What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2023-11-03 · 140 added, 489 removed, 408 unchanged (61% of the section changed)

3 unchanged sentences

(dollars in thousands)

September 30,

2024 December 31,

18 unchanged sentences

Current portion of lease obligations 14,519 14,855

Line of credit 19,000 10,000

Total current liabilities 118,282 111,100

8 unchanged sentences

Retained earnings 654,037 631,458

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

Accumulated other comprehensive loss ( 2,549 ) ( 2,518 )

Treasury stock, at cost ( 419,648 ) ( 416,342 )

1 unchanged sentence

shareholders’ equity 618,572 599,330

Noncontrolling interests — 8,602

Total shareholders’ equity 557,404 555,568

Total liabilities and shareholders’ equity $ 885,317 $ 849,422

3 unchanged sentences

(dollars in thousands except per share amounts)

Third Quarter First Nine Months

2023 2022 2023 2022

(Unaudited) (Unaudited)

First Quarter

Restaurant operations $ 61,996 $ 61,129

9 unchanged sentences

Selling, general and administrative 18,275 17,263

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

Gain on sale of oil and gas properties ( 481 ) —

Impairments 107 776

1 unchanged sentence

Interest expense on leases 1,314 1,307

Interest expense on borrowings 262 67 469 67

Interest expense on debt — 167

Total costs and expenses 83,754 81,127

Investment gains (losses) ( 4,715 ) ( 849 ) ( 724 ) ( 4,184 )

Investment partnership gains (losses) ( 89,599 ) 29,658 ( 24,507 ) ( 82,244 )

Total other income (expenses) ( 94,314 ) 28,809 ( 25,231 ) ( 86,428 )

Earnings (loss) before income taxes ( 74,016 ) 41,637 14,153 ( 55,321 )

Income tax expense (benefit) ( 17,502 ) 9,598 3,254 ( 13,282 )

Net earnings (loss) ( 56,514 ) 32,039 10,899 ( 42,039 )

Investment gains 1,713 3,638

Investment partnership gains 21,985 72,588

Total other income 23,698 76,226

Earnings before income taxes 29,395 85,275

Income tax expense 6,816 19,738

Net earnings 22,579 65,537

Earnings attributable to noncontrolling interest — 651

Net earnings (loss) attributable to Biglari Holdings Inc.

Net earnings attributable to Biglari Holdings Inc.

shareholders $ 22,579 $ 64,886

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 $( 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.

Net earnings per average equivalent Class A share* $ 79.56 $ 222.28

* Net earnings per average equivalent Class B share outstanding are one-fifth of the average equivalent Class A share or $ 15.91 for the first quarter of 2024 and $ 44.46 for the first quarter of 2023.

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

Third Quarter First Nine Months

2023 2022 2023 2022

(Unaudited) (Unaudited)

Net earnings (loss) $ ( 56,514 ) $ 32,039 $ 10,899 $ ( 42,039 )

First Quarter

Net earnings $ 22,579 $ 65,537

Foreign currency translation ( 31 ) 332

Comprehensive income 22,548 65,869

Comprehensive income attributable to noncontrolling interests — 34 591 34

Comprehensive income attributable to noncontrolling interest — 651

Total comprehensive income attributable to Biglari Holdings Inc.

shareholders $ 22,548 $ 65,218

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 2024

Balance at December 31, 2023 $ 1,138 $ 385,594 $ 631,458 $ ( 2,518 ) $ ( 416,342 ) $ — $ 599,330

Net earnings 22,579 22,579

Other comprehensive income (loss) ( 31 ) ( 31 )

Adjustment for holdings in investment partnerships ( 3,306 ) ( 3,306 )

Balance at March 31, 2024 $ 1,138 $ 385,594 $ 654,037 $ ( 2,549 ) $ ( 419,648 ) $ — $ 618,572

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 64,886 651 65,537

Other comprehensive income (loss) 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

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

(dollars in thousands)

First Nine Months

First Quarter

Operating activities

Net earnings (loss) $ 10,899 $ ( 42,039 )

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

Depreciation, depletion, and amortization 29,645 24,127

Net earnings $ 22,579 $ 65,537

Adjustments to reconcile net earnings to operating cash flows:

