What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 191 added, 171 removed, 706 unchanged (34% of the section changed)

3 unchanged sentences

(dollars in thousands)

September 30,

2023 December 31,

29 unchanged sentences

Retained earnings 586,818 576,510

Accumulated other comprehensive loss ( 2,780 ) ( 2,790 )

Accumulated other comprehensive income ( 3,066 ) ( 2,790 )

Treasury stock, at cost ( 413,080 ) ( 409,680 )

8 unchanged sentences

(dollars in thousands except per share amounts)

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

11 unchanged sentences

Selling, general and administrative 18,315 15,469 54,587 48,275

Gain on sale — oil and gas properties ( 13,563 ) — ( 13,563 ) —

Impairments 752 — 2,381 20

13 unchanged sentences

Net earnings (loss) per average equivalent Class A share * $ ( 195.55 ) $ 109.13 $ 35.44 $ ( 140.30 )

*Net earnings (loss) per average equivalent Class B share outstanding are one-fifth of the average equivalent Class A share or $ 1.33 and $ 45.80 for the second quarter and first six months of 2023, respectively, and $( 48.87 ) and $( 48.86 ) for the second quarter and first six months of 2022, respectively.

*Net earnings (loss) per average equivalent Class B share outstanding are one-fifth of the average equivalent Class A share or $( 39.11 ) and $ 7.09 for the third quarter and first nine months of 2023, respectively, and $ 21.83 and $( 28.06 ) for the third quarter and first nine months of 2022, respectively.

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

2 unchanged sentences

Foreign currency translation ( 286 ) ( 618 ) ( 276 ) ( 1,870 )

Comprehensive income (loss) 1,554 ( 74,801 ) 67,423 ( 75,330 )

Comprehensive income (loss) attributable to noncontrolling interests ( 60 ) — 591 —

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

Comprehensive income ( 56,800 ) 31,421 10,623 ( 43,909 )

Comprehensive income attributable to noncontrolling interests — 34 591 34

Total comprehensive income attributable to Biglari Holdings Inc.

shareholders $ ( 56,800 ) $ 31,387 $ 10,032 $ ( 43,943 )

3 unchanged sentences

(dollars in thousands)

First Six Months

First Nine Months

Operating activities

12 unchanged sentences

Capital expenditures ( 16,910 ) ( 23,437 )

Proceeds from property and equipment disposals 9,670 109

Proceeds from property and equipment sales 20,403 2,201

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

Purchases of noncontrolling interests ( 5,387 ) —

7 unchanged sentences

Principal payments on direct financing lease obligations ( 4,618 ) ( 4,647 )

Net cash used in financing activities ( 9,478 ) ( 3,134 )

Net cash provided by financing activities 4,382 25,353

Effect of exchange rate changes on cash ( 56 ) ( 150 )

Decrease in cash, cash equivalents and restricted cash ( 6,336 ) ( 1,837 )

Increase (decrease) in cash, cash equivalents and restricted cash ( 3,224 ) 22,493

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

Cash, cash equivalents and restricted cash at end of second quarter $ 32,469 $ 41,850

Cash, cash equivalents and restricted cash at end of third quarter $ 35,581 $ 66,180

September 30,

Cash and cash equivalents $ 33,993 $ 64,842

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

Cash, cash equivalents and restricted cash at end of second quarter $ 32,469 $ 41,850

Cash, cash equivalents and restricted cash at end of third quarter $ 35,581 $ 66,180

See accompanying Notes to Consolidated Financial Statements.

