What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 170 added, 305 removed, 392 unchanged (55% of the section changed)

3 unchanged sentences

(dollars in thousands)

September 30,

2023 December 31,

15 unchanged sentences

Accounts payable and accrued expenses $ 79,244 $ 78,616

Loss and loss adjustment expenses 14,613 14,609

Unpaid losses and loss adjustment expenses 15,514 16,805

Unearned premiums 13,445 12,495

Current portion of lease obligations 16,109 16,981

Line of credit 6,500 10,000

Total current liabilities 130,812 134,897

Lease obligations 90,135 91,844

Line of credit 30,000 —

Deferred taxes 49,809 31,343

17 unchanged sentences

(dollars in thousands except per share amounts)

Third Quarter First Nine Months

2022 2021 2022 2021

(Unaudited) (Unaudited)

First Quarter

Restaurant operations $ 61,129 $ 59,847

2 unchanged sentences

Licensing and media 595 634

92,034 82,083 269,773 267,158

Cost and expenses

Total revenues 90,176 85,372

Costs and expenses

Restaurant cost of sales 32,738 35,352

7 unchanged sentences

Interest expense on borrowings 167 —

79,206 81,329 238,666 249,122

Investment gains (losses) ( 849 ) 4,534 ( 4,184 ) 6,465

Total costs and expenses 81,127 79,405

Investment gains 3,638 225

Investment partnership gains (losses) 72,588 ( 6,661 )

6 unchanged sentences

shareholders $ 64,886 $ ( 298 )

Net earnings (loss) per equivalent Class A share * $ 109.13 $ ( 33.74 ) $ ( 140.30 ) $ 125.79

*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $ 21.83 and $( 28.06 ) for the third quarter and first nine months of 2022, respectively, and $( 6.75 ) and $ 25.16 for the third quarter and first nine months of 2021, respectively.

Net earnings (loss) per average equivalent Class A share* $ 222.28 $ ( 0.98 )

* Net earnings (loss) per average equivalent Class B share outstanding are one-fifth of the average equivalent Class A share or $ 44.46 for the first quarter of 2023 and $( 0.20 ) for the first quarter of 2022.

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Third Quarter First Nine Months

2022 2021 2022 2021

(Unaudited) (Unaudited)

First Quarter

Net earnings (loss) $ 65,537 $ ( 298 )

1 unchanged sentence

Comprehensive income (loss) 65,869 ( 529 )

Comprehensive income attributable to noncontrolling interests 34 — 34 —

Comprehensive income attributable to noncontrolling interest 651 —

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

shareholders $ 65,218 $ ( 529 )

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands)

Biglari Holdings Inc.

Shareholders’ Equity

Stock Additional Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stock Non-controlling Interests Total

For the first quarter of 2023

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

Net earnings (loss) 64,886 651 65,537

Other comprehensive income 332 332

Adjustment for holdings in investment partnerships ( 239 ) ( 239 )

Balance at March 31, 2023 $ 1,138 $ 381,788 $ 641,396 $ ( 2,458 ) $ ( 409,919 ) $ 9,253 $ 621,198

For the first quarter of 2022

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

Net earnings (loss) ( 298 ) ( 298 )

Other comprehensive loss ( 231 ) ( 231 )

Adjustment for holdings in investment partnerships 130 130

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

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

First Nine Months

First Quarter

Operating activities

3 unchanged sentences

Provision for deferred income taxes 18,450 ( 4,750 )

Asset impairments and other non-cash expenses 20 696

Gains on disposal of assets ( 905 ) ( 306 )

Investment and investment partnership (gains) losses 86,428 ( 34,461 )

Asset impairments 776 —

Gains on sale of assets ( 1,590 ) ( 133 )

Investment and investment partnerships (gains) losses ( 76,226 ) 6,436

Distributions from investment partnerships — 4,500

5 unchanged sentences

Proceeds from property and equipment disposals 2,140 109

Acquisition of a business, net of cash acquired ( 54,899 ) —

Purchases of limited partner interests ( 23,886 ) ( 4,800 )