Depreciation and amortization 10,053 9,940

Provision for deferred income taxes 3,877 18,450

1 unchanged sentence

Gains on sale of assets ( 1,431 ) ( 1,590 )

Investment and investment partnership (gains) losses 25,231 86,428

Investment and investment partnerships gains ( 23,698 ) ( 76,226 )

Distributions from investment partnerships 1,000 —

Changes in receivables, inventories and other assets 5,441 7,240

Changes in receivables and inventories ( 2,249 ) 2,006

Changes in accounts payable and accrued expenses 8,887 1,030

2 unchanged sentences

Capital expenditures ( 4,596 ) ( 5,929 )

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 ) —

Proceeds from property and equipment disposals 920 2,140

Purchases of interests in limited partnerships ( 3,975 ) ( 2,700 )

3 unchanged sentences

Financing activities

Proceeds from line of credit 31,600 30,000

Payments on line of credit ( 22,600 ) —

Repayments of borrowings — ( 3,500 )

Principal payments on direct financing lease obligations ( 1,403 ) ( 1,550 )

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

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

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

Net cash used in financing activities ( 1,403 ) ( 5,050 )

Effects of foreign currency exchange rate changes ( 10 ) 8

Increase in cash, cash equivalents and restricted cash 6,470 2,146

Cash, cash equivalents and restricted cash at beginning of year 29,654 38,805

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

September 30,

Cash, cash equivalents and restricted cash at end of first quarter $ 36,124 $ 40,951

First Quarter

Cash and cash equivalents $ 34,536 $ 39,363

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

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

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 Treasury

Stock Non-controlling Interests Total

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

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

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

Other comprehensive income ( 322 ) ( 322 )

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

Purchases of noncontrolling interests 3,806 ( 9,193 ) ( 5,387 )

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

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 income ( 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

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

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

Cash, cash equivalents and restricted cash at end of first quarter $ 36,124 $ 40,951

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

(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 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 $ 80,000 .

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 .

As of March 31, 2024, Mr.

Biglari beneficially owns shares of the Company that represent approximately 71.5 % of the voting interest.

Principles of Consolidation

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

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 September 30, 2023 and December 31, 2022.

September 30, 2023 December 31, 2022

The following table presents shares authorized, issued, and outstanding on March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

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 ”.

1 unchanged sentence

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

Third Quarter First Nine Months

2023 2022 2023 2022

March 31, 2024 March 31, 2023

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

3 unchanged sentences

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

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.

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

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

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

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 gains for the first quarter of 2024 and 2023 were $ 1,713 and $ 3,638 , respectively.

Investment Partnerships

9 unchanged sentences

is solely owned by Mr.

Investment Partnerships (continued)

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

3 unchanged sentences

Investment partnership gains (losses) 69,162 47,177 21,985

Contributions 41,530 41,530

Contributions (net of distributions) 2,975 2,975

Changes in proportionate share of Company stock held 3,306 ( 3,306 )

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

Partnership interest at March 31, 2024 $ 544,909 $ 324,152 $ 220,757

Fair Value Company

2 unchanged sentences

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

Contributions (net of distributions) ( 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

Investment Partnerships (continued)

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

September 30,

2024 December 31, 2023

2 unchanged sentences

Carrying value of investment partnerships net of deferred taxes $ 189,443 $ 171,207

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 $ 413,080 and $ 409,680 at September 30, 2023 and December 31, 2022, respectively.

We expect that a majority of the $ 31,314 and $ 27,896 deferred tax liabilities enumerated above will not become due until the dissolution of the investment partnerships.

The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 419,648 and $ 416,342 as of March 31, 2024, and December 31, 2023, 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

2023 2022 2023 2022

Gains (losses) from investment partnerships $ ( 89,599 ) $ 29,658 $ ( 24,507 ) $ ( 82,244 )

Tax expense (benefit) ( 21,222 ) 6,601 ( 6,660 ) ( 20,153 )

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

First Quarter

Gains from investment partnerships $ 21,985 $ 72,588

Tax expense 4,837 16,559

Contribution to net earnings $ 17,148 $ 56,029

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 accrued during the first quarters of 2024 and 2023.

Investment Partnerships (continued)

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.