6 unchanged sentences

Capital Retained

Earnings Accumulated Other Comprehensive Income (Loss) Treasury

Earnings Accumulated Other Comprehensive Income Treasury

Stock Non-controlling Interests Total

For the second quarter and first six months of 2023

For the third quarter and first nine months of 2023

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

4 unchanged sentences

Net earnings (loss) 1,936 ( 60 ) 1,876

Other comprehensive loss ( 322 ) ( 322 )

Other comprehensive income ( 322 ) ( 322 )

Adjustment for holdings in investment partnerships ( 1,011 ) ( 1,011 )

1 unchanged sentence

Balance at June 30, 2023 $ 1,138 $ 385,594 $ 643,332 $ ( 2,780 ) $ ( 410,930 ) $ — $ 616,354

For the second quarter and first six months of 2022

Net earnings (loss) ( 56,514 ) ( 56,514 )

Other comprehensive income ( 286 ) ( 286 )

Adjustment for holdings in investment partnerships ( 2,150 ) ( 2,150 )

Balance at September 30, 2023 $ 1,138 $ 385,594 $ 586,818 $ ( 3,066 ) $ ( 413,080 ) $ — $ 557,404

For the third quarter and first nine months 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 )

Other comprehensive income ( 231 ) ( 231 )

Adjustment for holdings in investment partnerships 130 130

1 unchanged sentence

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

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

Other comprehensive income ( 1,021 ) ( 1,021 )

Adjustment 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 (loss) 32,005 34 32,039

Other comprehensive income ( 618 ) ( 618 )

Adjustment for holdings in investment partnerships ( 638 ) ( 638 )

Purchases of 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

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

September 30, 2023

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

14 unchanged sentences

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

As of June 30, 2023, Mr.

As of September 30, 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 purchased Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum Corporation (“Abraxas Petroleum”) for a purchase price of $ 80 million.

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

On June 14, 2023, Biglari Holdings purchased the remaining 10 % of the outstanding common stock of Abraxas Petroleum.

On September 14, 2022, the Company purchased 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 Shares to 90 % of the outstanding common stock of Abraxas Petroleum.

On June 14, 2023, the remaining 10 % of the outstanding common stock of Abraxas Petroleum was acquired for $ 5,387 .

Principles of Consolidation

3 unchanged sentences

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.

Earnings Per Share (continued)

The following table presents shares authorized, issued and outstanding on June 30, 2023 and December 31, 2022.

June 30, 2023 December 31, 2022

The following table presents shares authorized, issued and outstanding on September 30, 2023 and December 31, 2022.

September 30, 2023 December 31, 2022

Class A Class B Class A Class B

4 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

4 unchanged sentences

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

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

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

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

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

Investment gains for the second quarter and first six months of 2023 were $ 353 and $ 3,991 , respectively.

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

Investment losses for the third quarter and first nine months of 2023 were $ 4,715 and $ 724 , respectively.

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

Investment Partnerships

15 unchanged sentences

Investment partnership gains (losses) 21,141 45,648 ( 24,507 )

Contributions (net of distributions) 9,100 9,100

Contributions 41,530 41,530

Changes in proportionate share of Company stock held 3,400 ( 3,400 )

Partnership interest at June 30, 2023 $ 549,872 $ 321,136 $ 228,736

Partnership interest at September 30, 2023 $ 445,675 $ 276,258 $ 169,417

Fair Value Company

4 unchanged sentences

Changes in proportionate share of Company stock held 7,268 ( 7,268 )

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

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

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 $ 151,771 $ 132,151

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 $ 38,926 deferred tax liability enumerated above will not become due until the dissolution of the investment partnerships.

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 $ 17,646 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 $ 410,930 and $ 409,680 at June 30, 2023 and December 31, 2022, respectively.

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 413,080 and $ 409,680 at September 30, 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.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

8 unchanged sentences

Investment Partnerships (continued)

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

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

and The Lion Fund II, L.P.

is presented below.

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

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 June 30, 2023 $ 423,880 $ 383,192

Total liabilities as of June 30, 2023 $ 19,939 $ 160,906

Revenue for the first six months of 2023 $ 117,282 $ 68,060

Earnings for the first six months of 2023 $ 116,952 $ 63,273

Biglari Holdings’ ownership interest as of June 30, 2023 88.8 % 86.0 %

Total assets as of September 30, 2023 $ 366,038 $ 327,011

Total liabilities as of September 30, 2023 $ 26,330 $ 174,471

Revenue for the first nine months of 2023 $ 44,886 $ ( 12,172 )

Earnings for the first nine months of 2023 $ 44,208 $ ( 19,603 )

Biglari Holdings’ ownership interest as of September 30, 2023 89.4 % 87.8 %

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 six months of 2022 $ ( 43,115 ) $ ( 119,441 )

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

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

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 %

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 $ 383,766 $ 400,725

Depletion expense related to oil and gas properties was $ 5,386 and $ 2,772 during the first six months of 2023 and 2022, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 833 in the second quarter of 2023 and $ 1,609 in the first six months of 2023 related to underperforming stores.