Purchases of interests in limited partnerships ( 2,700 ) ( 3,000 )

Purchases of investments ( 27,255 ) ( 50,086 )

2 unchanged sentences

Financing activities

Proceeds from revolving credit facility 30,000 —

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

Repayments of borrowings ( 3,500 ) —

Principal payments on direct financing lease obligations ( 1,550 ) ( 1,564 )

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

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

Net cash used in financing activities ( 5,050 ) ( 1,564 )

Effects of foreign currency exchange rate changes 8 ( 23 )

Increase in cash, cash equivalents and restricted cash 2,146 3,428

Cash, cash equivalents and restricted cash at beginning of year 38,805 43,687

Cash, cash equivalents and restricted cash at end of third quarter $ 66,180 $ 30,458

First Nine Months

Cash, cash equivalents and restricted cash at end of first quarter $ 40,951 $ 47,115

First Quarter

Cash and cash equivalents $ 39,363 $ 45,777

Restricted cash in other long-term assets 1,588 1,338

Cash, cash equivalents and restricted cash at end of third quarter $ 66,180 $ 30,458

See accompanying Notes to Consolidated Financial Statements.

BIGLARI HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands)

Biglari Holdings Inc.

Shareholders’ Equity

Stock Additional Paid-In

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Treasury

Stock Non-controlling Interests Total

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

Net earnings (loss) ( 298 ) ( 298 )

Other comprehensive loss ( 231 ) ( 231 )

Adjustment to treasury stock for holdings in investment partnerships 130 130

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

Net earnings 32,005 34 32,039

Other comprehensive loss ( 618 ) ( 618 )

Adjustment to treasury stock for holdings in investment partnerships ( 638 ) ( 638 )

Transactions with noncontrolling interests 8,889 8,889

Balance at September 30, 2022 $ 1,138 $ 381,788 $ 566,455 $ ( 3,777 ) $ ( 409,119 ) $ 8,923 $ 545,408

Biglari Holdings Inc.

Shareholders’ Equity

Stock Additional Paid-In Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury

Stock Non-controlling interests Total

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

Net earnings 71,707 71,707

Other comprehensive loss ( 444 ) ( 444 )

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

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

Net earnings (loss) ( 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

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

Other comprehensive loss ( 49 ) ( 49 )

Adjustment to treasury stock for holdings in investment partnerships ( 4,208 ) ( 4,208 )

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

Cash, cash equivalents and restricted cash at end of first quarter $ 40,951 $ 47,115

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

March 31, 2023

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

5 unchanged sentences

In our opinion, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal recurring adjustments.

The results for the interim periods shown are not necessarily indicative of results for the entire fiscal year.

The results for the interim periods shown are not necessarily indicative of results for the year.

The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2022.

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

Biglari Holdings Inc.

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

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

Biglari Holdings 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.

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

As of September 30, 2022, Mr.

As of March 31, 2023, 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.

Business Acquisition

On September 14, 2022, the Company completed the purchase of 685,505 shares of Series A Preferred Stock (the "Preferred Shares") of Abraxas Petroleum Corporation ("Abraxas Petroleum") for a purchase price of $ 80,000 .

On October 26, 2022, the Company converted the preferred stock to 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 third quarter.

The revenues and operating results for Abraxas Petroleum were not significant to the Company for the third quarter.

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

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

Principles of Consolidation

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

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

Intercompany accounts and transactions have been eliminated in consolidation.

1 unchanged sentence

Earnings per share of common stock is based on the weighted-average number of shares outstanding during the year.

The shares of Company stock attributable to our limited partner interest in The Lion Fund, L.P.

and The Lion Fund II, L.P.

(collectively, the “investment partnerships”) — based on our proportional ownership during this period — are considered treasury stock on the consolidated balance sheet and thereby deemed not to be included in the calculation of weighted average common shares outstanding.

The shares of Company stock attributable to our limited partner interest in The Lion Fund, L.P., and The Lion Fund II, L.P., (collectively, the “investment partnerships”) — based on our proportional ownership during this period — are considered treasury stock on the consolidated balance sheet and thereby deemed not to be included in the calculation of weighted-average common shares outstanding.