1 unchanged sentence

Lion Fund Lion Fund II

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 March 31, 2024 $ 425,899 $ 412,720

Total liabilities as of March 31, 2024 $ 31,718 $ 193,830

Revenue for the first quarter of 2024 $ 50,262 $ 31,118

Earnings for the first quarter of 2024 $ 49,820 $ 28,237

Biglari Holdings’ ownership interest as of March 31, 2024 89.9 % 86.3 %

Total assets as of December 31, 2023 $ 371,365 $ 373,302

Total liabilities as of December 31, 2023 $ 26,594 $ 185,024

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 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 %

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,

2024 December 31,

8 unchanged sentences

Property and equipment, net $ 377,363 $ 380,491

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.

Depletion expense related to oil and gas properties was $ 2,568 and $ 2,648 during the first quarter of 2024 and 2023, respectively.

The Company recorded an impairment to restaurant long-lived assets of $ 107 in the first quarter of 2024 and $ 776 in the first quarter of 2023 related to underperforming stores.

Property and equipment held for sale of $ 1,149 and $ 773 are recorded in other current assets as of March 31, 2024, and December 31, 2023, respectively.

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

During the first quarter of 2024 and 2023, the Company sold former company-operated restaurants for a gain of $ 767 and $ 1,431 , respectively.

Goodwill and Other Intangible Assets

4 unchanged sentences

Accumulated impairment losses ( 300 )

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

Goodwill at September 30, 2023

Change in foreign exchange rates during the first quarter of 2024 ( 9 )

Goodwill at March 31, 2024

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 revenue and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs.

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 for the forecasts.

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 nine months of 2023 or 2022.

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

There was no impairment recorded for goodwill during the first quarters of 2024 or 2023.

Other Intangible Assets

2 unchanged sentences

Balance at December 31, 2023

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

Intangibles $ 15,876 $ 11,102 $ 26,978

Accumulated impairment losses — ( 3,748 ) ( 3,748 )

$ 15,876 $ 7,354 $ 23,230

Impairment — ( 20 ) ( 20 )

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

Balance at September 30, 2023

Change in foreign exchange rates during the first quarter of 2024 — ( 109 ) ( 109 )

Balance at March 31, 2024

$ 15,876 $ 7,245 $ 23,121

1 unchanged sentence

Restaurant operations revenues were as follows.

Third Quarter First Nine Months

2023 2022 2023 2022

First Quarter

Net sales $ 38,735 $ 36,894

3 unchanged sentences

$ 61,996 $ 61,129

Restaurant Operations Revenues (continued)

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

1 unchanged sentence

Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.

Restaurant Operations Revenues (continued)

Franchise Partner Fees

6 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 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.

During the first quarter of 2024 and 2023, restaurant operations recognized $ 5,705 and $ 5,575 , respectively, in franchise partner fees related to rental income.

Franchise Royalties and Fees

3 unchanged sentences

Other Revenue

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

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

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.

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

This estimate utilizes historical trends based on the vintage of the gift card.

2 unchanged sentences

Accounts payable and accrued expenses include the following.

September 30,

2024 December 31,

Accounts payable $ 21,829 $ 22,448

Gift card and other marketing 8,564 12,028

Gift cards and other marketing 5,877 7,089

Insurance accruals 2,318 2,565

Salaries, wages and vacation 11,937 4,400

Compensation 14,015 12,821

Deferred revenue 7,066 5,314

3 unchanged sentences

Accounts payable and accrued expenses $ 72,811 $ 66,743

Lines of Credit

Line of Credit and Note Payable

Biglari Holdings ’ Line of Credit

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

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

Biglari Holdings’ available line of credit is $ 30,000 .

The line of credit matures on September 12, 2024.

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

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)

There was no balance on the line of credit on March 31, 2024, or December 31, 2023.

Western Sizzlin Revolver

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

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

Unpaid Losses and Loss Adjustment Expenses

As of March 31, 2024, and December 31, 2023, Western Sizzlin had no debt outstanding under its revolver.

Unpaid Loss 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 nine month periods ended September 30, 2023 and 2022 follows.

A reconciliation of the changes in claim liabilities, net of reinsurance, for each of the three-month periods ended March 31, 2024 and 2023 follows.