There were no impairments of property and equipment in the second quarter and first six months of 2022.

Property and equipment held for sale of $ 1,671 and $ 4,700 are recorded in other assets as of June 30, 2023 and December 31, 2022, respectively.

The assets classified as held for sale at June 30, 2023 include five properties owned by Steak n Shake, which were previously company-operated restaurants.

During the first six months of 2023, Steak n Shake sold four properties for a gain of $ 4,414 .

Abraxas Petroleum sold its office building with no gain or loss recorded.

Depletion expense related to oil and gas properties was $ 7,550 and $ 4,345 during the first nine months of 2023 and 2022, respectively.

The Company recorded an impairment of $ 752 in the third quarter of 2023 and $ 2,361 in the first nine months of 2023 related to underperforming stores.

There were no impairments of property and equipment in the third quarter and first nine months of 2022.

Property and equipment held for sale of $ 1,410 and $ 4,700 are recorded in other assets as of September 30, 2023 and December 31, 2022, respectively.

The assets classified as held for sale at September 30, 2023 include properties owned by Steak n Shake, which were previously company-operated restaurants.

During the third quarter, Abraxas Petroleum entered into a royalty-based arrangement with an unaffiliated party to conduct development activities that will establish proved undeveloped reserves on its proportional share;

however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties.

As a result of the transaction, a gain of $ 13,563 was recorded for the upfront payment portion of the arrangement.

During the first nine months of 2023, Steak n Shake sold properties for a gain of $ 5,253 .

Abraxas Petroleum sold its office building for $ 4,719 with no gain or loss recorded.

Goodwill and Other Intangible Assets

4 unchanged sentences

Accumulated impairment losses ( 300 )

Change in foreign exchange rates during the first six months of 2023 9

Goodwill at June 30, 2023

Change in foreign exchange rates during the first nine months of 2023 ( 7 )

Goodwill at September 30, 2023

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

4 unchanged sentences

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 six months of 2023 or 2022.

There was a $ 20 impairment recorded for intangible assets during the first six months of 2023 and $ 20 impairment recorded in the first six months of 2022.

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

There was a $ 20 impairment recorded for intangible assets during the first nine months of 2023 and 2022.

Other Intangible Assets

2 unchanged sentences

Balance at December 31, 2022

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

Intangible assets $ 15,876 $ 10,889 $ 26,765

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

1 unchanged sentence

Impairment — ( 20 ) ( 20 )

Change in foreign exchange rates during the first six months of 2023 — 117 117

Balance at June 30, 2023

Change in foreign exchange rates during the first nine months of 2023 — ( 79 ) ( 79 )

Balance at September 30, 2023

$ 15,876 $ 7,062 $ 22,938

1 unchanged sentence

Restaurant operations revenues were as follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

16 unchanged sentences

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

During the second quarter of 2023 and 2022, restaurant operations recognized $ 5,763 and $ 5,057 , respectively, in franchise partner fees related to rental income.

During the first six months ended June 30, 2023 and June 30, 2022, restaurant operations recognized $ 11,338 and $ 9,831 , respectively, in franchise partner fees related to rental income.

During the third quarter of 2023 and 2022, restaurant operations recognized $ 5,692 and $ 5,362 , respectively, in franchise partner fees related to rental income.

During the first nine months ended September 30, 2023 and September 30, 2022, restaurant operations recognized $ 17,030 and $ 15,193 , respectively, in franchise partner fees related to rental income.

