covenants.

The balance of the line of credit on September 30, 2022 was $30,000.

Steak n Shake Credit Facility

21 unchanged sentences

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 2. Management’s Discussion and Analysis