March 31, March 31,

Balances at beginning of year:

10 unchanged sentences

Total 10,033 9,887

Balances at September 30:

Balances at March 31:

Net liabilities 16,013 15,514

1 unchanged sentence

Gross liabilities $ 16,700 $ 17,721

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.

We recorded net reductions of estimated ultimate liabilities for prior accident years of $ 3,319 and $ 1,651 in the first quarter of 2024 and 2023, 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 21.9 % in 2024 and 9.8 % in 2023.

Lease Assets and Obligations

Lease obligations include the following.

Current portion of lease obligations September 30,

Current portion of lease obligations March 31,

2024 December 31,

16 unchanged sentences

Total lease cost consists of the following.

Third Quarter First Nine Months

2023 2022 2023 2022

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 $ 2,666 $ 3,355

Lease Assets and Obligations (continued)

Supplemental balance sheet information related to leases is as follows.

September 30,

2024 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, 2023 are as follows.

Lease Assets and Obligations (continued)

Maturities of lease liabilities as of March 31, 2024 are as follows.

Year Operating

Leases Finance

2023 $ 3,040 $ 378

Remainder of 2024 $ 8,368 $ 1,134

2025 9,697 1,486

6 unchanged sentences

Total lease liabilities $ 36,844 $ 4,896

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

Third Quarter First Nine Months

2023 2022 2023 2022

The components of lease income are as follows.

First Quarter

Operating lease income $ 4,181 $ 4,085

1 unchanged sentence

Total lease income $ 5,980 $ 5,869

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, 2023.

The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of March 31, 2024.

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

1 unchanged sentence

Year Subleases Owned Properties

2023 $ 143 $ 99

Remainder of 2024 $ 457 $ 297

After 2028 — 2,435

Total future minimum receipts $ 1,518 $ 4,381

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.

In determining the quarterly provision for income taxes, the Company used an estimated annual effective tax rate for the first quarter of 2024 and 2023.

Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and underlying income tax rates applicable to the various taxing jurisdictions.

Income tax benefit for the 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.

Income tax expense for the first quarter of 2024 was $ 6,816 compared to $ 19,738 for the first quarter of 2023.

The variance in income taxes between 2024 and 2023 is primarily attributable to taxes on income generated by the investment partnerships.

Investment partnership pre-tax gains were $ 21,985 during the first quarter of 2024 compared to pre-tax gains of $ 72,588 during the first quarter of 2023.

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.

15 unchanged sentences

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

Non-qualified deferred compensation plan investments:

The assets of the non-qualified plan are set up in a rabbi trust.

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

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

September 30, 2023 December 31, 2022

Fair Value of Financial Assets (continued)

As of March 31, 2024, and December 31, 2023, the fair values of financial assets were as follows.

March 31, 2024 December 31, 2023

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

5 unchanged sentences

Corporate 879 — — 879 3,199 — — 3,199

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

Total assets at fair value $ 102,296 $ — $ — $ 102,296 $ 96,940 $ — $ — $ 96,940

4 unchanged sentences

Biglari Enterprises is owned by Mr.

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

The Company paid Biglari Enterprises $ 2,400 and $ 2,100 in service fees during the first quarter of 2024 and 2023, respectively.

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 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 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

A disaggregation of our consolidated data for the first quarters of 2024 and 2023 is presented in the tables which follow.

First Quarter

Operating Businesses:

4 unchanged sentences

Insurance Operations:

Underwriting:

First Guard 9,310 8,899

9 unchanged sentences

Business Segment Reporting (continued)

Earnings (Losses) Before Income Taxes

Third Quarter First Nine Months

2023 2022 2023 2022

Earnings (Loss) Before Income Taxes

First Quarter

Operating Businesses:

17 unchanged sentences

Corporate and other ( 2,539 ) ( 3,593 )

Investment gains (losses) ( 4,715 ) ( 849 ) ( 724 ) ( 4,184 )

Investment partnership gains (losses) ( 89,599 ) 29,658 ( 24,507 ) ( 82,244 )

$ ( 74,016 ) $ 41,637 $ 14,153 $ ( 55,321 )

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.

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 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, 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 $80,000.

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.

shareholders are disaggregated in the table that follows.

Amounts are recorded after deducting income taxes.