Franchise Royalties and Fees

10 unchanged sentences

Accounts payable and accrued expenses include the following.

September 30,

2023 December 31,

13 unchanged sentences

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

The balance of the line of credit on June 30, 2023 was $ 3,600 and $ 10,000 on December 31, 2022.

On June 30, 2023, the interest rate was 7.8 %.

The balance of the line of credit was $ 19,000 and $ 10,000 on September 30, 2023 and December 31, 2022, respectively.

On September 30, 2023, the interest rate was 8.0 %.

Lines of Credit (continued)

1 unchanged sentence

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

As of June 30, 2023 and December 31, 2022, Western Sizzlin had no debt outstanding under its revolver.

As of September 30, 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 six month periods ended June 30, 2023 and 2022 follows.

A reconciliation of the changes in claim liabilities, net of reinsurance, for each of the nine month periods ended September 30, 2023 and 2022 follows.

Balances at beginning of year:

10 unchanged sentences

Total 28,469 26,133

Balances at June 30:

Balances at September 30:

Net liabilities 14,086 14,613

1 unchanged sentence

Gross liabilities $ 15,133 $ 15,262

Incurred loss and loss adjustment expenses of $ 16,968 and $ 18,832 in the first six months 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 $ 3,016 and $ 837 in the first six months 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 17.9 % in 2023 and 6.4 % in 2022.

In the first nine months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $ 3,421 in 2023 and net increases of $ 757 in 2022, which resulted in corresponding changes in incurred losses and loss adjustment expenses.

These changes as a percentage of the net liabilities at the beginning of each year were reductions of 20.4 % in 2023 and increases of 5.8 % in 2022.

Lease Assets and Obligations

Lease obligations include the following.

Current portion of lease obligations June 30,

Current portion of lease obligations September 30,

2023 December 31,

8 unchanged sentences

Total long-term lease obligations $ 88,447 $ 91,844

Lease Assets and Obligations (continued)

Nature of Leases

5 unchanged sentences

Total lease cost consists of the following.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

6 unchanged sentences

Supplemental cash flow information related to leases is as follows.

First Six Months

First Nine Months

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

4 unchanged sentences

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 June 30, 2023 are as follows.

Maturities of lease liabilities as of September 30, 2023 are as follows.

Year Operating

9 unchanged sentences

Total lease liabilities $ 36,657 $ 4,431

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

Second Quarter First Six Months

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

Third Quarter First Nine Months

2023 2022 2023 2022

3 unchanged sentences

Lease Assets and Obligations (continued)

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of June 30, 2023.

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2023.

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

4 unchanged sentences

Total future minimum receipts $ 965 $ 4,579

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

In determining the quarterly provision for income taxes, the Company used an estimated annual effective tax rate for the first nine months 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 second quarter of 2023 was $ 1,018 compared to an income tax benefit of $ 22,709 for the second quarter of 2022.

Income tax expense for the first six months of 2023 was $ 20,756 compared to an income tax benefit of $ 22,880 for the first six months of 2022.

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

Investment partnership pre-tax losses were $ 7,496 during the second quarter of 2023 compared to pre-tax losses of $ 105,241 during the second quarter of 2022.

Investment partnership pre-tax gains were $ 65,092 during the first six months of 2023 compared to pre-tax losses of $ 111,902 during the first six months of 2022.

Income tax benefit for the third quarter of 2023 was $ 17,502 compared to an income tax expense of $ 9,598 for the third quarter of 2022.

Income tax expense for the first nine months of 2023 was $ 3,254 compared to an income tax benefit of $ 13,282 for the first nine months of 2022.

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

Investment partnership pre-tax losses were $ 89,599 during the third quarter of 2023 compared to pre-tax gains of $ 29,658 during the third quarter of 2022.

Investment partnership pre-tax losses were $ 24,507 during the first nine months of 2023 compared to pre-tax losses of $ 82,244 during the first nine months of 2022.

Commitments and Contingencies

21 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.

3 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the fair values of financial assets were as follows.

