What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-28 · 281 added, 205 removed, 773 unchanged (39% of the section changed)

26 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Property and Equipment — Refer to Note 5 to the financial statements

Property and Equipment — Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

11 unchanged sentences

• We evaluated the reasonableness of management’s undiscounted future cash flows analysis by comparing management’s projections to the Company’s historical results and available market data.

• With the assistance of our fair value specialists, for the properties where management applied a market analysis, we evaluated the reasonableness of the valuation methodology and used comparable current market data to develop a range of independent estimates and compare our estimates to those used by management.

• We evaluated the discount rates used by management in the performance of discounted cash flow analyses by testing management’s calculation, performing sensitivity analyses, comparing components to external market information as applicable, and assessed the mathematical accuracy of the Company’s calculations of potential impairment.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

Austin, Texas

February 25, 2023

7 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 25, 2023, expressed an unqualified opinion on those financial statements and included an emphasis of a matter paragraph relating to the Company’s investment in related party investment partnerships.

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Abraxas Petroleum, which was acquired on September 14, 2022, and whose financial statements constitute approximately 9.8% of total assets, 3.1% of revenues, and 2.5% of net earnings of the consolidated financial statement amounts as of and for the year ended December 31, 2022.

Accordingly, our audit did not include the internal control over financial reporting at Abraxas Petroleum.

Basis for Opinion

15 unchanged sentences

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

Austin, Texas

February 25, 2023

22 unchanged sentences

Current portion of lease obligations 16,981 16,898

Current portion of notes payable — 152,261

Current portion of line of credit 10,000 —

Total current liabilities 134,897 143,641

12 unchanged sentences

shareholders’ equity 546,966 587,696

Noncontrolling interests 8,602 —

Total shareholders’ equity 555,568 587,696

Total liabilities and shareholders’ equity $ 828,474 $ 894,807

19 unchanged sentences

Interest expense on leases 5,493 6,039 6,274

Interest expense on note payable 1,121 9,262 12,442

Interest expense on debt 399 1,121 9,262

331,912 341,193 444,496

Other income (expenses)

Investment gains 6,401 3,644 —

Investment gains (losses) ( 3,393 ) 6,401 3,644

Investment partnership gains (losses) ( 75,953 ) 10,953 ( 43,032 )

3 unchanged sentences

Net earnings (loss) ( 32,305 ) 35,478 ( 37,989 )

Net earnings per equivalent Class A share * $ 111.83 $ ( 110.05 ) $ 131.64

* Net earnings per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $ 22.37 for 2021, $( 22.01 ) for 2020 and $ 26.33 for 2019.

Earnings (loss) attributable to noncontrolling interest ( 287 ) — —

Net earnings (loss) attributable to Biglari Holdings Inc.

shareholders $ ( 32,018 ) $ 35,478 $ ( 37,989 )

Net earnings (loss) per equivalent Class A share * $ ( 107.43 ) $ 111.83 $ ( 110.05 )

* Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or ($ 21.49 ) for 2022, $ 22.37 for 2021, and ($ 22.01 ) for 2020.

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

3 unchanged sentences

Net earnings (loss) $ ( 32,305 ) $ 35,478 $ ( 37,989 )

Other comprehensive income:

Foreign currency translation ( 883 ) ( 376 ) 1,279

Other comprehensive income (loss), net ( 376 ) 1,279 ( 294 )

Total comprehensive income (loss) $ 35,102 $ ( 36,710 ) $ 45,086

Comprehensive income (loss) ( 33,188 ) 35,102 ( 36,710 )

Comprehensive income (loss) attributable to noncontrolling interest ( 287 ) — —

Total comprehensive income (loss) attributable to Biglari Holdings Inc.

shareholders $ ( 32,901 ) $ 35,102 $ ( 36,710 )

See accompanying Notes to Consolidated Financial Statements.

6 unchanged sentences

Net earnings (loss) $ ( 32,305 ) $ 35,478 $ ( 37,989 )

Adjustments to reconcile net earnings to operating cash flows:

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

Depreciation and amortization 36,443 30,050 32,222

1 unchanged sentence

Asset impairments and other non-cash expenses 3,520 4,772 24,636

(Gains) losses on disposal of assets ( 25 ) ( 868 ) 264

Losses on disposal of assets ( 1,578 ) ( 25 ) ( 868 )

Investment (gains) losses 3,393 ( 6,214 ) ( 4,856 )

9 unchanged sentences

Acquisition of business, net of cash acquired ( 58,274 ) — ( 36,187 )

Distributions from investment partnerships — — 40,000

Purchases of limited partner interests ( 48,569 ) ( 12,300 ) ( 70,130 )

Purchases of investments ( 134,451 ) ( 110,199 ) ( 299,950 )

Redemptions of fixed maturity securities 118,422 293,067 149,030

Sales of investments and redemptions of fixed maturity securities 129,117 118,422 293,067

Net cash used in investing activities ( 136,605 ) ( 58,525 ) ( 129,487 )

Financing activities

Payments on revolving credit facility — ( 500 ) —

Proceeds from revolving credit facility — 500 —

Payments on line of credit ( 20,000 ) — ( 500 )

Proceeds from line of credit 30,000 — 500

Principal payments on long-term debt — ( 149,952 ) ( 23,279 )

Principal payments on direct financing lease obligations ( 6,140 ) ( 6,205 ) ( 5,830 )

Net cash used in financing activities ( 156,157 ) ( 29,109 ) ( 8,010 )

Net cash provided by (used in) financing activities 3,860 ( 156,157 ) ( 29,109 )

Effect of exchange rate changes on cash 38 ( 64 ) 10

11 unchanged sentences

(dollars in thousands)

Biglari Holdings Inc.