Third Quarter First Nine Months

2023 2022 2023 2022

Operating businesses:

Restaurant $ 3,395 $ 3,320 $ 16,170 $ 9,588

Insurance 2,674 2,389 7,975 5,292

Oil and gas 14,631 5,574 18,451 14,867

Brand licensing (179) 1,150 68 1,274

Interest expense (202) (52) (362) (52)

Corporate and other (4,746) (2,742) (12,987) (7,630)

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

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

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

Net earnings (loss) (56,514) 32,039 10,899 (42,039)

Earnings (loss) attributable to noncontrolling interest — 34 591 34

Net earnings (loss) attributable to Biglari Holdings Inc.

shareholders $ (56,514) $ 32,005 $ 10,308 $ (42,073)

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 510 company-operated and franchise restaurants as of September 30, 2023.

Steak n Shake Western Sizzlin

operated Franchise

Partner Traditional

Franchise Company-

operated Franchise Total

Total stores as of December 31, 2022

177 175 154 3 36 545

Corporate stores transitioned (6) 7 (1) — — —

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

Total stores as of September 30, 2023

159 181 134 3 33 510

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

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.

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

Restaurant operations are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Net sales $ 39,195 $ 37,448 $ 115,613 $ 113,345

Franchise partner fees 17,622 15,880 54,604 47,929

Franchise royalties and fees 4,073 5,089 12,456 15,472

Other revenue 996 1,020 4,833 2,862

Total revenue 61,886 59,437 187,506 179,608

Restaurant cost of sales

Cost of food 11,888 30.3 % 11,359 30.3 % 34,038 29.4 % 33,684 29.7 %

Restaurant operating costs 20,955 53.5 % 20,745 55.4 % 58,707 50.8 % 61,127 53.9 %

Occupancy costs 3,946 10.1 % 4,058 10.8 % 11,710 10.1 % 12,658 11.2 %

Total cost of sales 36,789 36,162 104,455 107,469

Selling, general and administrative

General and administrative 10,720 17.3 % 9,556 16.1 % 31,973 17.1 % 28,327 15.8 %

Marketing 2,629 4.2 % 2,758 4.6 % 8,876 4.7 % 9,589 5.3 %

Other expenses (825) (1.3) % (825) (1.4) % (5,126) (2.7) % (1,141) (0.6) %

Total selling, general and administrative 12,524 20.2 % 11,489 19.3 % 35,723 19.1 % 36,775 20.5 %

Impairments (752) — (2,381) (20)

Depreciation and amortization (6,804) (6,081) (20,298) (18,401)

Interest on finance leases and obligations (1,262) (1,372) (3,870) (4,169)

Earnings before income taxes 3,755 4,333 20,779 12,774

Income tax expense 360 1,013 4,609 3,186

Contribution to net earnings $ 3,395 $ 3,320 $ 16,170 $ 9,588

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.

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.

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.

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 $4,073 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 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 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 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 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.

The year-over-year increase was primarily attributable to higher capital expenditures incurred in 2022 and 2021.

Interest on obligations under leases was $3,870 during 2023 versus $4,169 during 2022.

The year-over-year decrease in interest expense is primarily attributable to the maturity and retirement of lease obligations.

We view our insurance businesses as possessing two activities:

underwriting and investing.

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

Our business units are operated under separate local management.

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

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

Underwriting results of our insurance operations are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Underwriting gain attributable to:

First Guard $ 2,362 $ 2,354 $ 7,379 $ 4,800

Southern Pioneer (166) (483) (728) (1,101)

Pre-tax underwriting gain 2,196 1,871 6,651 3,699

Income tax expense 461 392 1,397 776

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

Earnings of our insurance operations are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Premiums earned $ 15,160 $ 15,116 $ 45,895 $ 44,511

Insurance losses 8,783 8,814 25,751 27,646

Underwriting expenses 4,181 4,431 13,493 13,166

Pre-tax underwriting gain 2,196 1,871 6,651 3,699

Other income and expenses

Investment income 832 362 2,169 832

Other income (expenses) 323 859 1,286 2,356

Total other income 1,155 1,221 3,455 3,188

Earnings before income taxes 3,351 3,092 10,106 6,887

Income tax expense 677 703 2,131 1,595

Contribution to net earnings $ 2,674 $ 2,389 $ 7,975 $ 5,292

Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.