June 30, 2023 December 31, 2022

As of September 30, 2023 and December 31, 2022, the fair values of financial assets were as follows.

September 30, 2023 December 31, 2022

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

12 unchanged sentences

Biglari Enterprises is owned by Mr.

The Company paid Biglari Enterprises $ 4,200 in service fees during the first six months of 2023 and 2022.

The Company paid Biglari Enterprises $ 6,300 in service fees during the first nine months of 2023 and 2022.

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

11 unchanged sentences

The Company also reports segment information for Maxim.

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

Other business activities not specifically identified with reportable business segments are presented under corporate and other.

We report our earnings from investment partnerships separate from our corporate expenses.

3 unchanged sentences

Business Segment Reporting (continued)

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

Second Quarter First Six Months

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

Third Quarter First Nine Months

2023 2022 2023 2022

17 unchanged sentences

Earnings (Losses) Before Income Taxes

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

29 unchanged sentences

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

As of June 30, 2023, Mr.

As of September 30, 2023, 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 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.

On June 14, 2023, Biglari Holdings purchased the remaining 10% of the outstanding common stock of Abraxas Petroleum.

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

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

On June 14, 2023, the remaining 10% of the outstanding common stock of Abraxas Petroleum was acquired for $5,387.

Net earnings (loss) attributable to Biglari Holdings Inc.

1 unchanged sentence

Amounts are recorded after deducting income taxes.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

7 unchanged sentences

Total operating businesses 15,573 9,639 29,315 23,339

Investment gains 276 (2,805) 3,141 (2,630)

Investment gains (losses) (3,710) (657) (569) (3,287)

Investment partnership gains (losses) (68,377) 23,057 (17,847) (62,091)

4 unchanged sentences

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 521 company-operated and franchise restaurants as of June 30, 2023.

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 510 company-operated and franchise restaurants as of September 30, 2023.

Steak n Shake Western Sizzlin

7 unchanged sentences

Net restaurants opened (closed) (12) (1) (19) — (3) (35)

Total stores as of June 30, 2023

Total stores as of September 30, 2023

159 181 134 3 33 510

3 unchanged sentences

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

Total stores as of June 30, 2022

Total stores as of September 30, 2022

181 171 159 3 38 552

As of June 30, 2023, 30 of the 167 company-operated Steak n Shake stores were closed.

Steak n Shake has contracted to sell five of the 30 closed stores.

An additional fifteen closed stores are listed with brokers for lease or sale.

Steak n Shake plans to refranchise the remaining closed company-operated restaurants.

During the first six months of 2023, Steak n Shake reopened five stores and sold four properties;

As of September 30, 2023, 27 of the 159 company-operated Steak n Shake stores were closed.

As of September 30, 2023, Steak n Shake has contracted to sell three of the 27 closed stores.

An additional 16 closed stores are listed with brokers for lease or sale as of September 30, 2023.

Steak n Shake plans to reopen or refranchise the remaining closed company-operated restaurants.

During the first nine months of 2023, Steak n Shake reopened four stores and sold six properties;

all were closed as of December 31, 2022.

1 unchanged sentence

Restaurant operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

22 unchanged sentences

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

Net sales for the second quarter and first six months of 2023 were $39,524 and $76,418, respectively, representing an increase of $1,843 or 4.9% and $521 or 0.7%, compared to the second quarter and first six months of 2022, respectively.

Net sales for the third quarter and first nine months of 2023 were $39,195 and $115,613, respectively, representing an increase of $1,747 or 4.7% and $2,268 or 2.0%, compared to the third quarter and first nine months of 2022, respectively.

The increase in revenue of company-owned restaurants is primarily due to higher same-store sales.

1 unchanged sentence

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.

Our franchise partner fees were $19,070 during the second quarter of 2023, as compared to $16,425 during the second quarter of 2022.

Franchise partner fees were $36,982 and $32,049 during the first six months of 2023 and 2022, respectively.

As of June 30, 2023 and June 30, 2022, there were 177 franchise partner units.

