1
Franchising
In addition to the traditional franchise arrangements described above, Steak n Shake initiated a new franchise partner program during 2018 to transition company-operated restaurants to such franchisees. The franchise agreement stipulates that the franchisee make an upfront investment totaling $10,000. Steak n Shake, as the franchisor, assesses a fee of up to 15% of sales as well as 50% of profits. Potential franchisees are screened based on entrepreneurial attitude and ability, but they become franchise partners based on achievement. Each must meet the gold standard in service. Franchise partners are required to be hands-on operators. We limit a franchisee to a single location.
First Guard competes for truck insurance with other companies. The commercial truck insurance business is highly competitive in the areas of price and service. Vigorous competition is provided by large, well-capitalized companies and by small regional insurers. 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 truck insurer. First
The insurance business is stringently regulated by state insurance departments. First Guard is headquartered in Venice, Florida.
2
Media and Licensing Business
Internet.
factor of prime importance to us, talent, is invariably found across a wide spectrum of humanity. We seek to associate with people of high character and competence.
3
We are a “controlled company” within the meaning of the New York Stock Exchange rules and thus can rely on exemptions from certain corporate governance requirements.
The Company does not have a governance and nominating committee.
Unfavorable domestic and international
Toearnings.
operations.
4
In recent years, there has been Risks Relating to Our Insurance Business Our pursuit of licensing opportunities for the Maxim brand may prove to be unsuccessful. None. 17, 2021. 2020. the Impact of COVID-19 Mexico. of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 24, 2020. the majority of our dining rooms remained closed through the end of 2020. To mitigate high labor costs associated with full service, Steak n Shake is seeking to reopen dining rooms with a self-service model, which will require an investment of between $100 and $200 per restaurant. takeout. revenues compared to $88,914, or 14.6% of total revenues during 2019. General and administrative expenses decreased by Marketing store level cash flows. 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 our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. investments can be highly volatile. 2020. Other higher legal expenses. $14,760. 2019. 2020. $220,000. The term loan 2020 follows. Income Taxes arrangements. Southern Oil’s business is fundamentally a commodity business. This means Southern Oil’s operations and earnings may be significantly affected by changes in oil and gas prices. Such commodity prices depend on local, regional and global events or conditions that affect supply and demand for oil and gas. Any material decline in crude oil or natural gas prices could have a material adverse effect on Southern Oil’s operations. 27, 2021 2018) the Impact of COVID-19 not material. our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. 2018. Revenue Recognition 2040. During the 2021. Insurance premiums and commissions Use of Estimates 2018. Accretion expense of the Company's asset retirement obligations was $497 and $177 during 2020 and 2019, respectively. Depletion and accretion expense are included in depreciation and amortization within the consolidated statement of earnings. No goodwill was recorded with the acquisition of Southern Oil. the adverse effects of the COVID-19 pandemic. The impairment and fair value were determined using Level 3 inputs and available market data. Amortization expense for 2020, 2019 and 2018 $220,000. The term loan balance in full on February 19, 2021. Contributions to and distributions from The Lion Fund, L.P. and The Lion Fund II, L.P. were as follows. Gains on the Company's common stock and the related incentive reallocations are eliminated in our financial statements. There were no incentive reallocations from Biglari Holdings to Biglari Capital during 2019 and 2018. financial reporting purposes. On December 4, 2019, the Indiana Court of Appeals issued a unanimous decision affirming the trial court’s decision to dismiss the shareholder litigation. On January 20, 2020, the shareholders filed a petition to transfer with the Indiana Supreme Court seeking review of the decision of the Court of Appeals. The Company The following methods and assumptions were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets: hierarchy. hierarchy depending on the instrument. lease retirements of $4,842. In 2019, we had new finance lease obligations of $5,026 and lease retirements of $940. During 2018, we had new capital lease obligations of $1,000 and lease retirements of $11,557. 2020. We excluded the evaluation of internal controls over financial reporting for Southern Pioneer during the quarter ended December 31, 2020. 2020. Interactive Data FilesWe may not be able to adequately protect our intellectual property, which could decrease the value of our brand and products.The success of our business depends on the continued ability to use the existing trademarks, service marks, and other components of our brand to increase brand awareness and further develop branded products. While we take steps to protect our intellectual property, our rights to our trademarks could be challenged by third parties or our use of these trademarks may result in a liability for trademark infringement, trademark dilution, or unfair competition, adversely affecting our profitability. We may also become subject to these risks in the international markets in which we operate and in which we plan to expand. Any impairment of our intellectual property or brands, including due to changes in U.S. or foreign intellectual property laws or the absence of effective legal protections or enforcement measures, could adversely impact our business, financial condition and results of operations.Certain agreements with our Chairman and CEO may have an adverse effect on our financial position.We have entered into a license agreement with Sardar Biglari, Chairman and Chief Executive Officer, under which Mr. Biglari has granted the Company an exclusive license to use his name when connected to the provision of certain products and services, as well as a sublicense agreement with Steak n Shake that,inter alia, grants Steak n Shake the right to use the trademark “Steak n Shake by Biglari.” In the event of a change of control of the Company or Mr. Biglari’s termination without cause or resignation following specified occurrences, including (1) his removal as Chairman of the Board or Chief Executive Officer or (2) his not maintaining sole capital allocation authority, Mr. Biglari would be entitled to receive revenue-based royalty payments related to the usage of his name under the terms of the license agreement for a defined period of no less than five years. In addition, we have an incentive agreement with Mr. Biglari, in which he is entitled to receive performance-based annual incentive payments contingent on the growth of the Company’s adjusted book value in each fiscal year.There may be established competitors with financial and other resources that are greater than the Company’s restaurant operations capabilities. Restaurant businesses compete on the basis of price, convenience, service, experience, menu food quality, location,variety and customer service.product quality. The restaurant business is often affected by changes in consumer tastes and by national, regional, and local economic conditions. The performance of individual restaurants may be impacted by factors such as traffic patterns, demographic trends, weather conditions, and competing restaurants. Additional factors that may adversely affect the restaurant industry include, but are not limited to, food and wage inflation, safety, and food-borne illness.5 ContentsSteak n Shake’s competitors have reopened their dining rooms. Steak n Shake will reopen dining rooms only in restaurants it believes will provide excellent customer service.The disruptions experiencedDeclines in the global economy and volatility in the financial markets have reduced, and may continue to reduce, consumer confidence in the economy, negatively affecting consumer restaurant spending which could be harmful to our financial position and results of operations. As a result, decreased cash flow generated from our business may adversely affect our financial position and our ability to fund our operations. In addition, macroeconomic disruptions could adversely impact the availability of financing for our franchisees’ expansions and operations.Our cash flows and financial position could be negatively impacted if we are unable to comply with the restrictions and covenants in Steak n Shake’s debt agreements.Covenants in Steak n Shake’s credit facility include restrictions on, among other things, its ability to incur additional indebtedness and to make distributions to the Company. Steak n Shake’s ability to make payments on its credit facility and to fund operations depends on its ability to generate cash, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. Steak n Shake may not generate sufficient cash flow from operations to service this debt or to fund its other liquidity needs. Steak n Shake’s failure to service its debt could constitute an event6 an increased legislative, regulatory, and consumer focus on nutrition and advertising practices in the food industry. As a result, restaurant operations mayhave become subject to regulatory initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional content of our food products, which could increase expenses.products. The operation of the Steak n Shake and Western Sizzlin franchise system is also subject to franchise laws and regulations enacted by a number of states, and to rules promulgated by the U.S. Federal Trade Commission. Any future legislation regulating franchise relationships may negatively affect our operations, particularly our relationship with franchisees. Failure to comply with new or existing franchise laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales. Further national, state and local government initiatives, such as mandatory health insurance coverage, or proposed increases in minimum wage rates could adversely affect our business.Our primarily through outside investment partnerships, The Lion Fund, L.P. and The Lion Fund II, L.P., which are controlled by Mr. Biglari.will paypays a fixed fee to the Biglari Entities for business and administrative-related services. The Biglari Entities are owned by Mr. Biglari. There can be no assurance that the fees paid will be commensurate with the benefits received.are unusuallymay be concentrated and fair values are subject to a loss in value.Our predominantly held through the investment partnerships, which generally invest in common stocks. These investments aremay be largely concentrated in the common stockstocks of one investee, Cracker Barrel Old Country Store, Inc.a few investees. A significant decline in the major values of these investments may produce a large decrease in our consolidated shareholders’ equity and can have a material adverse effect on our consolidated book value per share and earnings.19,0004,000 employees, along with an asset base from which to pursue acquisitions. Furthermore, Section 3(c)(3) of the Investment Company Act excludes insurance companies from the definition of “investment company”. Because we monitor the value of our investments and structure transactions accordingly, we may structure transactions in a less advantageous manner than if we did not have Investment Company Act concerns, or we may avoid otherwise economically desirable transactions due to those concerns. In addition, adverse developments with respect to our ownership of certain of our operating subsidiaries, including significant appreciation or depreciation in the market value of certain of our publicly traded holdings, could result in our inadvertently becoming an investment company. If it were established that we were an investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the SEC, that we would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment company.7 newother forms of media, including digital media, and as a result our media business may not be able to improve its operating results.growing popularityproliferation of mobile devices and the shift in consumer preference