Shareholder’s Equity

Common Stock Additional Paid-

2 unchanged sentences

Comprehensive

Income (Loss) Treasury Stock Total

Income (Loss) Treasury Stock Non-controlling interest Total

Balance at December 31, 2019 $ 1,138 $ 381,788 $ 611,039 $ ( 2,810 ) $ ( 374,857 ) $ — $ 616,298

Net earnings 45,380 45,380

Adoption of accounting standards 1,499 1,499

Net earnings (loss) ( 37,989 ) ( 37,989 )

Other comprehensive income, net 1,279 1,279

Adjustment to treasury stock for

holdings in investment partnerships ( 116 ) ( 626 ) ( 742 )

Adjustment to treasury stock for holdings in investment partnerships ( 14,760 ) ( 14,760 )

Balance at December 31, 2020 $ 1,138 $ 381,788 $ 573,050 $ ( 1,531 ) $ ( 389,617 ) $ — $ 564,828

1 unchanged sentence

Other comprehensive income, net ( 376 ) ( 376 )

Adjustment to treasury stock for

holdings in investment partnerships ( 14,760 ) ( 14,760 )

Adjustment to treasury stock for holdings in investment partnerships ( 12,234 ) ( 12,234 )

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

1 unchanged sentence

Other comprehensive income, net ( 883 ) ( 883 )

Adjustment to treasury stock for

holdings in investment partnerships ( 12,234 ) ( 12,234 )

Adjustment to treasury stock for holdings in investment partnerships ( 7,829 ) ( 7,829 )

Transactions with noncontrolling interest 8,889 8,889

Balance at December 31, 2022 $ 1,138 $ 381,788 $ 576,510 $ ( 2,790 ) $ ( 409,680 ) $ 8,602 $ 555,568

10 unchanged sentences

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.

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

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

2 unchanged sentences

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

COVID-19 and its variants have adversely affected nearly all of our operations, although the effects vary 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 Acquisitions

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 and commercial property coverage, as well as homeowners and dwelling fire insurance coverage.

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

Pro-forma financial information of Southern Pioneer is not material.

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.

Intercompany accounts and transactions have been eliminated in consolidation.

Change in Presentation

Loss and loss adjustment expenses of $ 1,508 were reclassified to accounts payable and accrued expenses as of December 31, 2021 to conform to current year presentation.

Cash, Cash Equivalents, and Restricted Cash

6 unchanged sentences

As of December 31, 2022 and 2021, all investments were classified as available-for-sale and carried at fair value with net unrealized gains or losses reported in the statements of earnings.

Realized gains and losses on disposals of investments are determined by the specific identification of cost of investments sold.

Realized gains and losses on disposals of investments are determined by the specific identification of the cost of investments sold.

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

1 unchanged sentence

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

Summary of Significant Accounting Policies (continued)

Investment Partnerships

The Company holds a limited interest in The Lion Fund, L.P.

and The Lion Fund II, L.P.

The Company holds a limited interest in The Lion Fund, L.P., and The Lion Fund II, L.P.

(collectively the “investment partnerships”).

9 unchanged sentences

We concentrate a high percentage of the investments in a small number of equity securities.

A significant decline in the general stock market or in the prices of major investments may have a materially adverse effect on our earnings and on consolidated shareholders’ equity.

Table of Conten t s

Summary of Significant Accounting Policies (continued)

A significant decline in the general stock market or in the prices of our major investments may have a materially adverse effect on our earnings and on consolidated shareholders’ equity.

Our accounts receivable balance consists primarily of franchisee, customer, and other receivables.

19 unchanged sentences

All other exploratory wells and costs are expensed.

There were no capitalized costs for exploratory activities during 2021.

We did not have any property acquisition or exploration activities during 2022, and our development costs were nominal.

Asset Retirement Obligations

2 unchanged sentences

The fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred, and the cost of such liability increases the carrying amount of the related long-lived asset by the same amount.

The liability is accreted each period through charges to depreciation, depletion, and amortization expense,

Summary of Significant Accounting Policies (continued)

and the capitalized cost is depleted on a unit-of-production basis over the proved developed reserves of the related asset.

The liability is accreted each period through charges to depreciation, depletion, and amortization expense, and the capitalized cost is depleted on a unit-of-production basis over the proved developed reserves of the related asset.

If an asset retirement obligation is settled for an amount other than the recorded amount, a gain or loss is recognized.

5 unchanged sentences

When an impairment is identified, we reduce the carrying value of the asset to its estimated fair value.

During 2021, no impairments were recorded to goodwill and other intangible assets.

During 2020, we recorded an impairment to goodwill of $ 300 and to indefinite life intangible assets of $ 3,728 .

No impairment was recorded in 2019.

During 2022 and 2021, no impairments were recorded to goodwill and other intangible assets.

During 2020, we recorded an impairment to goodwill of $ 300 and an impairment to indefinite life intangible assets of $ 3,728 .

Refer to Note 8 for information regarding our goodwill and other intangible assets.

Table of Conten t s

Summary of Significant Accounting Policies (continued)

Dual Class Common Stock

13 unchanged sentences

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.

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

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

There are no dilutive securities outstanding.

3 unchanged sentences

Equivalent Class A common stock for earnings per share 298,031 317,251 345,192

Summary of Significant Accounting Policies (continued)

Revenue Recognition

7 unchanged sentences

$ 241,568 $ 271,290 $ 350,666

Table of Conten t s

Summary of Significant Accounting Policies (continued)

Net sales are composed of retail sales of food through company-operated stores.

4 unchanged sentences

We are therefore fully affected by the operating results of the business, unlike in a traditional franchising arrangement, where the franchisor obtains a royalty fee based on sales only.

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

We generate the majority 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.