However, these shares are legally outstanding.

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.

Earnings Per Share (continued)

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

September 30, 2022 December 31, 2021

The following table presents shares authorized, issued and outstanding on March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Class A Class B Class A Class B

1 unchanged sentence

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

Earnings Per Share (continued)

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

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

(Class B shares are economically equivalent to one-fifth of a Class A 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 the weighted-average equivalent Class A common stock for earnings per share.

There are no dilutive securities outstanding.

Third Quarter First Nine Months

2022 2021 2022 2021

March 31, 2023 March 31, 2022

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

1 unchanged sentence

Equivalent Class A common stock for earnings per share 291,911 304,572

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

Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity.

We classify investments in fixed maturity securities at the acquisition date as available-for-sale.

Realized gains and losses on disposals of investments are determined on a specific identification basis.

2 unchanged sentences

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

Investment losses for the third quarter and first nine months of 2022 were $ 849 and $ 4,184 , respectively.

Investment gains in the third quarter and first nine months of 2021 were $ 4,534 and $ 6,465 , respectively.

Investment gains for the first quarter of 2023 and 2022 were $ 3,638 and $ 225 , respectively.

Investment Partnerships

6 unchanged sentences

Biglari Capital Corp.

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

Investment Partnerships (continued)

is the general partner of the investment partnerships.

Biglari Capital Corp.

is solely owned by Mr.

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

3 unchanged sentences

Investment partnership gains (losses) 121,795 49,207 72,588

Distributions (net of contributions) ( 16,023 ) ( 16,023 )

Contributions 2,700 2,700

Changes in proportionate share of Company stock held 239 ( 239 )

Partnership interest at September 30, 2022 $ 338,314 $ 193,450 $ 144,864

Partnership interest at March 31, 2023 $ 507,499 $ 276,656 $ 230,843

Fair Value Company

4 unchanged sentences

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

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

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

Investment Partnerships (continued)

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

September 30,

2023 December 31, 2022

2 unchanged sentences

Carrying value of investment partnerships net of deferred taxes $ 190,433 $ 132,151

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 409,119 and $ 401,851 at September 30, 2022 and December 31, 2021, respectively, and was recorded as treasury stock.

Because of a transaction that occurred between The Lion Fund, L.P., and The Lion Fund II, L.P., in 2022, we expect that a majority of the $ 40,410 deferred tax liability enumerated above will not become due until the dissolution of the investment partnerships.

In effect, the tax-basis cost increased for the common stock of certain unaffiliated securities held by the investment partnerships.

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 409,919 and $ 409,680 as of March 31, 2023 and December 31, 2022, respectively.

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.

Third Quarter First Nine Months

2022 2021 2022 2021

First Quarter

Gains (losses) from investment partnerships $ 72,588 $ ( 6,661 )

Tax expense (benefit) 16,559 ( 1,860 )

Contribution to net earnings (loss) $ 23,057 $ ( 15,285 ) $ ( 62,091 ) $ 21,169

Contribution to net earnings $ 56,029 $ ( 4,801 )

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.

3 unchanged sentences

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

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

during the first nine months of 2022 and 2021.

There were no incentive reallocations accrued during the first quarters of 2023 and 2022.

Investment Partnerships (continued)

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

and The Lion Fund II, L.P.

is presented below.

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

Equity in Investment Partnerships

Lion Fund Lion Fund II

Total assets as of September 30, 2022 $ 247,357 $ 307,446

Total liabilities as of September 30, 2022 $ 9,973 $ 162,520

Revenue for the first nine months of 2022 $ ( 46,341 ) $ ( 88,378 )

Earnings for the first nine months of 2022 $ ( 46,544 ) $ ( 89,771 )

Biglari Holdings’ ownership interest as of September 30, 2022 88.2 % 87.7 %

Total assets as of March 31, 2023 $ 348,606 $ 415,057

Total liabilities as of March 31, 2023 $ 10,373 $ 173,731

Revenue for the first quarter of 2023 $ 63,558 $ 78,592

Earnings for the first quarter of 2023 $ 63,404 $ 76,341

Biglari Holdings’ ownership interest as of March 31, 2023 88.6 % 86.1 %

Total assets as of December 31, 2022 $ 285,071 $ 330,832

Total liabilities as of December 31, 2022 $ 10,517 $ 167,847

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

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

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

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 %

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

1 unchanged sentence

Property and equipment is composed of the following.