Included in franchise partner fees were $5,763 and $5,057 of rental income during the second quarter of 2023 and 2022, respectively, and $11,338 and $9,831 during the first six months of 2023 and 2022, respectively.

Our franchise partner fees were $17,622 during the third quarter of 2023, as compared to $15,880 during the third quarter of 2022.

Franchise partner fees were $54,604 and $47,929 during the first nine months of 2023 and 2022, respectively.

As of September 30, 2023 there were 181 franchise partner units compared to 171 franchise partner units as of September 30, 2022.

Included in franchise partner fees were $5,692 and $5,362 of rental income during the third quarter of 2023 and 2022, respectively, and $17,030 and $15,193 during the first nine months of 2023 and 2022, respectively.

Franchise partners rent buildings and equipment from Steak n Shake.

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

The franchise royalties and fees generated by the traditional franchising business were $4,125 during the second quarter of 2023, as compared to $5,237 during the second quarter of 2022.

Franchise royalties and fees during the first six months of 2023 were $8,383 compared to $10,383 during the first six months of 2022.

There were 138 Steak n Shake traditional units open on June 30, 2023, as compared to 166 units open on June 30, 2022.

The franchise royalties and fees generated by the traditional franchising business were $4,073 during the third quarter of 2023, as compared to $5,089 during the third quarter of 2022.

Franchise royalties and fees during the first nine months of 2023 were $12,456 compared to $15,472 during the first nine months of 2022.

There were 134 Steak n Shake traditional units open on September 30, 2023, as compared to 159 units open on September 30, 2022.

The decrease in franchise royalties and fees was primarily due to fewer traditional units open during 2023.

The cost of food at company-operated units during the second quarter of 2023 was $11,702 or 29.6% of net sales, as compared to $11,365 or 30.2% of net sales during the second quarter of 2022.

The cost of food at company-operated units during the first six months of 2023 was $22,150 or 29.0% of net sales, as compared to $22,325 or 29.4% of net sales during the first six months of 2022.

The cost of food at company-operated units during the third quarter of 2023 was $11,888 or 30.3% of net sales, as compared to $11,359 or 30.3% of net sales during the third quarter of 2022.

The cost of food at company-operated units during the first nine months of 2023 was $34,038 or 29.4% of net sales, as compared to $33,684 or 29.7% of net sales during the first nine months of 2022.

Cost of food expressed as a percentage of net sales remained relatively consistent.

The operating costs at company-operated restaurants during the second quarter of 2023 were $19,295 or 48.8% of net sales, as compared to $20,350 or 54.0% of net sales in the second quarter of 2022.

The operating costs at company-operated restaurants during the first six months of 2023 were $37,752 or 49.4% of net sales, as compared to $40,382 or 53.2% of net sales in 2022.

The operating costs at company-operated restaurants during the third quarter of 2023 were $20,955 or 53.5% of net sales, as compared to $20,745 or 55.4% of net sales in the third quarter of 2022.

The operating costs at company-operated restaurants during the first nine months of 2023 were $58,707 or 50.8% of net sales, as compared to $61,127 or 53.9% of net sales in 2022.

The decrease in operating costs as a percentage of net sales was mainly attributable to higher net sales.

General and administrative expenses during the second quarter of 2023 were $10,790 or 16.7% of total revenue, as compared to $10,121 or 16.8% of total revenue in the second quarter of 2022.

General and administrative expenses during the first six months of 2023 were $21,253 or 16.9% of total revenue, as compared to $18,771 or 15.6% of total revenue in the first six months of 2022.

The increase in general and administrative expenses was mainly attributable to increased support for franchise partnerships.

Marketing expense decreased by $584 during the first six months of 2023 compared to the first six months of 2022.

General and administrative expenses during the third quarter of 2023 were $10,720 or 17.3% of total revenue, as compared to $9,556 or 16.1% of total revenue in the third quarter of 2022.

General and administrative expenses during the first nine months of 2023 were $31,973 or 17.1% of total revenue, as compared to $28,327 or 15.8% of total revenue in the first nine months of 2022.