20 unchanged sentences

Breakage on gift cards is recorded as other revenue in proportion to the rate of gift card redemptions by vintage.

Summary of Significant Accounting Policies (continued)

For the years ended December 31, 2022, 2021, and 2020, restaurant operations recognized $ 5,395 , $ 5,903 , and $ 9,201 , respectively, of revenue from gift card redemptions.

8 unchanged sentences

Payment is due within 30 days of delivery.

Table of Conten t s

Summary of Significant Accounting Policies (continued)

Licensing Revenue and Other

11 unchanged sentences

Reinsurance contracts do not relieve the ceding company of its obligations to indemnify policyholders with respect to the underlying insurance contracts.

Liabilities for insurance losses of $ 14,609 and $ 14,652 are included in accrued expenses in the consolidated balance sheet as of December 31, 2021 and 2020, respectively.

Oil and Gas Production Costs

Oil and gas production costs are composed of lease operating expenses and production taxes.

Oil and gas production costs are costs incurred to operate and maintain wells and related equipment and facilities, including lease operating expenses and production taxes.

Marketing Expense

1 unchanged sentence

Marketing expense is included in selling, general and administrative expenses in the consolidated statement of earnings.

Insurance Reserves

We self-insure a significant portion of expected losses under our workers’ compensation, general liability, auto, directors and officers liability, and medical liability insurance programs, and record a reserve for our estimated losses on all unresolved open claims and our estimated incurred but not reported claims at the anticipated cost to us.

Insurance reserves are recorded in accrued expenses in the consolidated balance sheet.

Savings Plans

Several of our subsidiaries also sponsor deferred compensation and defined contribution retirement plans, such as 401(k) or profit sharing plans.

Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit-sharing plans.

Employee contributions to the plans are subject to regulatory limitations and the specific plan provisions.

Summary of Significant Accounting Policies (continued)

Some of the plans allow for discretionary contributions as determined by management.

9 unchanged sentences

Actual results could differ from the estimates.

Business Acquisitions

On September 14, 2022, the Company purchased the Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum for a purchase price of $ 80,000 .

On October 26, 2022, the Company exchanged the Preferred Shares for 90 % of the outstanding common stock of Abraxas Petroleum.

We have concluded that Abraxas Petroleum is a consolidated entity and have recorded noncontrolling interests attributable to the interest held by other shareholders.

The Company used working capital including its line of credit to fund the purchase of the Preferred Shares.

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

The Company’s financial results include the results of Abraxas Petroleum from the acquisition date to the end of the year.

The purchase price allocation is provisional and subject to revision as the related valuations are completed.

September 14, 2022

Cash and cash equivalents $ 21,726

Receivables and other assets 6,518

Property and equipment 75,400

Total identifiable assets acquired 103,644

Accounts payable and accrued expenses ( 10,719 )

Asset retirement obligations ( 3,587 )

Deferred taxes ( 449 )

Total liabilities assumed ( 14,755 )

Minority interest ( 8,889 )

Total consideration $ 80,000

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 and commercial property coverage, homeowners and dwelling fire insurance coverage, among other lines.

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

Pro-forma financial information of Southern Pioneer is not material.

Investments were $ 69,466 and $ 83,061 as of December 31, 2022 and 2021, respectively.

3 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 result.

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.

Investment gains in 2021 were $ 6,401 , which include a $ 5,047 gain on the sale of real estate.

Investment losses in 2022 were $ 3,393 .

Investment gains in 2021 were $ 6,401 , which includes 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 in 2020 were $ 3,644 .

There were no investment gains in 2019.

The carrying value of investments net of deferred taxes is presented below.

Carrying value of investments $ 83,061 $ 94,861

Deferred tax liability related to investments ( 845 ) ( 665 )

Carrying value of investments net of deferred taxes $ 82,216 $ 94,196

Investment gains were $ 3,644 in 2020.

Investment Partnerships

26 unchanged sentences

Carrying value of investment partnerships net of deferred taxes $ 132,151 $ 205,867

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 401,851 and $ 389,617 at December 31, 2021 and 2020, respectively, and was recorded as treasury stock.

The Company’s proportionate share of Company stock held by the investment partnerships at cost was $ 409,680 and $ 401,851 at December 31, 2022 and 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.

10 unchanged sentences

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

Investment Partnerships (continued)

There were no incentive reallocations from Biglari Holdings to Biglari Capital during 2021.

There were no incentive reallocations from Biglari Holdings to Biglari Capital during 2022 and 2021.

There were $ 987 of incentive reallocations from Biglari Holdings to Biglari Capital during 2020, including $ 253 associated with gains on the Company’s common stock.

There were no incentive reallocations from Biglari Holdings to Biglari Capital during 2019.

Summarized financial information for The Lion Fund, L.P.

and The Lion Fund II, L.P.

is presented below.

Investment Partnerships (continued)

Summarized financial information for The Lion Fund, L.P., and The Lion Fund II, L.P., is presented below.

Equity in Investment Partnerships

19 unchanged sentences

Deferred commissions on gift cards sold by third parties $ 1,454 $ 3,221

Asset held for sale 4,700 —

Prepaid contractual obligations 4,341 3,867

Other current assets $ 10,495 $ 7,088

The asset held for sale is Abraxas Petroleum’s office building in San Antonio, Texas.

Property and Equipment

Property and equipment is composed of the following.

Property and equipment are composed of the following.

Land $ 143,313 $ 144,605

7 unchanged sentences

Property and equipment, net $ 400,725 $ 349,351

Depreciation and amortization expense for property and equipment for 2021, 2020 and 2019 was $ 22,012 , $ 19,586 and $ 18,881 , respectively.

Depletion expense related to oil and gas properties was $ 7,600 , $ 11,989 and $ 8,077 during 2021, 2020 and 2019, respectively.