September 30,

2023 December 31,

8 unchanged sentences

Property and equipment, net $ 392,904 $ 400,725

Depletion expense related to oil and gas properties was $ 4,345 and $ 5,875 during the first nine months of 2022 and 2021, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 559 in the first nine 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 of property and equipment in 2022.

As of September 30, 2022, $ 5,002 of property and equipment is recorded as held for sale within other current assets.

Depletion expense related to oil and gas properties was $ 2,648 and $ 1,380 during the first quarter of 2023 and 2022, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 776 in the first quarter of 2023 related to underperforming stores.

There were no impairments in the first quarter of 2022.

Property and equipment held for sale of $ 8,012 and $ 4,700 are recorded in other current assets as of March 31, 2023 and December 31, 2022, respectively.

The assets classified as held for sale include seven properties owned by Steak n Shake, which were previously operated restaurants, and Abraxas Petroleum’s office building.

During the first quarter of 2023, Steak n Shake sold the property of a former company-operated restaurant for a gain of $ 1,431 .

Goodwill and Other Intangible Assets

2 unchanged sentences

Goodwill at December 31, 2022

Change in foreign exchange rates during the first nine months of 2022 ( 83 )

Goodwill at September 30, 2022

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

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

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

We use both qualitative and quantitative assessments.

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

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

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

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

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

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.

Goodwill $ 53,813

Accumulated impairment losses ( 300 )

Change in foreign exchange rates during the first quarter of 2023 9

Goodwill at March 31, 2023

Goodwill and indefinite-lived intangible asset impairment reviews include determining the estimated fair values of our reporting units and indefinite-lived intangible assets.

The key assumptions and inputs used in such determinations may include forecasting revenues and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs.

Significant judgment by management is required in estimating the fair value of a reporting unit and in performing impairment reviews.

Due to the inherent subjectivity and uncertainty in forecasting future cash flows and earnings over long periods of time, actual results may differ materially from the forecasts.

If the carrying value of the indefinite-lived intangible asset exceeds fair value, the excess is charged to earnings as an impairment loss.

If the carrying value of a reporting unit exceeds the estimated fair value of the reporting unit, then the excess, limited to the carrying amount of goodwill, will be charged to earnings as an impairment loss.

There was no impairment recorded for goodwill during the first quarters of 2023 or 2022.

Other Intangible Assets

2 unchanged sentences

Balance at December 31, 2022

Intangibles $ 15,876 $ 10,889 $ 26,765

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

$ 15,876 $ 7,161 $ 23,037

Impairment to lease rights — ( 20 ) ( 20 )

Change in foreign exchange rates during the first nine months of 2022 — ( 974 ) ( 974 )

Balance at September 30, 2022

Change in foreign exchange rates during the first quarter of 2023 — 113 113

Balance at March 31, 2023

$ 15,876 $ 7,274 $ 23,150

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

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

Restaurant Operations Revenues

Restaurant operations revenues were as follows.

Third Quarter First Nine Months

2022 2021 2022 2021

First Quarter

Net sales $ 36,894 $ 38,216

11 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 during the year the operator becomes a franchise partner.

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

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

1 unchanged sentence

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

During the third quarter of 2022 and 2021, restaurant operations recognized $ 5,362 and $ 4,277 , respectively, in franchise partner fees related to rental income.

During the first nine months ended September 30, 2022 and September 30, 2021, restaurant operations recognized $ 15,193 and $ 10,910 , respectively, in franchise partner fees related to rental income.

During the first quarter of 2023 and 2022, restaurant operations recognized $ 5,575 and $ 4,774 , respectively, in franchise partner fees related to rental income.