The change in general and administrative expenses is mainly attributable to an increase in support staff during 2023.

Marketing expense decreased by $713 during the first nine months of 2023 compared to the first nine months of 2022.

The decrease was primarily attributable to reduced marketing by traditional franchisees.

During the first six months of 2023, Steak n Shake sold four properties for a gain of $4,414.

The Company recorded $853 of impairment charges in the second quarter and $1,629 in the first six months of 2023 related to underperforming stores.

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

During the first nine months of 2023, Steak n Shake sold properties for a gain of $5,253.

The Company recorded $752 in impairment charges in the third quarter and $2,381 in the first nine months of 2023 related to underperforming stores.

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

Depreciation and amortization expense was $20,298 during 2023 versus $18,401 during 2022.

7 unchanged sentences

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

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

Underwriting results of our insurance operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

5 unchanged sentences

Net underwriting gain $ 1,735 $ 1,479 $ 5,254 $ 2,923

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

Earnings of our insurance operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

15 unchanged sentences

A summary of First Guard’s underwriting results follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

5 unchanged sentences

Pre-tax underwriting gain $ 2,362 $ 2,354 $ 7,379 $ 4,800

First Guard’s ratio of losses and loss adjustment expenses to premiums earned was 46.2% during the second quarter of 2023 as compared to 60.6% during the second quarter of 2022 and 52.4% during the first six months of 2023 as compared to 65.7% during the first six months of 2022.

First Guard’s underwriting results in 2023 were in line with its historical performance despite cost inflation in property and physical damage claims, which began to accelerate in 2022.

First Guard’s ratio of losses and loss adjustment expenses to premiums earned was 56.3% during the third quarter of 2023 as compared to 52.8% during the third quarter of 2022 and 53.8% during the first nine months of 2023 as compared to 61.3%

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

during the first nine months of 2022.

First Guard’s underwriting results in 2023 were in line with its historical performance despite cost inflation in property and physical damage claims, which began to accelerate in 2022.

Southern Pioneer

1 unchanged sentence

A summary of Southern Pioneer’s underwriting results follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

4 unchanged sentences

Total losses and expenses 5,975 102.8 % 6,487 108.0 % 19,158 103.9 % 18,754 106.2 %

Pre-tax underwriting gain (loss) $ (451) $ (281) $ (562) $ (618)

Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 61.0% during the second quarter of 2023 as compared to 60.8% during the second quarter of 2022 and 59.2% during the first six months of 2023 and 61.6% during the first six months of 2022.

Pre-tax underwriting loss $ (166) $ (483) $ (728) $ (1,101)

Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 60.5% during the third quarter of 2023 as compared to 66.6% during the third quarter of 2022 and 59.6% during the first nine months of 2023 and 63.3% during the first nine months of 2022.

Southern Pioneer’s underwriting losses were primarily attributable to weather-related losses in its personal lines as well as a higher expense ratio, an increase caused by information technology projects related to the implementation of a new policy administration system.

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

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

9 unchanged sentences

A summary of revenues and earnings of our oil and gas operations follows.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

2 unchanged sentences

Depreciation, depletion and accretion 2,404 2,233 8,155 5,286

Gain on sale of properties (13,563) — (13,563) —

General and administrative expenses 594 816 3,831 2,011

3 unchanged sentences

Our oil and gas business is highly dependent on oil and natural gas prices.

The average West Texas Intermediate price per barrel for the first six months of 2023 was approximately $74.86 as compared to approximately $101.66 in the first six months of 2022.

The average West Texas Intermediate price per barrel for the first nine months of 2023 was approximately $77.30 as compared to approximately $98.27 in the first nine months of 2022.

It is expected that the prices of oil and gas commodities will remain volatile, which will be reflected in our financial results.