Accretion expense of the Company’s asset retirement obligations was $ 438 , $ 497 and $ 177 during 2021, 2020 and 2019, respectively.

Depletion and accretion expense are included in depreciation and amortization within the consolidated statement of earnings.

The depreciation and amortization expense for property and equipment for 2022, 2021, and 2020 was $ 28,879 , $ 22,012 , and $ 19,586 , respectively.

The depletion expense related to oil and gas properties was $ 7,024 , $ 7,600 , and $ 11,989 during 2022, 2021, and 2020, respectively.

The accretion expense of the Company’s asset retirement obligations was $ 540 , $ 438 , and $ 497 during 2022, 2021, and 2020, respectively.

Depletion and accretion expense are included in depreciation, depletion, and amortization expense within the consolidated statement of earnings.

The Company recorded impairments to restaurant long-lived assets of $ 3,520 , $ 4,635 , and $ 19,618 during 2022, 2021, and 2020, respectively.

5 unchanged sentences

Beginning balance $ 10,624 $ 10,258

Acquired balance 3,587 —

Liabilities settled ( 106 ) ( 72 )

4 unchanged sentences

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

No goodwill was recorded with the acquisition of Southern Oil.

No goodwill was recorded with the acquisition of Southern Oil or Abraxas Petroleum.

Goodwill and Other Intangible Assets (continued)

1 unchanged sentence

Restaurants Insurance Total

Goodwill at December 31, 2018 $ 28,139 $ 11,913 $ 40,052

Change in foreign exchange rates during 2019 ( 12 ) — ( 12 )

Goodwill at December 31, 2019 $ 28,127 $ 11,913 $ 40,040

Goodwill from acquisition — 13,800 13,800

Impairments to goodwill ( 300 ) — ( 300 )

Balance as of December 31, 2020

Goodwill $ 28,183 $ 25,713 $ 53,896

Accumulated impairment losses ( 300 ) — ( 300 )

$ 27,883 $ 25,713 $ 53,596

Change in foreign exchange rates during 2021 ( 49 ) — ( 49 )

Goodwill at December 31, 2020 $ 27,883 $ 25,713 $ 53,596

Balance as of December 31, 2021 $ 27,834 $ 25,713 $ 53,547

Change in foreign exchange rates during 2022 ( 34 ) — ( 34 )

Goodwill at December 31, 2021 $ 27,834 $ 25,713 $ 53,547

Balance as of December 31, 2022 $ 27,800 $ 25,713 $ 53,513

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

1 unchanged sentence

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 used both qualitative and quantitative assessments in 2021.

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.

No impairment was recorded for our reporting units in 2021.

The fair value of certain of Steak n Shake’s reporting units declined in 2020, and an impairment to goodwill of $ 300 was recorded.

No impairment was recorded in 2019.

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

If Western Sizzlin’s franchised units continue to decline, an impairment of its goodwill may be necessary.

For our 2022 annual goodwill impairment testing, we elected to perform qualitative assessments for our reporting units.

No indicators of impairment were noted.

If a quantitative test were to be utilized for our reporting units, it would estimate the fair value of each reporting unit and compare it to its carrying value.

To the extent the fair value was in excess of the carrying value, no impairment would be recognized.

Otherwise, an impairment loss would be recognized for the amount that the carrying value of our reporting units, including goodwill, exceeded its fair value.

In performing the quantitative test of goodwill, fair value would be determined based on a calculation that gives consideration to an income approach utilizing the discounted cash flow method and to a market approach using the market comparable and market transaction methods.

No impairment was recorded for our reporting units in 2022 and 2021.

The fair value of certain of Steak n Shake’s reporting units declined in 2020, and an impairment to goodwill of $ 300 was recorded in 2020.

An impairment of Western Sizzlin’s goodwill may be necessary if a significant decline in its franchise units occurs.

Other Intangible Assets

1 unchanged sentence

Trade Names Lease Rights Total

Balance at December 31, 2019 $ 15,876 $ 11,323 $ 27,199

Impairments — ( 3,728 ) ( 3,728 )

Balance as of December 31, 2020

Intangibles $ 15,876 $ 11,917 $ 27,793

Accumulated impairment losses — ( 3,728 ) ( 3,728 )

$ 15,876 $ 8,189 $ 24,065

Change in foreign exchange rates during 2021 — ( 602 ) ( 602 )

Balance at December 31, 2020 15,876 8,189 24,065

Balance as of December 31, 2021 $ 15,876 $ 7,587 $ 23,463

Change in foreign exchange rates during 2022 — ( 426 ) ( 426 )

Balance at December 31, 2021 $ 15,876 $ 7,587 $ 23,463

Intangible assets with indefinite lives consist of trade names, franchise rights as well as lease rights.

No impairment was recorded in 2021.

During 2020, the Company recorded impairment charges of $ 3,728 on lease rights related to our international restaurant operations because of the adverse effects of the COVID-19 pandemic.

The impairment and fair value were determined using Level 3 inputs and available market data.

No amortization expense was recorded in 2021.

Amortization expense in 2020 and 2019 was $ 150 and $ 549 , respectively.

The Company’s intangible assets with definite lives fully amortized in 2020.

Balance as of December 31, 2022 $ 15,876 $ 7,161 $ 23,037

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

No impairment was recorded in 2022 or 2021.

During 2020, the Company recorded impairment charges of $ 3,728 on lease rights to our international operations because of the adverse effects of the COVID-19 pandemic.