Franchise Royalties and Fees

4 unchanged sentences

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

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

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

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

3 unchanged sentences

Accounts payable and accrued expenses include the following.

September 30,

2023 December 31,

2 unchanged sentences

Insurance accruals 2,479 6,012

Salaries, wages and vacation 6,902 5,905

Salaries and wages 6,602 4,400

Deferred revenue 5,835 4,445

Taxes payable 15,500 14,896

Professional fees 1,998 11,731

Oil and gas payable 4,641 3,877

2 unchanged sentences

Line of Credit and Note Payable

Bigari Holdings Line of Credit

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 .

1 unchanged sentence

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

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

Steak n Shake Credit Facility

On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $ 220,000 .

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

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

The balance of the line of credit was $ 6,500 and $ 10,000 on March 31, 2023 and December 31, 2022, respectively.

Our interest rate was 7.3 % on March 31, 2023.

The line of credit was paid in full in April 2023.

Western Sizzlin Revolver

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

As of March 31, 2023 and December 31, 2022, Western Sizzlin had no debt outstanding under its revolver.

Unpaid losses and loss adjustment expenses

Our 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, for each of the three-month periods ending March 31, 2023 and 2022 follows.

Balances at beginning of year:

Gross liabilities $ 17,520 $ 14,993

Reinsurance recoverable on unpaid losses ( 715 ) ( 1,892 )

Net liabilities 16,805 13,101

Incurred losses and loss adjustment expenses:

Current accident year 10,247 9,721

Prior accident years ( 1,651 ) ( 133 )

Total 8,596 9,588

Paid losses and loss adjustment expenses:

Current accident year 4,433 5,577

Prior accident years 5,454 3,977

Total 9,887 9,554

Balances at March 31:

Net liabilities 15,514 13,135

Reinsurance recoverable on unpaid losses 2,207 890

Gross liabilities $ 17,721 $ 14,025

Incurred loss and loss adjustment expenses of $ 8,596 and $ 9,588 in the first quarter of 2023 and 2022, respectively, were recorded in earnings and related to insured events occurring in the current period and events occurring in all prior periods.

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 $ 1,651 and $ 133 in the first quarter of 2023 and 2022, respectively, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods.

These reductions as a percentage of the net liabilities at the beginning of each year, were 9.8 % in 2023 and 1.0 % in 2022.

Lease Assets and Obligations

Lease obligations include the following.

Current portion of lease obligations September 30,

Current portion of lease obligations March 31,

2023 December 31,

8 unchanged sentences

Total long-term lease obligations $ 90,135 $ 91,844

Lease Assets and Obligations (continued)

Nature of Leases

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.

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.

2 unchanged sentences

Total lease cost consists of the following.

Third Quarter First Nine Months

2022 2021 2022 2021

First Quarter

Finance lease costs:

5 unchanged sentences

Supplemental cash flow information related to leases is as follows.

First Nine Months

First Quarter

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

2 unchanged sentences

Operating cash flows from operating leases $ 3,355 $ 3,067

Lease Assets and Obligations (continued)

Supplemental balance sheet information related to leases is as follows.

September 30,

2023 December 31,

2 unchanged sentences

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

September 30,

Weighted-average remaining lease terms:

4 unchanged sentences

Operating leases 7.0 %

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

Lease Assets and Obligations (continued)

Maturities of lease liabilities as of March 31, 2023 are as follows.

Year Operating

Leases Finance

2022 $ 4,215 $ 394

Remainder of 2023 $ 9,210 $ 1,134

2024 10,228 1,534

6 unchanged sentences

Total lease liabilities $ 37,656 $ 5,021

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

Third Quarter First Nine Months

2022 2021 2022 2021

The components of lease income are as follows.

First Quarter

Operating lease income $ 4,085 $ 4,724

1 unchanged sentence

Total lease income $ 5,869 $ 5,037

Lease Assets and Obligations (continued)

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2022.

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of March 31, 2023.