of some consumers from print media to digital media for the delivery and consumption of content.8 mediaOil and Gas Businessrisks associated with weak economic conditions.Because magazines are generally discretionary purchasesthe effects of volatile commodity prices.consumers, circulation revenues are sensitive to general economic conditionsour oil and economic cycles. Certain economic conditions such as general economic downturns, includingnatural gas production heavily influences Southern Oil’s revenue and profitability. Extended periods of increased inflation, unemployment levels, interest rates, gasolinelow prices for crude oil or natural gas can have a material adverse impact on our results of operations.energy prices, or declining consumer confidence, may negatively impact consumer spending. Reduced consumer spending or a shift in consumer spending patterns away from discretionary items will likelyforms of system failures, any of which could result in reduced demand forsuspension of operations or harm to people or the natural environment.media business’ magazinesoperations.may resultpolitical environments. Litigation or changes in decreased revenues.national, state, or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and natural gas, could adversely affect Southern Oil’s operations and profitability.Item 1B.None.9 Item 2.Properties2018,2020, restaurant operations included 685598 company-operated and franchise locations. Restaurant operations own the land and building for 153150 restaurants. The following table lists the locations of the restaurants, as of December 31, 2018. Steak n Shake Western Sizzlin Company Operated Franchise Company Operated Franchise Total Domestic: Alabama 2 7 - 6 15 Arizona 1 1 - - 2 Arkansas - 7 - 16 23 California 1 6 - 1 8 Colorado 2 2 - - 4 Delaware - 1 - - 1 Florida 80 4 - - 84 Georgia 22 17 - 5 44 Illinois 61 10 - - 71 Indiana 68 5 - - 73 Iowa 3 - - - 3 Kansas - 4 - - 4 Kentucky 14 10 - - 24 Louisiana - 1 - - 1 Maryland - 1 - 1 2 Michigan 19 - - - 19 Mississippi - 4 - 1 5 Missouri 37 24 - - 61 Nevada - 6 - - 6 North Carolina 6 11 - 6 23 Ohio 63 3 - 1 67 Oklahoma - 3 - 7 10 Pennsylvania 7 6 - - 13 South Carolina 1 5 - 3 9 Tennessee 9 17 - 4 30 Texas 14 18 - 1 33 Virginia - 8 3 3 14 Washington - 1 - - 1 West Virginia - 2 1 - 3 International: France 2 20 - - 22 Italy - 2 - - 2 Portugal - 4 - - 4 Qatar - 1 - - 1 Saudi Arabia - 1 - - 1 Spain 1 1 - - 2 Total 413 213 4 55 685 10 Steak n Shake Western Sizzlin Company
OperatedFranchise
PartnerTraditional
FranchiseCompany
OperatedFranchise Total Domestic: Alabama 2 — 6 — 6 14 Arizona — — 1 — — 1 Arkansas — — 6 — 9 15 California — — 4 — — 4 Colorado 1 — 1 — — 2 Delaware — — 1 — — 1 Florida 45 32 5 — — 82 Georgia 16 5 12 — 4 37 Illinois 47 8 11 — — 66 Indiana 50 11 3 — — 64 Iowa 2 1 — — — 3 Kansas — — 4 — — 4 Kentucky 9 4 11 — — 24 Louisiana — — 2 — — 2 Maryland — — 1 — 1 2 Michigan 18 — — — — 18 Mississippi — — 6 — 1 7 Missouri 18 4 23 — — 45 Nebraska — — 1 — — 1 Nevada — — 6 — — 6 North Carolina 4 2 8 — 6 20 Ohio 40 11 3 — 1 55 Oklahoma — — 3 — 2 5 Pennsylvania 6 — 2 — — 8 South Carolina 1 — 2 — 2 5 Tennessee 3 5 18 — 3 29 Texas 10 3 13 — 1 27 Virginia — — 3 2 3 8 Washington DC — — 1 — — 1 West Virginia — — 2 1 — 3 International: France 2 — 28 — — 30 Italy — — 1 — — 1 Monaco 1 — — — — 1 Portugal — — 4 — — 4 Qatar — — 1 — — 1 Spain 1 — 1 — — 2 Total 276 86 194 3 39 598 Item 3.Legal ProceedingsWe are involvedvariousItem 8 for a discussion of legal proceedings and have certain unresolved claims pending. We believe, based on examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided in our consolidated financial statements is not likely to have a material effect on our results of operations, financial position or cash flow.On January 29, 2018, a shareholder of the Company filed a purported class action complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholder generally alleges claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari as a result of the issuance of a dual class structure.On March 26, 2018, a shareholder of the Company filed a purported class action complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. This shareholder generally alleges claims of breach of fiduciary duty by the members of our Board of Directors. This shareholder sought to enjoin the shareholder vote on April 26, 2018 to approve the issuance of the dual class structure. On April 16, 2018, the shareholders withdrew their motions to enjoin the shareholder vote on April 26, 2018.On May 17, 2018, the shareholders who filed the January 29, 2018 complaint and the March 26, 2018 complaint filed a new, consolidated complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholders generally allege claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari arising out of the issuance of the dual class structure. The shareholders seek, for themselves and on behalf of all other shareholders as a class, a declaration that the defendants breached their duty to the shareholders and the class, and to recover unspecified damages, pre-judgment and post-judgment interest, and an award of their attorneys’ fees and other costs.On December 14, 2018, the Judge of the Superior Court of Hamilton County, Indiana issued an order granting the Company’s motion to dismiss the shareholders’ lawsuits. On January 11, 2019, the shareholders filed an appeal of the Judge’s order dismissing the lawsuits.The Company believes the claims in each case are without merit and intends to defend these cases vigorously. Item 4.Mine Safety DisclosuresItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities3,1732,154 beneficial shareholders of its Class A common stock and 5,7763,843 beneficial shareholders of its Class B common stock atas of February 11, 2019.December 11, 2018November 13, 2020 through December 17, 2018, Sardar Biglari2020, The Lion Fund II, L.P. purchased 1,393 share1,864 shares of Class A common stock at an average price paid per share of $712.24 and 35084,017 shares of Class B common stock at an average price paid per share of $125.99. Mr. Biglaristock. The Lion Fund II, L.P. may be deemed to be an “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended. The purchases were made through open market transactions.11 Total Number of Class A Shares Purchased Average Price Paid per Class A Share Total Number of Class B Shares Purchased Average Price Paid per Class B Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs October 1, 2020 – October 31, 2020 — $ — — $ — — — November 1, 2020 – November 30, 2020 351 $ 558.46 65,623 $ 103.63 — — December 1, 2020 – December 31, 2020 1,513 $ 608.95 18,394 $ 116.72 — — Total 1,864 84,017 — 20132015 to December 31, 2018.
12 Item 6.Selected Financial Data 2018 2017 2016 2015 Revenue: Total revenues $ 809,894 $ 839,804 $ 850,076 $ 861,452 Earnings: Net earnings (loss) $ 19,392 $ 50,071 $ 99,451 $ (15,843 ) Net earnings (loss) per equivalent Class A share $ 55.71 $ 136.01 $ 271.22 $ (33.94 ) Year-end data: Total assets $ 1,029,493 $ 1,063,584 $ 1,096,967 $ 987,079 Long-term notes payable and other borrowings 240,001 256,994 281,555 296,062 Biglari Holdings Inc. shareholders’ equity $ 570,455 $ 571,328 $ 531,940 $ 451,372 Transition Period 52 Weeks Ended Fiscal 2014 2014 Revenue: Total revenues $ 224,450 $ 793,811 Earnings: Net earnings attributable to Biglari Holdings Inc. $ 91,050 $ 28,804 Net earnings per equivalent Class A share $ 161.63 $ 56.16 Year-end data: Total assets $ 1,298,509 $ 1,156,310 Long-term notes payable and other borrowings 309,003 311,448 Biglari Holdings Inc. shareholders’ equity $ 725,551 $ 638,717 2020 2019 2018 2017 2016 Revenue: Total revenues $ 433,683 $ 668,838 $ 809,894 $ 839,804 $ 850,076 Earnings: Net earnings (loss) $ (37,989) $ 45,380 $ 19,392 $ 50,071 $ 99,451 Net earnings (loss) per equivalent Class A share $ (110.05) $ 131.64 $ 55.71 $ 136.01 $ 271.22 Year-end data: Total assets $ 1,017,968 $ 1,139,309 $ 1,029,493 $ 1,063,584 $ 1,096,967 Long-term notes payable and other borrowings $ 75,182 $ 263,182 $ 240,001 $ 256,994 $ 281,555 Biglari Holdings Inc. shareholders’ equity $ 564,828 $ 616,298 $ 570,455 $ 571,328 $ 531,940 2014 through2016 and 2017 on a retrospective basis for the calculation of earnings per share. The Company has applied the “two-class method” of computing earnings per share as prescribed in ASCAccounting Standards Codification 260, “Earnings Per Share.”For total assets, periods prior to 2016 were adjusted for the reclassifications of debt issuance costs and deferred taxes. For long-term notes payable and other borrowings, periods prior to 2016 were adjusted for the reclassification of debt issuance.ASCAccounting Standards Codification 606 for we have historically recognized initial franchise fees upon the opening of a franchise restaurant. Comparative prior periods have not been adjusted.Years 2015 through 2018 ended December 31. In 2014, the Company’s Board Directors approved a change in the Company’s fiscal year-end moving from the last Wednesday in September to December 31, 2020, long-term notes payable and other borrowings of each year. Transition period is for September 25, 2014 to$75,182 were financial lease obligations. The Company’s note payable on December 31, 2014. Fiscal year 2014 ended2020, was classified as current and was repaid in full on the last Wednesday nearest September 30.13 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operationsmedia, property and casualty insurance, media and restaurants.licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of Biglari Holdings and its major operating subsidiaries.Holdings. The Company’s long-term objective is to maximize per-share intrinsic value. All major operating, investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.2018,2020, Mr. Biglari’s beneficial ownership was approximately 56.9%67.2% of the Company’s outstanding Class A common stock and 54.3%60.6% of the Company’s outstanding Class B common stock.IssuanceDual Class Common Stock5, 2018,9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company, entered into an agreement withand its predecessor registrant, now knownagency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites garage liability and commercial property as OBH Inc. (the “Predecessor”),well as homeowners and BH Merger Company,dwelling fire insurance coverages. The Company’s financial results include the results of Southern Pioneer from the date of acquisition.wholly ownedwholly-owned subsidiary of the Company. Pursuant toCompany, Southern Oil Company, acquired the agreement on April 30, 2018, BH Merger Company merged withstock of Southern Oil of Louisiana Inc. (collectively “Southern Oil”). Southern Oil primarily operates oil and intonatural gas properties offshore in the Predecessor, with the Predecessor continuing as the surviving corporation and a wholly owned subsidiaryshallow waters of the Company.As a resultGulf of the April 30, 2018 transaction, the Company has two classes of common stock, designated Class A common stock and Class B common stock. A share of Class B common stock has economic rights equivalent to 1/5th of a share of Class A common stock; however, Class B common stock has no voting rights. Upon completion of the transaction, every ten (10) shares of common stock outstanding on April 30, 2018 converted into (i) ten (10) shares of Class B common stock and (ii) one (1) share of Class A common stock.Since May 1, 2018, the shares of the Company’s Class A common stock have traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “BH.A” and the shares of the Company’s Class B common stock have traded on the NYSE under the ticker symbol “BH”. 2018 2017 2016 Operating businesses: Restaurant $ (2,613 ) $ 9,725 $ 24,834 Insurance 4,915 3,097 3,313 Media 796 435 (6,385 ) Other 472 506 (157 ) Total operating businesses 3,570 13,763 21,605 Corporate (8,661 ) 32,072 (6,387 ) Investment partnership gains 33,240 11,080 91,332 Interest expense on notes payable (8,757 ) (6,844 ) (7,099 ) $ 19,392 $ 50,071 $ 99,451 2020 2019 2018 Operating businesses: Restaurant $ (4,961) $ (10,734) $ (2,613) Insurance 9,840 5,584 4,915 Oil and gas 1,890 5,921 — Media 1,374 572 796 Interest expense (6,940) (8,817) (8,757) Total operating businesses 1,203 (7,474) (5,659) Corporate and other (9,563) (7,919) (8,189) Investment partnership gains (32,506) 60,773 33,240 Investment gains 2,877 — — $ (37,989) $ 45,380 $ 19,392 14 Contents2018 items and year-to-year comparisons between 2019 and 2018 can be found in(continued)685598 company-operated and franchise restaurants as of December 31, 2018.