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

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

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

A summary of First Guard’s underwriting results follows.

Third Quarter First Nine Months

2023 2022 2023 2022

Amount % Amount % Amount % Amount %

Premiums earned $ 9,351 100.0 % $ 9,112 100.0 % $ 27,465 100.0 % $ 26,858 100.0 %

Insurance losses 5,268 56.3 % 4,815 52.8 % 14,766 53.8 % 16,468 61.3 %

Underwriting expenses 1,721 18.4 % 1,943 21.3 % 5,320 19.4 % 5,590 20.8 %

Total losses and expenses 6,989 74.7 % 6,758 74.1 % 20,086 73.2 % 22,058 82.1 %

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 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

Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance.

A summary of Southern Pioneer’s underwriting results follows.

Third Quarter First Nine Months

2023 2022 2023 2022

Amount % Amount % Amount % Amount %

Premiums earned $ 5,809 100.0 % $ 6,004 100.0 % $ 18,430 100.0 % $ 17,653 100.0 %

Insurance losses 3,515 60.5 % 3,999 66.6 % 10,985 59.6 % 11,178 63.3 %

Underwriting expenses 2,460 42.3 % 2,488 41.4 % 8,173 44.3 % 7,576 42.9 %

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

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.

Third Quarter First Nine Months

2023 2022 2023 2022

Interest, dividends and other investment income:

First Guard $ 475 $ 202 $ 1,293 $ 398

Southern Pioneer 357 160 876 434

Pre-tax investment income 832 362 2,169 832

Income tax expense 174 76 455 175

Net investment income $ 658 $ 286 $ 1,714 $ 657

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

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

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

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

Third Quarter First Nine Months

2023 2022 2023 2022

Oil and gas revenues $ 12,159 $ 14,380 $ 35,123 $ 38,632

Oil and gas production costs 3,771 4,090 12,754 11,752

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

Earnings before income taxes 18,953 7,241 23,946 19,583

Income tax expense 4,322 1,667 5,495 4,716

Contribution to net earnings $ 14,631 $ 5,574 $ 18,451 $ 14,867

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 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.

Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.

Earnings for Southern Oil are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Oil and gas revenues $ 3,849 $ 12,688 $ 13,630 $ 36,940

Oil and gas production costs 1,710 3,484 5,918 11,146

Depreciation, depletion and accretion 754 1,873 3,106 4,926

General and administrative expenses 422 536 1,704 1,731

Earnings before income taxes 963 6,795 2,902 19,137

Income tax expense 185 1,564 656 4,613

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

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

Earnings for Abraxas Petroleum are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Oil and gas revenues $ 8,310 $ 1,692 $ 21,493 $ 1,692

Oil and gas production costs 2,061 606 6,836 606

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

Earnings before income taxes 17,990 446 21,044 446

Income tax expense 4,137 103 4,839 103

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

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

Maxim’s business lies principally in licensing and media.

Earnings of operations are summarized below.

Third Quarter First Nine Months

2023 2022 2023 2022

Licensing and media revenue $ 268 $ 1,905 $ 1,624 $ 3,788

Licensing and media costs 476 345 1,427 1,975

General and administrative expenses 31 26 106 114

Earnings before income taxes (239) 1,534 91 1,699

Income tax expense (60) 384 23 425

Contribution to net earnings $ (179) $ 1,150 $ 68 $ 1,274

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

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

Investment Gains and Investment Partnership Gains

Investment 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.

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

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

Third Quarter First Nine Months

2023 2022 2023 2022

Investment partnership gains (losses) $ (89,599) $ 29,658 $ (24,507) $ (82,244)

Tax expense (benefit) (21,222) 6,601 (6,660) (20,153)

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

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.

These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

The investment partnerships hold the Company’s common stock as investments.

The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding.

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

Investment gains and losses in 2023 and 2022 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period.

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

Interest Expense

The Company’s interest expense is summarized below.

Third Quarter First Nine Months

Investment gains 1,713 3,638

Investment partnership gains 21,985 72,588

$ 29,395 $ 85,275

Interest expense on notes payable $ 262 $ 67 $ 469 $ 67

Tax benefit 60 15 107 15

Interest expense net of tax $ 202 $ 52 $ 362 $ 52

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 $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

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 $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