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

1 unchanged sentence

Year Subleases Owned Properties

2022 $ 228 $ 62

Remainder of 2023 $ 520 $ 119

After 2027 125 2,315

Total future minimum receipts $ 1,852 $ 3,514

Accumulated Other Comprehensive Income

Accumulated other comprehensive income decreased by $ 618 and $ 49 during the third quarters of 2022 and 2021, respectively.

During the first nine months of 2022, accumulated other comprehensive income decreased by $ 1,870 and $ 378 in the first nine months of 2021.

There were no reclassifications from accumulated other comprehensive loss to earnings during the first nine 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 nine months of 2022 and a discrete effective tax rate method based on statutory tax rates for the first nine months of 2021.

In determining the quarterly provision for income taxes, the Company used an estimated annual effective tax rate for the first quarter of 2023 and 2022.

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 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 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.

Income tax expense for the first quarter of 2023 was $ 19,738 compared to an income tax benefit of $ 171 for the first quarter of 2022.

The variance in income taxes between 2023 and 2022 is primarily attributable to taxes on income generated by the investment partnerships.

Investment partnership pre-tax gains were $ 72,588 during the first quarter of 2023 compared to pre-tax losses of $ 6,661 during the first quarter of 2022.

Commitments and Contingencies

6 unchanged sentences

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

Fair Value of Financial Assets (continued)

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

12 unchanged sentences

Equity securities:

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

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

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

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

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

Non-qualified deferred compensation plan investments:

1 unchanged sentence

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

Derivative instruments:

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

Fair Value of Financial Assets (continued)

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

September 30, 2022 December 31, 2021

As of March 31, 2023 and December 31, 2022, the fair values of financial assets were as follows.

March 31, 2023 December 31, 2022

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

2 unchanged sentences

Consumer goods 22,337 — — 22,337 17,274 — — 17,274

Insurance 49 — — 49 6,513 — — 6,513

Technology 1,832 — — 1,832 2,887 — — 2,887

Other 2,555 — — 2,555 2,031 — — 2,031

Government 53,663 — — 53,663 48,456 — — 48,456

Corporate 1,603 — — 1,603 2,199 — — 2,199

Options on equity securities — 3,531 — 3,531 — 2,095 — 2,095

Non-qualified deferred compensation plan investments 684 — — 684 699 — — 699

3 unchanged sentences

Service Agreement

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

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

The Biglari Entities are owned by Mr.

The Company paid Biglari Enterprises $ 6,300 in service fees during the first nine months of 2022 and 2021.

The Company is party to a service agreement with Biglari Enterprises LLC (“Biglari Enterprises”) under which Biglari Enterprises provides business and administrative related services to the Company.

Biglari Enterprises is owned by Mr.

The Company paid Biglari Enterprises $ 2,100 in service fees during the first quarters of 2023 and 2022.

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

5 unchanged sentences

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.

Biglari becomes eligible to receive any further incentive payment.

Business Segment Reporting

9 unchanged sentences

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

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

Third Quarter First Nine Months

2022 2021 2022 2021

Business Segment Reporting (continued)

A disaggregation of our consolidated data for the first quarters of 2023 and 2022 is presented in the tables which follow.

First Quarter

Operating Businesses:

4 unchanged sentences

Insurance Operations:

Underwriting:

First Guard 8,899 8,731

3 unchanged sentences

Oil and Gas Operations:

Southern Oil 12,688 7,353 36,940 24,310

Abraxas Petroleum 7,252 —

Southern Oil 4,971 9,812

Total Oil and Gas Operations 12,223 9,812

3 unchanged sentences

Earnings (Losses) Before Income Taxes

Third Quarter First Nine Months

2022 2021 2022 2021

First Quarter

Operating Businesses:

10 unchanged sentences

Oil and Gas Operations:

Southern Oil 6,795 2,982 19,137 9,047

Abraxas Petroleum 1,209 —

Southern Oil 894 3,921

Total Oil and Gas Operations 2,103 3,921

3 unchanged sentences

Corporate and other ( 3,593 ) ( 3,412 )

Investment gains (losses) ( 849 ) 4,534 ( 4,184 ) 6,465

Investment partnership gains (losses) 29,658 ( 20,231 ) ( 82,244 ) 27,344

$ 41,637 $ ( 14,943 ) $ ( 55,321 ) $ 51,845

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands except per share data)

Biglari Holdings Inc.