Steak n Shake Western Sizzlin Company- operated Franchise Company-operated Franchise Total Total stores as of December 31, 2015 417 144 4 66 631 Net restaurants opened (closed) — 29 (1 ) (2 ) 26 Total stores as of December 31, 2016 417 173 3 64 657 Net restaurants opened (closed) (2 ) 27 1 (6 ) 20 Total stores as of December 31, 2017 415 200 4 58 677 Net restaurants opened (closed) (2 ) 13 — (3 ) 8 Total stores as of December 31, 2018 413 213 4 55 685 The term “same-store sales” refers to the sales2020.Steak n Shake Western Sizzlin Company-
operatedFranchise
PartnerTraditional
FranchiseCompany-
operatedFranchise Total Total stores as of December 31, 2017 415 — 200 4 58 677 Net restaurants opened (closed) (2) — 13 — (3) 8 Stores open on December 31, 2018 413 — 213 4 55 685 Corporate stores transitioned (29) 29 — — — — Net restaurants opened (closed) (16) — — — (7) (23) Stores open on December 31, 2019 368 29 213 4 48 662 Corporate stores transitioned (58) 57 1 — — — Net restaurants opened (closed) (34) — (20) (1) (9) (64) Stores open on December 31, 2020 276 86 194 3 39 598 company-operated units open at least 18 months at the beginningDecember 31, 2020, 57 of the current period and have remained open through276 company-operated Steak n Shake stores were closed. Throughout 2020, it became increasingly clear that the endproblems leading to operational shortfalls of certain restaurants could be fixed, thereby enabling those restaurants to produce a satisfactory return on investment. Steak n Shake reopened 33 locations which were previously closed. In addition, we plan to reopen most of our closed company-operated restaurants. As of December 31, 2019, 107 of the period. Same-store traffic measures the number368 company-operated Steak n Shake stores were closed.2018, 20172020, 2019 and 20162018 are summarized below. 2018 2017 2016 Revenue Net sales $ 740,922 $ 781,856 $ 795,322 Franchise royalties and fees 30,998 20,773 18,794 Other revenue 3,770 4,524 3,798 Total revenue 775,690 807,153 817,914 Restaurant cost of sales Cost of food 223,273 30.1 % 238,143 30.5 % 221,657 27.9 % Restaurant operating costs 393,348 53.1 % 404,373 51.7 % 395,262 49.7 % Rent 19,835 2.7 % 18,514 2.4 % 18,047 2.3 % Total cost of sales 636,456 661,030 634,966 Selling, general and administrative General and administrative 57,684 7.4 % 60,527 7.5 % 59,446 7.3 % Marketing 55,063 7.1 % 49,589 6.1 % 51,324 6.3 % Other expenses 8,060 1.0 % 4,011 0.5 % 3,907 0.5 % Total selling, general and administrative 120,807 15.6 % 114,127 14.1 % 114,677 14.0 % Depreciation and amortization 18,831 2.4 % 20,623 2.6 % 21,573 2.6 % Interest on obligations under leases 8,207 9,082 9,475 Earnings before income taxes (8,611 ) 2,291 37,223 Income tax expense (benefit) (5,998 ) (7,434 ) 12,389 Net earnings (loss) $ (2,613 ) $ 9,725 $ 24,834 2020 2019 2018 Revenue Net sales $ 306,577 $ 578,164 $ 740,922 Franchise partner fees 22,213 3,829 33 Franchise royalties and fees 18,794 23,360 30,965 Other revenue 3,082 4,867 3,770 Total revenue 350,666 610,220 775,690 Restaurant cost of sales Cost of food 88,698 28.9 % 176,346 30.5 % 223,273 30.1 % Restaurant operating costs 137,574 44.9 % 307,337 53.2 % 393,348 53.1 % Rent 20,383 6.6 % 17,266 3.0 % 19,835 2.7 % Total cost of sales 246,655 500,949 636,456 Selling, general and administrative General and administrative 35,922 10.2 % 47,685 7.8 % 57,684 7.4 % Marketing 21,507 6.1 % 39,476 6.5 % 55,063 7.1 % Other expenses 2,972 0.8 % 1,753 0.3 % 2,383 0.3 % Total selling, general and administrative 60,401 17.2 % 88,914 14.6 % 115,130 14.8 % Impairments 23,646 6.7 % 8,186 1.3 % 5,677 0.7 % Depreciation and amortization 19,042 5.4 % 21,174 3.5 % 18,831 2.4 % Interest on finance leases and obligations 6,274 7,816 8,207 Earnings (loss) before income taxes (5,352) (16,819) (8,611) Income tax expense (benefit) (391) (6,085) (5,998) Contributions to net earnings $ (4,961) $ (10,734) $ (2,613) 15 ContentsManagement’s Discussion2020, and Analysis(continued)20182020 were $740,922$306,577, representing a decrease of $40,934 when$271,587, as compared to 2017.2019. The decreased performance of our restaurant operations in 20182020 was largely driven by Steak n Shake’s same-store sales, which decreased 5.1% whereas customer traffic decreased by 7.0%. Net salesprimarily due to the closing of dining rooms and stores over the course of the year.2017 were $781,856 representing a decrease of $13,466 when2020, as compared to 2016. The decreased performance$3,829 during 2019. As of our restaurant operations in 2017 was largely driven by Steak n Shake’s same-store sales. In 2017, Steak n Shake’s same-store sales decreased by 1.8%December 31, 2020, there were 86 franchise partner units, as compared to 2016.In 2018,29 franchise partner units as of December 31, 2019. We continue to transition from company-operated units to franchise-operated ones. For a franchise partner to be awarded a restaurant, he or she must demonstrate the gold standard in service.increased $10,225which decreased by $4,566, or 49.2%. During 2018, Steak n Shake opened 33 franchise units and closed 20. Western Sizzlin opened one franchise unit and closed four.19.5% during 2020, as compared to 2019. The increasedecrease in franchise royalties and fees was primarily due to franchise stores that closed during the adoptionpandemic.fees during 2017 increased $1,979 compared to 2016. In 2017 Steak n Shake opened 40 franchise units and closed thirteen. During the same period, six Western Sizzlin franchise units closed. Analysis(continued)increase in franchise fees and royalties during 2017 are primarily attributable to new Steak n Shake franchise units, which opened in 2017 and 2016.Costcost of food in 20182020 was $223,273$88,698, or 30.1%28.9% of net sales, as compared with $238,143to $176,346, or 30.5% of net sales in 2017 and $221,6572019. Restaurant operating costs during 2020 were $137,574, or 27.9%44.9% of net sales, as compared to $307,337, or 53.2% of net sales in 2016.2019. The increasedecrease in the cost of food and restaurant operating costs during 2020 as a percent of net sales during 2018 and 2017 compared to 20162019 was attributable to increased commodity costs.Restaurant operating costs during 2018 were $393,348 or 53.1% oflower net sales compared to $404,373 or 51.7% of net sales in 2017resulting from store closures as well as dining room closures. Throughout 2020, our business was mainly off-premises — drive-through, delivery, and $395,262 or 49.7% of net sales in 2016. Total costs as a percent of net sales during 2018 and 2017 increased compared to the respective prior years principally due to higher wages.20182020 were $120,807$60,401, or 15.6%17.2% of total revenues.$2,843$11,763 during 20182020, as compared to 2017,2019, primarily because of decreased personnel costs.expense increasedexpenses decreased by $5,474$17,969 in 20182020 as compared to 20172019, primarily by shifting to a digital strategy.adoptionimpact of new accounting guidance. New ASC 606 accounting guidance requires the Company to recognize franchise fees as revenueCOVID-19. The pandemic caused dining room closures and reflect advertising expenditures madehad a negative impact on behalf of the franchisees as marketing expense. The new guidance increased marketing expenses by $9,689 during 2018.Other expenses increased by $4,049 during 2018 compared to 2017. The increase in other expenses was primarily due to asset impairments of $5,677.Selling, general and administrative expenses during 2017 were $114,127 or 14.1% of total revenues.General and administrative expenses increased by $1,081 during 2017 compared to 2016, primarily because of increased recruiting.Marketing expense decreased by $1,735 in 2017 compared to 2016 because of a decrease in promotions.$8,207$6,274 during 2018,2020, versus $9,082$7,816 during 2017 and $9,475 during 2016.2019. The year over yearyear-over-year decrease in interest expense is primarily attributable to the maturity and retirement of lease obligations. The total obligationsleases outstanding at December 31, 2018 were $64,200, compared to $80,752 at December 31, 2017separate local management. Biglari Holdings’ insurance operations consist of First Guard and $89,498 at December 31, 2016. 16 2020 2019 2018 Underwriting gain attributable to: First Guard 9,379 6,477 5,634 Southern Pioneer 620 — — Pre-tax underwriting gain 9,999 6,477 5,634 Income tax expense 2,100 1,295 1,127 Net underwriting gain 7,899 5,182 4,507 2020 2019 2018 Premiums written $ 49,220 $ 28,746 $ 26,465 Insurance losses 24,828 16,924 15,457 Underwriting expenses 14,393 5,345 5,374 Pre-tax underwriting gain 9,999 6,477 5,634 Other income and expenses Investment income 1,212 790 579 Other income (expense) 1,220 (164) 2 Total other income 2,432 626 581 Earnings before income taxes 12,431 7,103 6,215 Income tax expense 2,591 1,519 1,300 Contribution to net earnings $ 9,840 $ 5,584 $ 4,915 InsuranceEarnings of our insurance business are summarized below. 2018 2017 2016 Premiums earned $ 26,465 $ 24,242 $ 22,397 Insurance losses 15,457 14,959 12,641 Underwriting expenses 5,374 4,765 4,843 Pre-tax underwriting gain 5,634 4,518 4,913 Other income and expenses Investment income and commissions 1,163 701 600 Other expense (582 ) (449 ) (378 ) Total other income 581 252 222 Earnings before income taxes 6,215 4,770 5,135 Income tax expense 1,300 1,673 1,822 Contribution to net earnings $ 4,915 $ 3,097 $ 3,313 trucking insurer.In 2018, premiums earned increased $2,223 or 9.2% compared to 2017. Premiums earned during 2017 increased $1,845 or 8.2% compared to 2016. Pre-tax A summary of First Guard’s underwriting gain during 2018 was $5,634, an increaseresults follows.2020 2019 2018 Amount % Amount % Amount % Premiums written $ 30,210 100.0 % $ 28,746 100.0 % $ 26,465 100.0 % Insurance losses 14,031 46.5 % 16,924 58.9 % 15,457 46.5 % Underwriting expenses 6,800 22.5 % 5,345 18.6 % 5,374 20.3 % Total losses and expenses 20,831 69.0 % 22,269 77.5 % 20,831 66.8 % Pre-tax underwriting gain $ 9,379 $ 6,477 $ 5,634 $1,116 (24.7%) compared to 2017. Pre-taxacquisition March 9, 2020.A summary of Southern Pioneer’s underwriting gain during 2017 was $4,518, a decreaseresults follows.2020 Amount % Premiums written $ 19,010 100.0 % Insurance losses 10,797 56.8 % Underwriting expenses 7,593 39.9 % Total losses and expenses 18,390 96.7 % Pre-tax underwriting gain $ 620 $395 (8.0%) compared to 2016. We strive to generate pre-tax underwriting profits every year.Insurance premiums and other on the statement of earnings includes premiums earned,net investment income attributable to our insurance operations follows.2020 2019 2018 Interest, dividends and other investment income: First Guard $ 285 $ 790 $ 579 Southern Pioneer 927 — — Pre-tax investment income 1,212 790 579 Income tax expense 255 166 122 Net investment income $ 957 $ 624 $ 457 commissions, which are included in other income in the above table.17 2020 2019 Oil and gas revenue $ 26,255 $ 24,436 Oil and gas production costs 8,700 7,259 Depreciation, depletion