Accounts Payable and Accrued Expenses

1 unchanged sentence

Accounts payable $ 28,431 $ 36,684

Gift card and other marketing 19,244 21,822

Gift cards and other marketing 12,028 19,244

Insurance accruals 6,012 7,936

3 unchanged sentences

Professional fees 600 11,731

Oil and gas payable 3,877 1,936

Other 3,927 464

Accounts payable and accrued expenses $ 78,616 $ 101,975

Other Liabilities

Other liabilities include the following.

Non qualified deferred compensation $ 1,607 $ 1,368

Other 462 312

Other liabilities $ 2,069 $ 1,680

Unpaid loss and loss adjustment expense

Other liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under insurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims.

A reconciliation of the changes in claim liabilities, net of reinsurance, is as follows.

Amount of claim liabilities at the beginning of the year, net of reinsurance loss recoverable of $ 1,892 and $ 1,544 , respectively

$ 13,101 $ 12,429

Incurred losses and loss adjustment expenses:

Provision for insured events in the current year 37,837 29,343

Change in provision for insured events of prior years ( 652 ) ( 1,695 )

Total incurred losses and loss adjustment expenses 37,185 27,648

Losses and loss adjustment expenses attributable to insured events of the current year 27,415 21,926

Losses and loss adjustment expenses attributable to insured events of prior years 6,066 5,050

Total payments 33,481 26,976

Amount of claim liabilities at the end of each year, net of reinsurance loss recoverable of $ 715 and $ 1,892 , respectively

$ 16,805 $ 13,101

Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year and events occurring in all prior years.

Incurred and paid loss and loss adjustment expenses are net of reinsurance recoveries.

We recorded net reductions of estimated ultimate liabilities for prior accident years of $ 652 in 2022 and $ 1,695 in 2021.

These reductions, as a percentage of net liabilities at the beginning of each year, were 5.0 % in 2022 and 13.6 % in 2021.

Unpaid losses and loss adjustment expenses (continued)

Our net incurred and paid liability losses and loss adjustment expenses are summarized by accident year below.

IBNR and case development liabilities are as of December 31, 2022.

Incurred Losses and Loss Adjustment Expenses through December 31,

Accident Year 2017* 2018* 2019* 2020* 2021* 2022 IBNR and Case Development Liabilities Cumulative Number of Reported Claims

2017 $ 29,877 $ 28,778 $ 28,944 $ 28,553 $ 28,231 $ 29,452 $ 229 $ 4,322

2018 26,930 26,660 26,455 26,387 27,616 359 3,746

2019 27,675 26,758 26,461 27,295 1,013 3,630

2020 26,755 25,176 25,594 978 3,640

2021 26,892 27,518 3,834 3,633

2022 35,996 10,392 3,703

Cumulative Paid Losses and Loss Adjustment Expenses through December 31,

Accident Year 2017* 2018* 2019* 2020* 2021* 2022

2017 $ 22,293 $ 25,491 $ 26,991 $ 27,548 $ 27,815 $ 29,223

2018 20,246 23,796 24,844 25,589 27,257

2019 20,755 23,787 24,647 26,282

2020 20,481 22,614 24,616

2021 19,649 23,684

*Unaudited required supplemental information

Loss and loss adjustment expense reserves include an amount for reported losses and an amount for losses incurred but not reported.

We establish average liabilities based on expected severities for newly reported claims prior to establishing individual case reserves when insufficient time or information is available for specific claim estimates and for large volumes of minor physical damage claims that, once reported, are quickly settled.

We establish case loss estimates for claims, including estimates for loss adjustment expenses, as the facts and merits of the claim are evaluated.

Such reserves are necessarily based upon estimates, and while management, based on past experience, believes that the amount is adequate, the ultimate liability may be more or less than the amounts provided.

We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply.

The methods for making such estimates and for establishing the resulting reserves are continually reviewed, and any adjustments are reflected in operations annually.

First Guard’s claim liabilities predominately relate to commercial truck claims.

For such claims, we establish and evaluate unpaid claim liabilities using historical claims data and other data as necessary to determine our best estimate, with an annual review by certified actuaries and certified public accountants.

Claim liabilities include average case, case development, and IBNR estimates.

Unpaid losses and loss adjustment expenses (continued)

Southern Pioneer

Southern Pioneer’s claim liabilities predominately relate to liquor liability, garage liability, and commercial property as well as homeowners and dwelling fire claims.

For such claims, we establish and evaluate unpaid claim liabilities using standard actuarial methods and techniques.

The actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns.

Claim liabilities include average case, case development, and IBNR estimates.

The components of the provision for income taxes consist of the following.

13 unchanged sentences

Income tax expense (benefit) $ ( 10,722 ) $ 6,789 $ ( 12,212 )

Income Taxes (continued)

The Company did not have a net tax expense or benefit on income from international operations.

Earnings (losses) before income taxes derived from domestic operations during 2021, 2020 and 2019 were $ 43,886 , $( 40,989 ) and $ 57,877 , respectively.

Losses before income taxes derived from domestic operations during 2022 were $ 40,624 , earnings before income taxes derived from domestic operations during 2021 were $ 43,886 , and losses before income taxes derived from domestic operations during 2020 were $ 40,989 .

Losses before income taxes derived from international operations during 2022, 2021, and 2020 were $ 2,403 , $ 1,619 , and $ 9,212 , respectively.

As of December 31, 2022, we had $ 99 of unrecognized tax benefits, including $ 13 of interest and penalties, which are included in other long-term liabilities in the consolidated balance sheet.

As of December 31, 2020, we had $ 204 of unrecognized tax benefits, including $ 59 of interest and penalties, which are included in other long-term liabilities in the consolidated balance sheet.

As of December 31, 2021, we had $ 83 of unrecognized tax benefits, including $ 4 of interest and penalties, which is included in other long-term liabilities in the consolidated balance sheet.

Our continuing practice is to recognize interest expense and penalties related to income tax matters in income tax expense.