1 unchanged sentence

Earnings for Southern Oil are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

6 unchanged sentences

Contribution to net earnings $ 778 $ 5,231 $ 2,246 $ 14,524

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

Abraxas Petroleum

1 unchanged sentence

Earnings for Abraxas Petroleum are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

2 unchanged sentences

Depreciation, depletion and accretion 1,650 360 5,049 360

Gain on sale of properties (13,563) — (13,563) —

General and administrative expenses 172 280 2,127 280

2 unchanged sentences

Contribution to net earnings $ 13,853 $ 343 $ 16,205 $ 343

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

At year-end 2022, none of Abraxas Petroleum’s proved reserves were classified as proved undeveloped.

however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties.

As a result of the transaction, a gain of $13,563 was recorded for the upfront payment portion of the arrangement.

Brand Licensing

1 unchanged sentence

Earnings of operations are summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

8 unchanged sentences

Investment Gains and Investment Partnership Gains

Investment gains net of tax for the second quarter of 2023 were $276 compared to investment losses net of tax for the second quarter of 2022 of $2,805.

Investment gains net of tax for the first six months of 2023 were $3,141 compared to investment gains net of tax for the first six months of 2022 of $2,630.

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

Investment losses net of tax for the third quarter of 2023 were $3,710 compared to investment losses net of tax for the third quarter of 2022 of $657.

Investment losses net of tax for the first nine months of 2023 were $569 compared to investment losses net of tax for the first nine months of 2022 of $3,287.

Dividends earned on investments are reported as investment income by

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

our insurance companies.

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

1 unchanged sentence

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

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

2 unchanged sentences

Contribution to net earnings (loss) $ (68,377) $ 23,057 $ (17,847) $ (62,091)

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

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

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

5 unchanged sentences

We believe that investment and derivative gains/losses are generally meaningless for analytical purposes in understanding our quarterly and annual results.

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

Interest Expense

The Company’s interest expense is summarized below.

Second Quarter First Six Months

Third Quarter First Nine Months

2023 2022 2023 2022

3 unchanged sentences

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

The balance of the line of credit was $3,600 as of June 30, 2023 and $10,000 as of December 31, 2022.

On June 30, 2023, the interest rate was 7.8%.

The balance of the line of credit was $19,000 as of September 30, 2023 and $10,000 as of December 31, 2022.

On September 30, 2023, the interest rate was 8.0%.

Corporate and Other

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

Corporate and other net losses increased during the second quarter and first six months of 2023 compared to the same periods in 2022 primarily because of recording a non-cash write down of a receivable of $1,000 and accruing for incentive fees.

Income tax expense for the second quarter of 2023 was $1,018 compared to an income tax benefit of $22,709 for the second quarter of 2022.

Income tax expense for the first six months of 2023 was $20,756 compared to an income tax benefit of $22,880 for the first six months of 2022.

Income and expense items in corporate and other exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses.

Corporate and other net losses increased during the third quarter and first nine months of 2023 compared to the same periods in 2022 primarily because of accruing for higher incentive fees.

Income tax benefit for the third quarter of 2023 was $17,502 compared to an income tax expense of $9,598 for the third quarter of 2022.

Income tax expense for the first nine months of 2023 was $3,254 compared to an income tax benefit of $13,282 for the first nine months of 2022.

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

Investment partnership pre-tax losses were $7,496 during the second quarter of 2023 compared to pre-tax losses of $105,241 during the second quarter of 2022.

Investment partnership pre-tax gains were $65,092 during the first six months of 2023 compared to pre-tax losses of $111,902 during the first six months of 2022.

Financial Condition

Consolidated cash and investments are summarized below.

2023 December 31,

Cash and cash equivalents $ 30,881 $ 37,467

Investments 88,259 69,466

Fair value of interest in investment partnerships 549,872 383,004

Total cash and investments 669,012 489,937

portion of Company stock held by investment partnerships (321,136) (227,210)

Carrying value of cash and investments on balance sheet $ 347,876 $ 262,727

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

Investment partnership pre-tax losses were $89,599 during the third quarter of 2023 compared to pre-tax gains of $29,658 during the third quarter of 2022.

Investment partnership pre-tax losses were $24,507 during the first nine months of 2023 compared to pre-tax losses of $82,244 during the first nine months of 2022.

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