and accretion 12,527 8,218 General and administrative expenses 3,010 927 Earnings before income taxes 2,018 8,032 Income tax expense 128 2,111 Contribution to net earnings $ 1,890 $ 5,921 2018 2017 2016 Revenue $ 6,576 $ 7,708 $ 9,165 Media cost of sales 4,152 6,527 15,834 Selling, general and administrative expenses 1,329 1,570 3,000 Depreciation and amortization 27 50 409 Earnings (loss) before income taxes 1,068 (439 ) (10,078 ) Income tax expense (benefit) 272 (874 ) (3,693 ) Contribution to net earnings $ 796 $ 435 $ (6,385 ) 2020 2019 2018 Media and licensing revenue $ 4,083 $ 4,099 $ 6,576 Media and licensing cost 2,156 3,181 4,152 General and administrative expenses 143 176 1,329 Depreciation and amortization — — 27 Earnings before income taxes 1,784 742 1,068 Income tax expense 410 170 272 Contribution to net earnings $ 1,374 $ 572 $ 796 have taken the risk on the belief that the probability for gain in value more than justifies the riskconsider investment income as a component of loss. 2018 2017 2016 Investment partnership gains $ 40,411 $ 6,965 $ 135,886 Loss on contribution of securities to investment partnership — — (306 ) Investment partnership gains 40,411 6,965 135,580 Income tax expense (benefit) 7,171 (4,115 ) 44,248 Contribution to net earnings $ 33,240 $ 11,080 $ 91,332 2020 2019 2018 Investment partnership gains (losses) $ (43,032) $ 78,133 $ 40,411 Tax expense (benefit) (10,526) 17,360 7,171 Contribution to net earnings $ (32,506) $ 60,773 $ 33,240 gains and gains/losses from changes in market values of underlying investments held by the investment partnerships and dividends earned by the partnerships. The volatility of the gains and losses during the various years is attributable to changes in market values of investments. Dividend income has a lower effective tax rate than income from changes in market values.The investments held by the investment partnerships are largely concentratedcapital gains. Changes in the common stockmarket values of one investee, Cracker Barrel Old Country Store, Inc.18 Management’s Discussion and Analysis(continued) 2018 2017 2016 Interest expense on notes payable and other borrowings $ (11,677 ) $ (11,040 ) $ (11,450 ) Income tax benefit (2,920 ) (4,196 ) (4,351 ) Interest expense net of tax $ (8,757 ) $ (6,844 ) $ (7,099 ) The outstanding balance on Steak n Shake’s credit facility on December 31, 2018 was $183,698 compared to $185,898 on December 31, 2017. The decrease in the outstanding balance was due to debt payments of $2,200 during 2018. The interest rate was 6.28% and 5.32% as of December 31, 2018 and 2017, respectively. 2020 2019 2018 Interest expense on notes payable and other borrowings $ (9,262) $ (12,442) $ (11,677) Tax benefit (2,322) (3,625) (2,920) Interest expense net of tax $ (6,940) $ (8,817) $ (8,757) 2018 increased2020 decreased by $637$3,180 compared to 2017, primarily due to higher interest rates during 2018. Interest expense during 2017 decreased by $410 compared to 2016, primarily2019 due to lower debt balances and lower average interest rates during 2017.a benefit of $2,637$12,212 in 20182020 versus a benefit of $62,961 in 2017 and an expense of $46,812$9,761 in 2016. The income2019. Income tax expense decreased during 2020 compared to 2019, primarily due to a tax benefit of $2,637 was primarily from the use$10,526 for investment partnership losses of employment tax credits generated by restaurant operations. The 2017 Tax Cuts$43,032.Jobs Act reduces the U.S. statutory corporate tax rate from 35% to 21% for our tax years beginning in 2018, which resulted in the re-measurement of the federal portion of our deferred tax assets and liabilities as of December 31, 2017. The change in the tax rate resulted in a onetime deferred tax benefit of $51,707 during 2017. The deferred income tax benefit is derived from a re-measurement in deferred tax balances to the new statutory rate applicable to unrealized gains on marketable securities held by the Company and in the investment partnerships.Corporateother companies.licensing, and oil and gas businesses. Corporate net losses during 2018 were $8,661 versus net earnings of $32,072 during 2017 and other net losses of $6,387$9,563 during 2016. In 2017, an increase in shareholders’ equity was derived from a re-measurement in deferred tax liability2020 increased compared to the new statutory rate applicable2019 due to unrealized gains on marketable securities. The majority of the Company’s deferred tax liabilities associated with unrealized gains on marketable securities are held in the corporate account. 20182020 was $570,455,$564,828, a decrease of $873$51,470 compared to the December 31, 20172019 balance. Shareholders’ equity increased by $19,392 inThe decrease was primarily due to net incomeloss of $37,989 and was offset by an increase in treasury stock of $19,292. The increase in treasury stock was primarily a result of recording our proportionate interest in shares of the Company’s stock purchased during 2018 by The Lion Fund II, L.P. under a Rule 10b5-1 trading plan. The shares purchased by the investment partnership are legally outstanding but under accounting convention the Company’s proportional ownership of the shares is reflected as treasury shares in the consolidated financial statements. December 31, 2018 2017 Cash and cash equivalents $ 48,557 $ 58,577 Investments 33,860 23,289 Investments reported in other current assets and other assets 4,463 4,463 Fair value of interest in investment partnerships 715,102 925,279 Total cash and investments 801,982 1,011,608 Less: portion of Company stock held by investment partnerships (157,622 ) (359,258 ) Carrying value of cash and investments on balance sheet $ 644,360 $ 652,350 December 31, 2020 2019 Cash and cash equivalents $ 24,503 $ 67,772 Investments 94,861 44,856 Fair value of interest in investment partnerships 590,926 666,123 Total cash and investments 710,290 778,751 Less: portion of Company stock held by investment partnerships (171,376) (160,581) Carrying value of cash and investments on balance sheet $ 538,914 $ 618,170 19 Management’s Discussion and Analysis(continued)Liquidity 2018 2017 2016 Net cash provided by operating activities $ 20,678 $ 25,780 $ 63,349 Net cash used in investing activities (25,290 ) (11,548 ) (28,795 ) Net cash used in financing activities (7,530 ) (23,000 ) (15,231 ) Effect of exchange rate changes on cash (78 ) 165 (38 ) Increase (decrease) in cash, cash equivalents and restricted cash $ (12,220 ) $ (8,603 ) $ 19,285 2020 2019 2018 Net cash provided by operating activities $ 117,556 $ 93,683 $ 20,678 Net cash used in investing activities (129,487) (69,982) (25,290) Net cash used in financing activities (29,109) (8,010) (7,530) Effect of exchange rate changes on cash 10 (5) (78) Increase (decrease) in cash, cash equivalents and restricted cash $ (41,030) $ 15,686 $ (12,220) 2018,2020, cash from operating activities decreasedincreased by $5,102$23,873, as compared to 2017 and by $42,671 compared to 2016. Net earnings (excluding non-cash items) were $3,061 during 2018, $3,316 during 2017 and $28,780 during 2016.2019. The decrease in net earnings during 2018 and 2017 compared to 2016increase was primarily due to decreases in restaurant net earnings. Distributions from investment partnerships were $29,660 during 2018, $9,395 during 2017increased operating income (excluding impairments and $26,265 during 2016. Changes in working capital accounts were a decreasedepreciation) of $12,043 during 2018, and increases during 2017 and 2016 of $13,069 and $8,304, respectively. The decrease of working capital accounts during 2018 was primarily tied$30,283, as compared to the payment of the 2017 CEO incentive fee of $7,353. And the accrual of the 2017 CEO incentive fee increased working capital accounts during 2017.20182020 by $13,742$59,505, as compared to 2017, and decreased2019. The increase was primarily due to purchases of investment partnership interests in the amount of $70,130 during 2020.$3,505$21,099 in 2020, as compared to 2016. Capital expenditures during 2018 were $7,259 and $6,630 higher than capital expenditures during 2017 and 2016, respectively. Purchases2019. The increase was primarily due to voluntary prepayments of investments, net of redemptions of fixed maturity securities during 2018 were $9,273 and $6,385 higher than purchases of investments during 2017 and 2016, respectively. Distributions from investment partnerships of $39,040 during 2018 were reinvested into the investment partnerships during 2018.During 2018, 2017 and 2016 we incurred debt payments of $7,579, $23,030 and $15,295, respectively. Debt obligations were reduced in 2018 because of additional principal payments on long-termSteak n Shake term debt during 2017 and 2016.hand, existing credit facilities, and the sale of excess properties and investments.hand. We continually review available financing alternatives.$220,000 and a senior secured revolving credit facility in an aggregate principal amount of up to $30,000. On October 27, 2017, Steak n Shake determined to end the use of its senior secured revolving credit facility. In 2017, Steak n Shake deposited cash to satisfy required collateral for casualty insurance previously collateralized by letters of credit issued through the revolving credit facility. The deposits are recorded in other assets under restricted cash in the consolidated balance sheets.iswas scheduled to mature on March 19, 2021. It amortizes at an annual rate of 1.0% in equal quarterly installments, beginning June 30, 2014, at 0.25% of the original principal amount of the term loan, subject to mandatory prepayments from excess cash flow, asset sales and other events described in the credit agreement. The balance will be due at maturity.Steak n Shake has the right to request an incremental term loan facility from participating lenders and/or eligible assignees at any time, up to an aggregate total principal amount not to exceed $70,000 if certain customary conditions within the credit agreement are met.Borrowings bear interest at a rate per annum equal to a base rate or a Eurodollar rate (minimum of 1%) plus an applicable margin. Interest on the term loan is based on a Eurodollar rate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. The interest rate on the term loan was 6.28% and 5.32% as of December 31, 2018 and 2017, respectively.The credit agreement includes customary affirmative and negative covenants and events of default. As of December 31, 2018, we were in compliance with all covenants.2020, $152,506 was outstanding. The Company repaid Steak n Shake’s credit facility contains restrictionsoutstanding balance in full on its ability to pay dividends to Biglari Holdings.20 Management’s Discussion and Analysis(continued)The term loan is secured by first priority security interests in substantially all the assets of Steak n Shake. Disruptions in debt capital markets that restrict access to funding when needed could adversely affect the results of operations, liquidity and capital resources of Steak n Shake. Biglari Holdings is not a guarantor under the credit facility. 