The unrecognized tax benefits of $ 99 would impact the effective income tax rate if recognized.

Adjustments to the Company’s unrecognized tax benefit for gross increases for the current period tax position, gross decreases for prior period tax positions and the lapse of statute of limitations during 2021, 2020 and 2019 were not significant.

Adjustments to the Company’s unrecognized tax benefit for gross increases for the current period tax position, gross decreases for prior period tax positions, and the lapse of statutes of limitations during 2022, 2021, and 2020 were not significant.

We file income tax returns which are periodically audited by various foreign, federal, state, and local jurisdictions.

1 unchanged sentence

We believe we have certain state income tax exposures related to fiscal years 2018 through 2022.

Because of the expiration of the various state statutes of limitations for these fiscal years, it is possible that the total amount of unrecognized tax benefits will decrease by approximately $ 15 within 12 months.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Income Taxes (continued)

Our deferred tax assets and liabilities consist of the following.

7 unchanged sentences

Income tax credit carryforward — 813

Deferred income 830 1,106

Bad debt reserve 1,104 1,052

Other 487 796

6 unchanged sentences

Net deferred tax liability $ ( 31,343 ) $ ( 46,533 )

Receivables on the balance sheet include income taxes receivable of $ 344 as of December 31, 2021 and accrued expenses on the balance sheet include income taxes payable $ 2,436 as of December 31, 2020.

Income taxes paid during 2021, 2020 and 2019 were $ 4,532 , $ 15,402 and $ 30,375 , respectively.

Income tax refunds during 2021, 2020 and 2019 were $ 111 , $ 68 and $ 1,546 , respectively.

Notes Payable and Lease Obligations

Accounts payable and accrued expenses include income taxes payable of $ 3,881 as of December 31, 2022.

Receivables include income taxes receivable of $ 344 as of December 31, 2021.

Line of Credit and Note Payable

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.

The balance of the line of credit on December 31, 2022, was $ 10,000 .

Our interest rate was 6.53 % on December 31, 2022, which is based on the 30-day Secured Overnight Financing Rate plus 2.728 %.

Steak n Shake Credit Facility

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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.

Western Sizzlin Revolver

Western Sizzlin’s available line of credit is $ 500 .

As of December 31, 2022 and 2021, Western Sizzlin had no debt outstanding under its revolver.

Lease Obligations

Lease Assets and Obligations

Lease obligations include the following.

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Total long-term lease obligations $ 91,844 $ 104,479

Interest paid on debt and obligations under leases are as follows.

2021 2020 2019

Interest paid on debt $ 994 $ 9,397 $ 11,273

Interest paid on obligations under leases $ 6,039 $ 6,274 $ 7,816

Leased Assets and Lease Commitments

Nature of Leases

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

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

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 costs consist of the following.

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*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.

Year Ended December 31, 2021 Year Ended December 31, 2020

Year Ended December 31,

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

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Operating cash flows from operating leases $ 12,946 $ 13,195

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

Operating lease liabilities $ — $ 73

Supplemental balance sheet information related to leases is as follows.

2 unchanged sentences

Property and equipment, net $ 4,352 $ 5,634

Current portion of notes payable and other borrowings $ 1,414 $ 1,897

Long-term notes payable and other borrowings 5,347 7,034

Total finance lease liabilities $ 6,761 $ 8,931

Lease Asset and Obligations (continued)

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

16 unchanged sentences

Total lease liabilities $ 39,430 $ 5,366

Leased Assets and Lease Commitments (continued)

Rent expense is presented below.

8 unchanged sentences

Total lease income $ 21,573 $ 16,652 $ 6,765

Lease Asset and Obligations (continued)

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

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The Biglari Entities are owned by Mr.

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

The fixed fee is $ 700 per month for the first year with adjustments in years two through five.

The monthly fee remained at $ 700 during 2021.

The services agreement has a rolling five-year term, with annual adjustments to the fixed fee.

The fixed fee has not been adjusted, remaining at $ 700 per month since inception.

The Company paid Biglari Enterprises $ 8,400 in service fees during 2022 and 2021.

The services agreement does not alter the Company’s hurdle rate connected with the incentive reallocation paid to Biglari Capital Corp.

Investments in The Lion Fund, L.P.

and The Lion Fund II, L.P.

As of December 31, 2021, the Company’s investments in The Lion Fund, L.P.

and The Lion Fund II, L.P.

had a fair value of $ 474,201 .

Related Party Transactions (continued)

Contributions to and distributions from The Lion Fund, L.P.

and The Lion Fund II, L.P.

were as follows.

Investments in The Lion Fund, L.P., and The Lion Fund II, L.P.

As of December 31, 2022, the Company’s investments in The Lion Fund, L.P., and The Lion Fund II, L.P., had a fair value of $ 383,004 .

Contributions to and distributions from The Lion Fund, L.P., and The Lion Fund II, L.P., were as follows.

2022 2021 2020

Contributions of cash $ 12,300 $ 70,130 $ 40,000

Distributions of cash ( 180,170 ) ( 98,330 ) ( 169,329 )

Contributions $ 59,877 $ 12,300 $ 70,130

Distributions ( 70,700 ) ( 180,170 ) ( 98,330 )

$ ( 10,823 ) $ ( 167,870 ) $ ( 28,200 )

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

There were no incentive reallocations in 2021.

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

There were no incentive reallocations in 2022 or 2021.

There were $ 987 of incentive reallocations from Biglari Holdings to Biglari Capital during 2020, including $ 253 associated with gains on the Company’s common stock.

Gains 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 during 2019.

Incentive Agreement

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Biglari will receive 25 % of any incremental book value created above the high-water mark plus the hurdle rate.