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

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

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

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

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

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

As of September 30, 2022, Mr.

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

On October 26, 2022, the Company converted the preferred stock to 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 third quarter.

The revenues and operating results for Abraxas Petroleum were not significant to the Company for the third quarter.

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

Amounts are recorded after deducting income taxes.

Third Quarter First Nine Months

2022 2021 2022 2021

Operating businesses:

Restaurant $ 3,320 $ (1,515) $ 9,588 $ 5,146

Insurance 2,389 2,985 5,292 8,902

Oil and gas 5,574 2,325 14,867 7,016

Brand licensing 1,150 (43) 1,274 662

Interest expense (52) — (52) (841)

Corporate and other (2,742) (2,526) (7,630) (6,649)

Total operating businesses 9,639 1,226 23,339 14,236

Investment gains 3,638 225

1 unchanged sentence

$ 85,275 $ ( 469 )

Earnings attributable to noncontrolling interest 34 — 34 —

$ 32,005 $ (10,669) $ (42,073) $ 40,301

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

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 552 company-operated and franchise restaurants as of September 30, 2022.

Steak n Shake Western Sizzlin

operated Franchise

Partner Traditional

Franchise Company-

operated Franchise Total

Total stores as of December 31, 2021

199 159 178 3 38 577

Corporate stores transitioned (12) 12 — — — —

Net restaurants opened (closed) (6) — (19) — — (25)

Total stores as of September 30, 2022

181 171 159 3 38 552

Total stores as of December 31, 2020

276 86 194 3 39 598

Corporate stores transitioned (54) 54 — — — —

Net restaurants opened (closed) (1) — (15) — (1) (17)

Total stores as of September 30, 2021

221 140 179 3 38 581

As of September 30, 2022, 39 of the 181 company-operated Steak n Shake stores were closed.

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

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

Restaurant operations are summarized below.

Third Quarter First Nine Months

2022 2021 2022 2021

Net sales $ 37,448 $ 41,916 $ 113,345 $ 146,269

Franchise partner fees 15,880 11,508 47,929 31,744

Franchise royalties and fees 5,089 4,865 15,472 14,594

Other revenue 1,020 855 2,862 3,817

Total revenue 59,437 59,144 179,608 196,424

Restaurant cost of sales

Cost of food 11,359 30.3 % 13,123 31.3 % 33,684 29.7 % 43,404 29.7 %

Restaurant operating costs 20,745 55.4 % 24,496 58.4 % 61,127 53.9 % 71,751 49.1 %

Occupancy costs 4,058 10.8 % 4,075 9.7 % 12,658 11.2 % 14,142 9.7 %

Total cost of sales 36,162 41,694 107,469 129,297

Selling, general and administrative

General and administrative 9,556 16.1 % 9,255 15.6 % 28,327 15.8 % 27,416 14.0 %

Marketing 2,758 4.6 % 2,302 3.9 % 9,589 5.3 % 10,212 5.2 %

Other expenses (825) (1.4) % 1,332 2.3 % (1,141) (0.6) % 2,266 1.2 %

Total selling, general and administrative 11,489 19.3 % 12,889 21.8 % 36,775 20.5 % 39,894 20.3 %

Impairments — — (20) (559)

Depreciation and amortization (6,081) (5,811) (18,401) (15,615)

Interest on finance leases and obligations (1,372) (1,462) (4,169) (4,619)

Earnings (loss) before income taxes 4,333 (2,712) 12,774 6,440

Income tax expense (benefit) 1,013 (1,197) 3,186 1,294

Contribution to net earnings (loss) $ 3,320 $ (1,515) $ 9,588 $ 5,146

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

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

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

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

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

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

Net sales for the third quarter and first nine months of 2022 were $37,448 and $113,345, respectively, representing a decrease of $4,468 or 10.7% and $32,924 or 22.5%, compared to the third quarter and first nine 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 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