2018, $183,698 was outstanding under the term loan.Western Sizzlin RevolverAs of December 31, 2018,2020 and 2019, Western Sizzlin had no debt outstanding under theits revolver.Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. managementus to make estimates and judgments concerning transactions that will be settled several yearsin determining the amounts reflected in the future. Amounts recognized in our consolidated financial statements from suchstatements. Such estimates areand judgments necessarily based on numerous assumptions involvinginvolve varying, and potentiallypossibly significant, degrees of judgment and uncertainty. Accordingly, thecertain amounts currently reflectedrecorded in our consolidatedthe financial statements will likely increase or decreasebe adjusted in the future as additionalbased on new available information becomes available.We believe the following criticaland changes in other facts and circumstances. A discussion of our principal accounting policies represent our morethat required the application of significant judgments and estimates used in preparation of our consolidated financial statements. Given the current composition of our business, we do not believe that any accounting policies related to our insurance or media businesses were critical to the preparation of our consolidated financial statements as of and for the year ended December 31, 2018.(i) Biglari Holdings Inc., and (ii) the wholly owned subsidiaries of Biglari Holdings Inc. in which control can be exercised. In evaluating whether we have a controlling interest in entities in which we wouldWe consolidate we consider the following: (1) for voting interest entities, we consolidate those entities in which we own a majority of the voting interests; and (2) for limited partnership entities, we consolidate those entities if we are the general partner of such entities and for which no substantive removal rights exist. The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered include the determination as to the degree of control over an entity by its various equity holders and the design of the entity. All intercompany accounts and transactions are eliminated in consolidation.InsuranceWe currently self-insure a significant portionexpected losses under our workers’ compensation, general liability, directors’ and officers’ liability, and auto liability insurance programs. For certain programs, we purchase reinsurance for individual and aggregate claims that exceed predetermined limits. We record a liability for all unresolved claims and our estimates of incurred but not reported (“IBNR”) claims at the anticipated cost to us. The liability estimateproved reserves, which is based on the requirement of reasonable certainty, is an ongoing process based on rigorous technical evaluations, commercial and market assessments and detailed analysis of well and reservoir information receivedsuch as flow rates and reservoir pressures. Although we are reasonably confident that proved reserves will be produced, the timing and amount recovered can be affected by a number of factors including, reservoir performance, government policies, and significant changes in long-term oil and natural gas price levels. In addition, proved reserves could be affected by an extended period of low prices which could reduce the level of our partners’ capacity to fund their share of joint projects. Accordingly, reserve estimates are generally different from insurance companies, combined with management’s judgments regarding frequencythe quantities of natural gas and severityoil that are ultimately recovered. We cannot predict the amounts or timing of claims, claims development history, and settlement practices. Significant judgment is required to estimate IBNR claims as parties have yet to assert a claim, and therefore the degree to which injuries have been incurred and the related costs have not yet been determined. Additionally, estimates about future costs involve significant judgment regarding legislation, case jurisdictions, and other matters.21 Management’s Discussion and Analysis(continued) As of December 31, 2018, a change of one percentage point in an enacted tax rate would have an impact of approximately $3,800 on net earnings.We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.are required to assessevaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value. The valuation methodology and underlying financial information included in our determination of fair value require significant management judgments. We use both market and income approaches to derive fair value. The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows. Changessuch estimatesthe lease is not readily determinable in most of our leases, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms include options to extend or terminate the applicationlease when it is reasonably certain that we will exercise that option. We do not record lease contracts with a term of alternative assumptions could produce significantly different results.LeasesRestaurant operations12 months or less on our consolidated balance sheets. We recognize fixed lease certain properties underexpense for operating leases. Many of these lease agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. Rent expense is recognizedleases on a straight-line basis over the expected lease term, including cancelable option periods when failure to exercise such options would result in an economic penalty. We use a time period for straight-line rentterm. For finance leases, we recognize amortization expense calculation that equals or exceedson the time period used for depreciation. In addition, the rent commencement date ofright-of-use asset and interest expense on the lease term isliability over the earlier of the date when they become legally obligated for the rent payments or the date when they take access to the grounds for build out. Accounting for leases involves significant management judgment.22 20182020 are shown in the following table. Payments due by period Contractual Obligations Less than
1 year 1 – 3 years 3 – 5 years More than
5 years Total Long-term debt (1)(2) $ 11,926 $ 193,562 $ — $ — $ 205,488 Capital leases and finance obligations (1) 11,169 14,075 4,543 1,673 31,460 Operating leases (3) 18,397 34,611 30,811 38,499 122,318 Purchase commitments (4) 7,320 8,699 1,000 — 17,019 Other long-term liabilities (5) — — — 2,149 2,149 Total $ 48,812 $ 250,947 $ 36,354 $ 42,321 $ 378,434 Payments due by period Contractual Obligations Less than
1 year1 – 3 years 3 – 5 years More than
5 yearsTotal Short-term debt (1) $ 153,512 $ — $ — $ — $ 153,512 Finance obligations and finance lease liabilities (2) 12,642 20,728 14,034 9,582 56,986 Operating leases (3) 13,521 20,553 13,548 9,447 57,069 Purchase commitments (4) 7,044 1,755 — — 8,799 Other long-term liabilities (5) — — — 1,368 1,368 Total $ 186,719 $ 43,036 $ 27,582 $ 20,397 $ 277,734 (1)Includes principal and interest and assumes payoff of indebtedness at maturity date.(2)Includes outstanding borrowings under the Credit Facility.(3)Excludes amounts to be paid for contingent rents. Includes amounts to be paid for subleased properties.(4)Includes agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms. Excludes agreements that are cancelable without penalty.(5)Includes liabilities for Non-Qualified Deferred Compensation Plan. Excludes our unrecognized tax benefits of $341 as of December 31, 2018 because we cannot make a reliable estimate of the timing of cash payments.arrangements other than operating leases entered into in the normal course of business.23 Item 7A.Quantitative and Qualitative Disclosures About Market Riska concentrated position in the common stock of Cracker Barrel Old Country Store, Inc.positions. A significant decline in the general stock market or in the prices of major investments may produce a large net loss and decrease in our consolidated shareholders’ equity. Decreases in values of equity investments can have a materially adverse effect on our earnings and on consolidated shareholders’ equity.$59,581,$51,441 along with a corresponding change in shareholders’ equity of approximately 8%7%.Borrowings on Steak n Shake’s credit facility bear interest at a rate per annum equal to a base rate or a Eurodollar rate (minimum of 1%) plus an applicable margin. Interest on the term loan is based on a Eurodollar rate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. At December 31, 2018, a hypothetical 100 basis point increase in short-term interest rates would have an impact of approximately $1,400 on our net earnings.2018, 20172020, 2019 and 2016.24 Item 8.Financial Statements and Supplementary Data20182020 and 2017,2019, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with accounting principles generally accepted in the United States of America.2018,2020, based on criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2019,27, 2021 expressed an unqualified opinion on the Company's internal control over financial reporting.1213 to the consolidated financial statements, the Company and its subsidiaries have invested in investment partnerships in the form of limited partnership interests. These investment partnerships represent related parties, and such investments are subject to a rolling five-year lock up period under the terms of the respective partnership agreements.agreements for the investment partnerships. The value of these investments reported in the Company’s consolidated balance sheets as of December 31, 20182020 and 20172019 totals $557,480,000$419,550,000 and $566,021,000,$505,542,000, respectively. Our opinion is not modified with respect to this matter.23, 201925 2018,2020, based on criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020, based on criteria established inInternal Control — Integrated Framework (2013) issued by COSO.2018,2020, of the Company and our report dated February 23, 2019,27, 2021, expressed an unqualified opinion on those financial statements and included an emphasis of a matter paragraph relating to the Company’s investment in related party investment partnerships.23, 201926 December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $ 48,557 $ 58,577 Investments 33,860 23,289 Receivables 15,743 16,284 Inventories 7,537 7,268 Other current assets 9,236 7,221 Total current assets 114,933 112,639 Property and equipment 274,716 295,800 Goodwill 40,052 40,081 Other intangible assets 28,114 26,564 Investment partnerships 557,480 566,021 Other assets 14,198 22,479 Total assets $ 1,029,493 $ 1,063,584 Liabilities and shareholders’ equity Liabilities Current liabilities: Accounts payable and accrued expenses $ 117,265 $ 128,744 Current portion of notes payable and other borrowings 5,720 6,748 Total current liabilities 122,985 135,492 Long-term notes payable and other borrowings 240,001 256,994 Deferred taxes 86,871 88,401 Other liabilities 9,181 11,369 Total liabilities 459,038 