In any year in which book value declines, our operating businesses must completely recover their deficit from the previous High Water Mark, along with attaining the Hurdle Rate, before Mr.

In any year in which book value declines, our operating businesses must completely recover their deficit from the previous high-water mark, and attain the hurdle rate, before Mr.

Biglari becomes eligible to receive any further incentive payment.

No incentive fees were earned during 2021, 2020 and 2019.

No incentive fees were earned during 2022, 2021, or 2020.

Commitments and Contingencies

3 unchanged sentences

The fair values of substantially all of our financial instruments were measured using market or income approaches.

Considerable judgment may be required in interpreting market data used to develop the estimates of fair value.

Considerable judgment may be required in interpreting the market data used to develop the estimates of fair value.

Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange.

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Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

Fair Value of Financial Assets (continued)

The following methods and assumptions were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:

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

Bonds are classified as Level 1 or Level 2 of the fair value hierarchy.

Bonds are classified as Level 1 of the fair value hierarchy.

Non-qualified deferred compensation plan investments:

3 unchanged sentences

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.

Fair Value of Financial Assets (continued)

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

3 unchanged sentences

Consumer goods 17,274 — — 17,274 10,775 2,368 — 13,143

Insurance 6,513 — — 6,513 261 — — 261

Technology 2,887 — — 2,887 — — — —

Other 2,031 — — 2,031 9,400 — — 9,400

Government 48,456 — — 48,456 54,584 — — 54,584

3 unchanged sentences

Total assets at fair value $ 88,267 $ — $ — $ 88,267 $ 99,325 $ 4,463 $ — $ 103,788

There were no changes in our valuation techniques used to measure fair values on a recurring basis.

Accumulated Other Comprehensive Income

Changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, were as follows.

2021 2020 2019

Beginning Balance $ ( 1,531 ) $ ( 2,810 ) $ ( 2,516 )

Foreign currency translation ( 376 ) 1,279 ( 294 )

Ending Balance $ ( 1,907 ) $ ( 1,531 ) $ ( 2,810 )

There were no reclassifications from accumulated other comprehensive income to earnings during 2021, 2020 or 2019.

There were no changes in the valuation techniques used to measure fair values on a recurring basis.

Business Segment Reporting

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Our insurance operations include First Guard and Southern Pioneer.

The Company also reports segment information for Maxim and Southern Oil.

Our oil and gas operations include Southern Oil and Abraxas Petroleum.

The Company also reports segment information for Maxim.

Other business activities not specifically identified with reportable business segments are presented in corporate.

3 unchanged sentences

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

Business Segment Reporting (continued)

A disaggregation of our consolidated data for each of the three most recent years is presented in the tables which follow.

3 unchanged sentences

Steak n Shake $ 231,820 $ 263,135 $ 344,305

Western 8,155 6,361 15,216

Western Sizzlin 9,748 8,155 6,361

Total Restaurant Operations 241,568 271,290 350,666

5 unchanged sentences

Total Insurance Operations 64,540 58,609 52,679

Oil and Gas Operations:

Southern Oil 46,091 33,004 26,255

Abraxas Petroleum 11,455 — —

Total Oil and Gas Operations 57,546 33,004 26,255

Maxim 4,577 3,203 4,083

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Steak n Shake $ 11,478 $ 13,524 $ ( 4,587 )

Western 931 ( 765 ) 1,756

Western Sizzlin 1,484 931 ( 765 )

Total Restaurant Operations 12,962 14,455 ( 5,352 )

5 unchanged sentences

Total Insurance Operations 9,904 14,435 12,431

Oil and Gas Operations:

Southern Oil 24,539 9,713 2,018

Abraxas Petroleum 652 — —

Total Oil and Gas Operations 25,191 9,713 2,018

Maxim 1,760 814 1,784

2 unchanged sentences

Corporate and other ( 13,099 ) ( 13,383 ) ( 12,432 )

Investment gains 6,401 3,644 —

Investment gains (losses) ( 3,393 ) 6,401 3,644

Investment partnership gains (losses) ( 75,953 ) 10,953 ( 43,032 )

5 unchanged sentences

Insurance 1,558 1,451 5

Southern Oil 996 2,806 7,594

Oil and Gas 906 996 2,806

Operating Businesses 26,934 62,743 20,669

1 unchanged sentence

Consolidated results $ 29,746 $ 64,549 $ 20,702

Business Segment Reporting (continued)

Depreciation, Depletion, and Amortization

3 unchanged sentences

Insurance 193 176 414

Southern Oil 8,073 12,527 8,218

Oil and Gas 8,013 8,073 12,527

Operating Businesses 35,702 29,733 31,983

1 unchanged sentence

Consolidated results $ 36,443 $ 30,050 $ 32,222

Business Segment Reporting (continued)

A disaggregation of our consolidated assets is presented in the table that follows.

3 unchanged sentences

Steak n Shake $ 341,199 $ 377,676

Western 17,239 16,512

Western Sizzlin 19,431 17,239

Total Restaurant Operations 360,630 394,915

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Total Insurance Operations 134,370 146,936

Oil and Gas Operations:

Southern Oil 49,416 53,359

Abraxas Petroleum 81,339 —

Total Oil and Gas Operations 130,755 53,359

Maxim 16,093 16,605

3 unchanged sentences

Supplemental Disclosures of Cash Flow Information

Capital expenditures in accounts payable at December 31, 2021, 2020 and 2019 were $ 8,733 , $ 2,399 and $ 339 , respectively.

In 2021, we had new finance lease obligations of $ 733 and lease retirements of $ 1,216 .

In 2020, we had new finance lease obligations of $ 3,285 and lease retirements of $ 4,842 .

During 2019, we had new finance lease obligations of $ 5,026 and lease retirements of $ 940 .