492,256 Shareholders’ equity Common stock 1,138 1,071 Additional paid-in capital 381,904 382,014 Retained earnings 564,160 565,504 Accumulated other comprehensive loss (2,516 ) (1,404 ) Treasury stock, at cost (374,231 ) (375,857 ) Biglari Holdings Inc. shareholders’ equity 570,455 571,328 Total liabilities and shareholders’ equity $ 1,029,493 $ 1,063,584 December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 24,503 $ 67,772 Investments 94,861 44,856 Receivables 19,185 21,640 Inventories 2,737 4,674 Other current assets 6,492 6,449 Total current assets 147,778 145,391 Property and equipment 316,122 350,627 Operating lease assets 42,832 59,719 Goodwill 53,596 40,040 Other intangible assets 24,065 27,349 Investment partnerships 419,550 505,542 Other assets 14,025 10,641 Total assets $ 1,017,968 $ 1,139,309 Liabilities and shareholders’ equity Liabilities Current liabilities: Accounts payable and accrued expenses $ 118,821 $ 121,079 Current portion of operating lease liabilities 10,614 11,635 Current portion of notes payable and other borrowings 159,012 7,103 Total current liabilities 288,447 139,817 Long-term notes payable and other borrowings 75,182 263,182 Operating lease liabilities 36,463 53,271 Deferred taxes 41,346 54,230 Asset retirement obligations 10,022 10,447 Other liabilities 1,680 2,064 Total liabilities 453,140 523,011 Shareholders’ equity Common stock 1,138 1,138 Additional paid-in capital 381,788 381,788 Retained earnings 573,050 611,039 Accumulated other comprehensive loss (1,531) (2,810) Treasury stock, at cost (389,617) (374,857) Biglari Holdings Inc. shareholders’ equity 564,828 616,298 Total liabilities and shareholders’ equity $ 1,017,968 $ 1,139,309 27 Year Ended
December 31, 2018 2017 2016 Revenues Restaurant operations $ 775,690 $ 807,153 $ 817,914 Insurance premiums and other 27,628 24,943 22,997 Media advertising and other 6,576 7,708 9,165 809,894 839,804 850,076 Cost and expenses Restaurant cost of sales 636,456 661,030 634,966 Insurance losses and underwriting expenses 20,831 19,724 17,484 Media cost of sales 4,152 6,527 15,834 Selling, general and administrative 132,909 130,808 127,259 Depreciation and amortization 19,318 21,448 22,925 813,666 839,537 818,468 Other income (expenses) Interest expense (11,677 ) (11,040 ) (11,450 ) Interest on obligations under leases (8,207 ) (9,082 ) (9,475 ) Investment partnership gains 40,411 6,965 135,580 Total other income (expenses) 20,527 (13,157 ) 114,655 Earnings (loss) before income taxes 16,755 (12,890 ) 146,263 Income tax expense (benefit) (2,637 ) (62,961 ) 46,812 Net earnings $ 19,392 $ 50,071 $ 99,451 Earnings per share Net earnings per equivalent Class A share * $ 55.71 $ 136.01 $ 271.22 Year Ended December 31, 2020 2019 2018 Revenues Restaurant operations $ 350,666 $ 610,220 $ 775,690 Insurance premiums and other 52,679 30,083 27,628 Oil and gas 26,255 24,436 0 Media and licensing 4,083 4,099 6,576 433,683 668,838 809,894 Cost and expenses Restaurant cost of sales 246,655 500,949 636,456 Insurance losses and underwriting expenses 39,221 22,269 20,831 Oil and gas production costs 8,700 7,259 0 Media and licensing cost 2,156 3,181 4,152 Selling, general and administrative 76,360 100,150 127,232 Impairments 23,646 8,186 5,677 Depreciation, depletion and amortization 32,222 29,578 19,318 Interest expense 15,536 20,258 19,884 444,496 691,830 833,550 Other income (expenses) Investment gains 3,644 0 0 Investment partnership gains (losses) (43,032) 78,133 40,411 Total other income (expenses) (39,388) 78,133 40,411 Earnings (loss) before income taxes (50,201) 55,141 16,755 Income tax expense (benefit) (12,212) 9,761 (2,637) Net earnings (loss) $ (37,989) $ 45,380 $ 19,392 Earnings per share Net earnings per equivalent Class A share * $ (110.05) $ 131.64 $ 55.71 $11.14($22.01) for 2018, $27.202020, $26.33 for 20172019 and $54.24$11.44 for 2016. Year Ended
December 31, 2018 2017 2016 Net earnings $ 19,392 $ 50,071 $ 99,451 Other comprehensive income: Reclassification of investment appreciation in net earnings (73 ) — 306 Applicable income taxes 15 — (113 ) Net change in unrealized gains on investments — 284 568 Applicable income taxes — (89 ) (211 ) Foreign currency translation (1,054 ) 1,985 (455 ) Other comprehensive income (loss), net (1,112 ) 2,180 95 Total comprehensive income $ 18,280 $ 52,251 $ 99,546 Year Ended December 31, 2020 2019 2018 Net earnings (loss) $ (37,989) $ 45,380 $ 19,392 Other comprehensive income: Reclassification to earnings 0 0 (73) Applicable income taxes 0 0 15 Foreign currency translation 1,279 (294) (1,054) Other comprehensive income (loss), net 1,279 (294) (1,112) Total comprehensive income (loss) $ (36,710) $ 45,086 $ 18,280 28 Year Ended
December 31, 2018 2017 2016 Operating activities Net earnings $ 19,392 $ 50,071 $ 99,451 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 19,318 21,448 22,925 Provision for deferred income taxes (2,153 ) (64,321 ) 38,485 Asset impairments and other non-cash expenses 6,481 3,860 1,693 (Gain) loss on disposal of assets 993 (777 ) 1,806 Investment (gains) losses (including contributions) (559 ) — 306 Investment partnership gains (40,411 ) (6,965 ) (135,886 ) Distributions from investment partnerships 29,660 9,395 26,265 Changes in receivables and inventories (359 ) (2,235 ) 4,280 Changes in other assets 536 268 116 Changes in accounts payable and accrued expenses (12,220 ) 15,036 3,908 Net cash provided by operating activities 20,678 25,780 63,349 Investing activities Capital expenditures (15,293 ) (8,034 ) (8,663 ) Purchases of perpetual lease rights (2,503 ) — (3,367 ) Proceeds from property and equipment disposals 2,590 1,004 1,084 Distributions from investment partnerships 39,040 — — Purchases of limited partner interests (39,040 ) (3,707 ) (14,150 ) Purchases of investments (58,642 ) (42,648 ) (35,784 ) Redemptions of fixed maturity securities 48,558 41,837 32,085 Net cash used in investing activities (25,290 ) (11,548 ) (28,795 ) Financing activities Payments on revolving credit facility (175 ) (202 ) (409 ) Principal payments on long-term debt (2,200 ) (17,200 ) (9,277 ) Principal payments on direct financing lease obligations (5,204 ) (5,628 ) (5,609 ) Proceeds for exercise of stock options 49 30 64 Net cash used in financing activities (7,530 ) (23,000 ) (15,231 ) Effect of exchange rate changes on cash (78 ) 165 (38 ) Increase (decrease) in cash, cash equivalents and restricted cash (12,220 ) (8,603 ) 19,285 Cash, cash equivalents and restricted cash at beginning of period 67,230 75,833 56,548 Cash, cash equivalents and restricted cash at end of period $ 55,010 $ 67,230 $ 75,833 Year Ended December 31, 2020 2019 2018 Operating activities Net earnings (loss) $ (37,989) $ 45,380 $ 19,392 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 32,222 29,578 19,318 Provision for deferred income taxes (12,216) (38,545) (2,153) Asset impairments and other non-cash expenses 24,636 9,113 6,481 (Gains) losses on disposal of assets (868) 264 993 Investment (gains) losses (4,856) (1,172) (559) Investment partnership (gains) losses 43,032 (78,133) (40,411) Distributions from investment partnerships 98,330 129,329 29,660 Changes in receivables and inventories 7,014 3,669 (359) Changes in other assets 733 10,450 536 Changes in accounts payable and accrued expenses (32,482) (16,250) (12,220) Net cash provided by operating activities 117,556 93,683 20,678 Investing activities Capital expenditures (20,702) (17,679) (15,293) Purchases of perpetual lease rights 0 0 (2,503) Proceeds from property and equipment disposals 4,415 4,577 2,590 Acquisition of business, net of cash acquired (36,187) (51,062) 0 Distributions from investment partnerships 0 40,000 39,040 Purchases of limited partner interests (70,130) (40,000) (39,040) Purchases of investments (299,950) (154,848) (58,642) Redemptions of fixed maturity securities 293,067 149,030 48,558 Net cash used in investing activities (129,487) (69,982) (25,290) Financing activities Payments on revolving credit facility (500) 0 (175) Proceeds from revolving credit facility 500 0 0 Principal payments on long-term debt (23,279) (2,200) (2,200) Principal payments on direct financing lease obligations (5,830) (5,810) (5,204) Proceeds for exercise of stock options 0 0 49 Net cash used in financing activities (29,109) (8,010) (7,530) Effect of exchange rate changes on cash 10 (5) (78) Increase (decrease) in cash, cash equivalents and restricted cash (41,030) 15,686 (12,220) Cash, cash equivalents and restricted cash at beginning of period 70,696 55,010 67,230 Cash, cash equivalents and restricted cash at end of period $ 29,666 $ 70,696 $ 55,010 Year Ended December 31, 2020 2019 2018 Cash and cash equivalents $ 24,503 $ 67,772 $ 48,557 Restricted cash included in other long-term assets 5,163 2,924 6,453 Cash, cash equivalents and restricted cash at end of period $ 29,666 $ 70,696 $ 55,010 29 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Balance at December 31, 2015 $ 1,071 $ 391,853 $ 415,982 $ (3,679 ) $ (353,855 ) $ 451,372 Net earnings 99,451 99,451 Other comprehensive income, net 95 95 Adjustment to treasury stock for holdings in investment partnerships (9,939 ) (9,103 ) (19,042 ) Exercise of stock options (8 ) 72 64 Balance at December 31, 2016 $ 1,071 $ 381,906 $ 515,433 $ (3,584 ) $ (362,886 ) $ 531,940 Net earnings 50,071 50,071 Other comprehensive income, net 2,180 2,180 Adjustment to treasury stock for holdings in investment partnerships 116 (13,009 ) (12,893 ) Exercise of stock options (8 ) 38 30 Balance at December 31, 2017 $ 1,071 $ 382,014 $ 565,504 $ (1,404 ) $ (375,857 ) $ 571,328 Net earnings 19,392 19,392 Adoption of accounting standards 90 90 Other comprehensive income, net (1,112 ) (1,112 ) Conversion of common stock 67 (67 ) (20,826 ) 20,826 — Adjustment to treasury stock for holdings in investment partnerships (19,292 ) (19,292 ) Exercise of stock options (43 ) 92 49 Balance at December 31, 2018 $ 1,138 $ 381,904 $ 564,160 $ (2,516 ) $ (374,231 ) $ 570,455 Common Stock Additional Paid-
In CapitalRetained
EarningsAccumulated
Other
Comprehensive
Income (Loss)Treasury Stock Total Balance at December 31, 2017 $ 1,071 $ 382,014 $ 565,504 $ (1,404) $ (375,857) $ 571,328 Net earnings 19,392 19,392 Adoption of accounting standards 90 90 Other comprehensive income, net (1,112) (1,112) Conversion of common stock 67 (67) (20,826) 20,826 — Adjustment to treasury stock for holdings in investment partnerships (19,292) (19,292) Exercise of stock options (43) 92 49 Balance at December 31, 2018 $ 1,138 $ 381,904 $ 564,160 $ (2,516) $ (374,231) $ 570,455 Net earnings 45,380 45,380 Adoption of accounting standards 1,499 1,499 Other comprehensive income, net (294) (294) Adjustment to treasury stock for holdings in investment partnerships (116) (626) (742) Balance at December 31, 2019 $ 1,138 $ 381,788 $ 611,039 $ (2,810) $ (374,857) $ 616,298 Net earnings (loss) (37,989) (37,989) Other comprehensive income, net 1,279 1,279 Adjustment to treasury stock for holdings in investment partnerships (14,760) (14,760) Balance at December 31, 2020 $ 1,138 $ 381,788 $ 573,050 $ (1,531) $ (389,617) $ 564,828 30 2018, 20172020, 2019 and 2016)media, property and casualty insurance, media and restaurants.licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of Biglari Holdings and its major operating subsidiaries.the Company. The Company’s long-term objective is to maximize per-share intrinsic value. All major operating, investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.2018,2020, Mr. Biglari’s beneficial ownership was approximately 56.9%67.2% of the Company’s outstanding Class A common stock and 54.3%60.6% of the Company’s outstanding Class B common stock.IssuanceDual Class Common Stock5, 2018,9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company, entered into an agreement withand its predecessor registrant, now knownagency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites garage liability insurance, commercial property coverage, as OBH Inc. (the “Predecessor”),well as homeowners and BH Merger Company,dwelling fire insurance coverages. The financial results for Southern Pioneer are included from the date of acquisition. Pro-forma financial information of Southern Pioneer is not material.wholly ownedwholly-owned subsidiary of the Company. Pursuant toCompany, Southern Oil Company, acquired the agreement on April 30, 2018, BH Merger Company merged withstock of Southern Oil of Louisiana Inc. (collectively "Southern Oil"). Southern Oil primarily operates oil and intonatural gas properties offshore in the Predecessor, with the Predecessor continuing as the surviving corporation and a wholly owned subsidiaryshallow waters of the Company.As a resultGulf of the April 30, 2018 transaction, the Company has two classesMexico. Pro-forma financial information of common stock, designated Class A common stock and Class B common stock. A share of Class B common stock has economic rights equivalent to 1/5th of a share of Class A common stock; however, Class B common stock has no voting rights. Upon completion of the transaction, every ten (10) shares of common stock outstanding on April 30, 2018 converted into (i) ten (10) shares of Class B common stock and (ii) one (1) share of Class A common stock.Since May 1, 2018, the shares of the Company’s Class A common stock have traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “BH.A” and the shares of the Company’s Class B common stock have traded on the NYSE under the ticker symbol “BH”.For accounting purposes, the April 30, 2018 transaction has been treated as a merger of entities under common control. Accordingly, the consolidated financial position and results of operations of the Predecessor has been included in the consolidated financial statements on a historical basis, except for earnings per share whichSouthern Oil is impacted by the issuance of the new common shares. (“Steak n Shake”), Western Sizzlin Corporation, (“Western Sizzlin”), Maxim Inc. (“Maxim”,) and First Guard Insurance Company, Maxim Inc., Southern Pioneer, and its agency, 1st Guard Corporation (collectively “First Guard”).Southern Oil. Intercompany accounts and transactions have been eliminated in consolidation.In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18,Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that theThe statement of cash flows includeincludes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on statements of cash flows. In 2017, the Company deposited cash to satisfy required collateral for casualty insurance.31 Cashreported oneither available-for-sale or held-to-maturity and re-evaluate the statementsclassification at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. As of cash flows consists of the following. December 31, 2018 2017 2016 Cash and cash equivalents $ 48,557 $ 58,577 $ 75,808 Restricted cash included in other long-term assets 6,453 8,653 25 Cash, cash equivalents and restricted cash $ 55,010 $ 67,230 $ 75,833 InvestmentsOurDecember 31, 2020 and 2019, all investments consist ofwere classified as available-for-sale securities. Available-for-sale securities areand carried at fair value with net unrealized gains or losses reported in the statements of earnings. Realized gains and losses on disposals of investments are determined by the specific identification of cost of investments sold andsold. Dividends earned on investments are included inreported as investment gains/losses,income by our insurance companies. We consider investment income as a component of other income.ThroughWe concentrate a high percentage of the investment partnerships we holdinvestments in a concentrated position in the common stocksmall number of Cracker Barrel Old Country Store, Inc.equity securities. A significant decline in the general stock market or in the prices of major investments may have a materially adverse effect on our earnings and on consolidated shareholders’ equity.$3,901$6,859 and $2,298$4,857 at December 31, 20182020 and 2017,2019, respectively.flows.flows which is generally at the individual restaurant level. Assets included in the impairment assessment generally consist of property, equipment and leasehold improvements directly associated with an individual restaurant as well as any related finance or operating lease assets. If the future undiscounted cash flows of an asset are less than the recorded value, an impairment is recorded for the difference between the carrying value and the estimated fair value of the asset.32 NoDuring 2020, we recorded an impairment to goodwill of $300 and to indefinite life intangible assets of $3,728. NaN impairments were recorded on goodwill orand other intangible assets during 2018, 2017 or 2016.2019 and 2018. Refer to Note 67 for information regarding our goodwill and other intangible assets.Operating Leasesleases certain property under operating leases. Manyhas two classes of these lease agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. Rent expense is recognized on a straight-line basis over the expected lease term, including cancellable option periods when failure to exercise such options would result in an economic penalty. In addition, the rent commencement date of the lease term is the earlier due date when we become legally obligated for the rent payments, the date when we take access to the property, or the grounds for build out.Common StockAs a result of the transaction on April 30, 2018, the Predecessor’s common stock, converted into the right to receive shares ofdesignated Class A common stock and Class B common stock. The treasury shares outstanding on April 30, 2018, were retired and not converted intoEach Class A andcommon share is entitled to one vote. Class B common stock. stock possesses economic rights equal to one-fifth (1/5 December 31, 2018 Class A Class B December 31, 2017 December 31, 2016 Common stock authorized 500,000 10,000,000 2,500,000 2,500,000 Common stock issued 206,864 2,068,640 2,142,202 2,142,202 Treasury stock held by the Company — — (74,589 ) (75,009 ) Outstanding shares 206,864 2,068,640 2,067,613 2,067,193 December 31, 2020 December 31, 2019 December 31, 2018 Class A Class B Class A Class B Class A Class B Common stock authorized 500,000 10,000,000 500,000 10,000,000 500,000 10,000,000 Common stock issued and outstanding 206,864 2,068,640 206,864 2,068,640 206,864 2,068,640 620,284 and 620,158 shares outstanding as of December 31, 2018, 20172020, 2019, and 2016, respectively.ASCAccounting Standards Codification (“ASC”) 260, “Earnings“Earnings Per Share.Share.” The issuance of dual class common stock on April 30, 2018 is applied on a retrospective basis for the calculation of earnings per share. Accordingly, earnings per share for 2018, 2017 and 2016 are impacted by the issuance of the new common shares. The equivalent Class A common stock applied for computing earnings per share excludes the proportional shares of Biglari Holdings’ stock held by the investment partnerships. The equivalent Class A common stock for the earnings per share calculation was 345,192, 344,736 and 348,108 368,150for 2020, 2019 and 366,678 for 2018, 2017 and 2016, respectively. There are no dilutive securities outstanding.33 Note 1. Summary of Significant Accounting Policies(continued) 2018 2017 2016 Net sales $ 740,922 $ 781,856 $ 795,322 Franchise royalties and fees 30,998 20,773 18,794 Other 3,770 4,524 3,798 $ 775,690 $ 807,153 $ 817,914 In accordance with ASC 606-10-50, the Company disaggregates revenue from contracts with customers. The only Company segment that was affected significantly by ASC 606 was restaurants. The Company’s accounting policies and practices related to restaurant operations revenues consist of the following under ASC 606.2020 2019 2018 Net sales $ 306,577 $ 578,164 $ 740,922 Franchise partner fees 22,213 3,829 33 Franchise royalties and fees 18,794 23,360 30,965 Other 3,082 4,867 3,770 $ 350,666 $ 610,220 $ 775,690 wereare composed of retail sales of food through company-ownedcompany-operated stores. Company-ownedCompany-operated store revenues are recognized, net of discounts and sales taxes, when our obligation to perform is satisfied at the point of sale. 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 incomeearnings as revenue. are composed offranchisees. Royaltiesfranchisees are based upon a percentage of sales of the franchise restaurant and are recognized as earned. Franchise royalties are billed on a monthly basis. Initial franchise fees when a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over the term of the franchise agreement. This represents a change in methodology under the January 1, 2018 adoption of ASC 606 for we have historically recognized initial franchise fees upon the opening of a franchise restaurant. Comparative prior periods have not been adjusted.yearyears ended December 31, 2020, 2019 and 2018 restaurant operations recognized $1,879, $1,725 and $3,096, respectively, in revenue related to initial franchise fees. As of December 31, 20182020 and January 1, 2018,2019, restaurant operations had deferred revenue recorded in accrued expenses related to franchise fees of $9,075$6,928 and $10,581,$7,976, respectively. Restaurant operations expects to recognize approximately $649$1,071 in 20192021 and the balance in the years 20202022 through 2039. This represents a change in methodology under the adoption of ASC 606 as we have historically applied advertising funds from the franchisees directly to various marketing programs. The new guidance requires the Company to recognize the marketing contributions received from franchisees as revenue and record a corresponding increase to marketing expense as the funds are applied to marketing programs as required by our franchise agreements.yearyears ended December 31, 2018,2020 and 2019, restaurant operations recognized $9,675$5,193 and $7,815, respectively, in revenue related to franchisee advertising fees. As of December 31, 20182020 and January 1, 2018,2019, restaurant operations had deferred revenue recorded in accrued expenses related to franchisee advertising fees of $2,255$4,391 and $2,064,$3,043, respectively. Restaurant operations expects to recognize approximately $1,128approximately$2,196 of deferred revenue during 2019 and the balance in 2020. This represents a change in the methodology, under the adoption of ASC 606, used to estimate breakage for we have historically recognized breakage for the portion of the gift card balances that remained outstanding following 48 months of issuance. yearyears ended December 31, 2018,2020 and 2019, restaurant operations recognized $27,081$9,201 and $22,869, respectively, of revenue from gift card redemptions. As of December 31, 20182020 and January 1, 2018,2019, restaurant operations had deferred revenue recorded in accrued expenses related to unredeemed gift cards of $22,685$17,431 and $20,968,$20,730, respectively. The Company expects to recognize approximately $18,132$13,392 in 20192021 and the balance in the years 20202022 through 2022. 