A summary of supplemental cash flow information for each of the three years ending December 31, 2022, 2021 and 2020 is presented in the following table.

2022 2021 2020

Cash paid during the year for:

Interest on debt $ 359 $ 994 $ 9,397

Interest on obligations under leases 5,493 6,039 6,274

Income taxes 1,092 4,532 15,402

Non-cash investing and financing activities

Capital expenditures in accounts payable 1,897 8,733 2,399

Finance lease additions — 733 3,285

Finance lease retirements — 1,216 4,842

Supplemental Oil and Gas Disclosures (Unaudited)

The Company has determined it has significant oil and gas producing activities during the year ended December 31, 2021 in accordance with ASC 932 " Extractive Activities — Oil and Gas ".

The Company did not have significant oil and gas producing activities within the meaning of ASC 932 during the years ended December 31, 2020 and 2019.

The Company has determined it had significant oil and gas producing activities during the years ended December 31, 2022 and December 31, 2021 in accordance with ASC 932 “ Extractive Activities — Oil and Gas.

” The Company did not have significant oil and gas producing activities within the meaning of ASC 932 during the year ended December 31, 2020.

Estimated Quantities of Proved Oil and Natural Gas Reserves

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Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods.

Proved undeveloped reserves are the quantities expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required from recompletion.

Proved undeveloped reserves are the quantities expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as additional information becomes available.

Supplemental Oil and Gas Disclosures (Unaudited) (continued)

We engaged Netherland, Sewell & Associates, Inc.

(“NSAI”), to prepare our reserve estimates for all of our estimated proved reserves at December 31, 2022.

All proved oil and natural gas reserves are located in the United States primarily offshore in the shallow waters of the Gulf of Mexico.

The following table sets forth our estimate of the net proved oil and gas reserves for the year ended December 31, 2021.

Oil (MBbl) Gas (MMcf) MBOE

All proved oil and natural gas reserves are located in the United States, primarily offshore in the shallow waters of the Gulf of Mexico and in the Permian Basin.

Supplemental Oil and Gas Disclosures (Unaudited) (continued)

The following table sets forth our estimate of the net proved oil and gas reserves for the year ended December 31, 2022 and 2021.

Oil (MBbl) Gas (MMcf) Liquids (Bbl) MBOE

Total proved reserves at December 31, 2020 2,223 24,917 — 6,376

Revisions 433 4,235 — 1,139

433 4,235 1,139

Extensions 62 189 — 94

1 unchanged sentence

Total proved reserves at December 31, 2021 2,361 26,544 — 6,785

Total proved developed reserves as of December 31, 2021 1,897 18,427 4,968

Total proved undeveloped reserves as of December 31, 2021 464 8,117 1,817

(1) Revisions are primarily related to increasing commodity prices.

Bbl — One stock tank barrel, of 42 United States gallons liquid volume.

Revisions ( 355 ) ( 3,288 ) — ( 903 )

Extensions — — — —

Acquisition of reserves 3,415 19,334 1,550 8,188

Production ( 450 ) ( 2,341 ) ( 42 ) ( 882 )

Total proved reserves at December 31, 2022 4,971 40,249 1,508 13,188

Proved developed reserves

December 31, 2022 4,507 32,132 1,508 11,371

December 31, 2021 1,897 18,427 — 4,968

Proved undeveloped reserves

December 31, 2022 464 8,117 — 1,817

December 31, 2021 464 8,117 — 1,817

Revisions are affected by commodity prices as well as changes to previous proved reserve estimates based on the evaluation of production and operating performance data.

Bbl — One stock tank barrel, or 42 United States gallons liquid volume.

MBbl — Thousand barrels.

1 unchanged sentence

MBOE — Thousand barrels of oil equivalent.

Natural gas is converted to an oil equivalent basis at six thousand cubic feet per one barrel of oil.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Natural Gas Reserves

The standardized measure of discounted future net cash flows presented in the following table was computed using the 12-month unweighted average of the first-day-of-the-month commodity prices, the costs in effect at December 31, 2021, and a 10 percent discount factor.

The Company cautions that actual future net cash flows may vary considerably from these estimates.

2 unchanged sentences

Therefore, the estimated future net cash flow computations should not be considered to represent the Company’s estimate of the expected revenues or the current value of proved reserves.

The following table sets forth the standardized measure of discounted future net cash flows attributable to proved crude oil and natural gas reserves as of December 31, 2021.

(in thousands) December 31, 2021

Supplemental Oil and Gas Disclosures (Unaudited) (continued)

The following table sets forth the standardized measure of discounted future net cash flows attributable to proved crude oil and natural gas reserves as of December 31, 2022 and 2021.

December 31, 2022 December 31, 2021

Future cash inflows $ 728,382 $ 247,294

4 unchanged sentences

10 % annual discount for estimated timing of cash flows

( 122,781 ) ( 29,751 )

Standardized measure of discounted future net cash flows $ 210,067 $ 77,759

Supplemental Oil and Gas Disclosures (Unaudited) (continued)

Changes in Standardized Measure of Discounted Future Net Cash Flows

Principle changes in the standardized measure of discounted future net cash flows attributable to the Company’s proved oil and natural gas reserves are as follows.

(in thousands) 2021

Standardized measure at December 31, 2020 $ 31,330

8 unchanged sentences

Standardized measure at December 31, 2021 $ 77,759

Net change in prices and production costs 58,439

Net change in future development costs 104

Sales of oil and natural gas, net of production expenses ( 41,859 )

Acquisition of reserves 141,051

Revisions of previous quantity estimates ( 9,072 )

Net change in taxes ( 26,456 )

Accretion of discount 9,862

Changes in timing and other 239

Standardized measure at December 31, 2022 $ 210,067

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data