34 Note 1. Summary of Significant Accounting Policies(continued)revenues, net of any commissions paid to subscription agents. Also included in subscription revenues are revenues generated from single-copy sales of magazines through retail outlets such as newsstands, supermarkets, convenience stores and drugstores and on certain digital devices, which may or may not result in future subscription sales. Revenues from retail outlet sales are recognized based on gross sales less a provision for estimated returns.revenues. License revenue is recognized when earned. We derive value and revenues from intellectual property assets through a range of licensing and business activities, including licensing and syndication of our trademarks and copyrights in the United States and internationally.$1,891$14,652 and $1,907$3,211 are included in accrued expenses in the consolidated balance sheet as of December 31, 20182020 and 2017,2019, respectively.directors’directors and officers’officers liability, and medical liability insurance programs, and record a reserve for our estimated losses on all unresolved open claims and our estimated incurred but not reported claims at the anticipated cost to us. Insurance reserves are recorded in accrued expenses in the consolidated balance sheet.35 Note 1. Summary of Significant Accounting Policies(continued)January 2017,June 2016, the Financial Accounting Standards Board (“FASB”("FASB") issued ASU 2017-04,Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 provides for the elimination of Step 2 from the goodwill impairment test. If impairment charges are recognized, the amount recorded will be the amount by which the carrying amount exceeds the reporting unit’s fair value with certain limitations. The ASU is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company adopted ASU 2017-04 on January 1, 2018.In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that the statement of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on statements of cash flows. For public entities, this standard is effective for fiscal years beginning after December 15, 2017. This standard should be applied retrospectively and early adoption is permitted, including adoption in an interim period. We adopted this standard in 2017 and have retroactively adjusted the consolidated statements of cash flows for all periods presented.In October 2016, the FASB issued ASU 2016-17,Interests Held through Related Parties That Are under Common Control.ASU 2016-17 amends the consolidation guidance in ASU 2015-02 regarding the treatment of indirect interests held through related parties that are under common control. The adoption of ASU 2016-17 did not have a material effect on our consolidated financial statements.In August 2016, the FASB issued ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.The objective of the update is to reduce diversity in how certain transactions are classified in the statement of cash flows. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of ASU 2016-15 did not have a material effect on our consolidated financial statements.In June 2016, the FASB issued ASUAccounting Standards Update ("ASU") 2016-13,available for saleavailable-for-sale debt securities. For available for saleavailable-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP; however, ASU 2016-13 will requirerequires that credit losses be presented as an allowance rather than as a write-down. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.2019. The Company is currently evaluating the impact the adoption ofadopted ASU 2016-13 will have on its consolidatedeffective January 1, 2020. The impact of this standard is not material to the Company's financial statements and related disclosures. the FASB issued ASU 2016-02,Leases. ASU 2016-02 requires a lessee to recognize lease assets and lease liabilities on the balance sheet, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued ASU 2018-11,Leases (Topic 842): Targeted Improvements, which provides an additional transition method with which to adopt the new leases standard.. We adopted ASC 842 “Leases” on January 1, 2019. Most prominent among the changes in the standard is the recognition of right of use assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statement of earnings. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.36 Note 1. Summary of Significant Accounting Policies(continued)The guidance permits the use ofsignificantly, ASC 842 requires a modified retrospective approach, which requires an entitylessee to recognize a liability to make lease payments and measure leases existing at, or entered into after,an asset with respect to its right to use the beginning ofunderlying asset for the earliest comparative period presented. Alternatively, the guidance permits a “Comparatives Under 840 Option” that changes the date of initial application to the beginning of the period of adoption.lease term. We will be electing the Comparatives Under 840 Option in which we will applyapplied ASC 840 to all comparative periods including disclosures,which included a cumulative-effect adjustment of $1,499 to retained earnings on January 1, 2019. Adoption of ASC 842 also resulted in an increase to total assets and recognizeliabilities due to the effectsrecording of operating lease assets of $63,261 and operating lease liabilities of $69,671 as of January 1, 2019 and due to the recording of finance lease assets of $11,638 and finance lease liabilities of $11,784. The difference between the asset and liability amounts primarily relates to previously recorded deferred/prepaid rent. The standard had a material impact on our consolidated balance sheets but did not have a material impact on our consolidated statements of earnings and statements of cash flow. The most significant impact was the recognition of right-of-use assets and lease liabilities for operating leases.as a cumulative-effect adjustment to retained earnings as of the effective date (January 1, 2019). We will electwe elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allows us to carryforwardcarry forward the historical lease classification. In addition, we elected certain practical expedients and accounting policies, including an accounting policy election to keep leases with an initial term of 12 months or less off offrom the balance sheet. We will recognize those lease payments in the consolidated statements of earnings on a straight-line basis over the lease term.The standard will have a material impact on our consolidated balance sheets, but will not have a material impact on our consolidated statementsstatements of cash flow. The most significant impact will be the recognition of right of use assets and lease liabilities for operating leases. Although our accounting for existing capital leases remains substantially unchanged, the adoption of the standard will result in the recognition of right of use assets and lease liabilities for operating leases of approximately $90,000 as of January 1, 2019.In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (Topic 606). On January 1, 2018, we adopted FASB accounting standards codification Topic 606 (“ASC 606”). In accordance with ASC 606, we changed certain characteristics of our revenue recognition accounting policy as described below. ASC 606 was applied using the modified retrospective method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018. Comparative prior periods have not been adjusted.The following table summarizes the impact of the adoption of ASC 606 on revenues, operating expenses and net earnings for 2018. As Reported Adjustments
for the
Adoption of
ASC 606 Amounts without
Adoption of
ASC 606Statements of Earnings Revenues Restaurant operations Net sales $ 740,922 $ — $ 740,922 Franchise royalties and fees 30,998 9,417 21,581 Other 3,770 (463 ) 4,233 Selling, general and administrative 132,909 9,689 123,220 Earnings before income taxes 16,755 (735 ) 17,490 Income tax expense (benefit) (2,637 ) (184 ) (2,453 ) Net earnings 19,392 (551 ) 19,943 The impact of ASC 606 on the Company’s balance sheet$44,856 as of December 31, 2018 was not material. The cumulative change in retained earnings2020 and 2019, respectively. All investments are classified as of January 1, 2018 was $90. Upon adoption of ASC 606, the Company changed its restaurant operations accounting policies for the recognition of franchise fees, recording of advertising arrangements,available-for-sale and recognition of gift card revenue. The adoption of ASC 606 did not have any significant impact on our insurance or media/licensing businesses.Note 2. InvestmentsAvailable for sale investments were $33,860 and $23,289 as of December 31, 2018 and 2017, respectively. Investments in equity securities and a related derivative position of $4,463 are included in other current assets as of December 31, 2018 and in other assets as of December 31, 2017. The investments are recorded at fair value.37 Fair Value Company Common Stock Carrying
ValuePartnership interest at December 31, 2015 $ 734,668 $ 262,979 $ 471,689 Investment partnership gains 248,935 113,049 135,886 Distributions (net of contributions of $19,832) (10,896 ) (10,896 ) Increase in proportionate share of Company stock held 19,042 (19,042 ) Partnership interest at December 31, 2016 $ 972,707 $ 395,070 $ 577,637 Investment partnership gains (losses) (41,740 ) (48,705 ) 6,965 Distributions (net of contributions of $3,707) (5,688 ) (5,688 ) Increase in proportionate share of Company stock held 12,893 (12,893 ) Partnership interest at December 31, 2017 $ 925,279 $ 359,258 $ 566,021 Investment partnership gains (losses) (180,517 ) (220,928 ) 40,411 Distributions (net of reinvestments of $39,040) (29,660 ) (29,660 ) Increase in proportionate share of Company stock held 19,292 (19,292 ) Partnership interest at December 31, 2018 $ 715,102 $ 157,622 $ 557,480 The Company recognized a pre-tax loss of $306 ($193 net of tax) on a contribution of $5,682 in securities to investment partnerships during 2016.Fair Value Company Common Stock Carrying
ValuePartnership interest at December 31, 2017 $ 925,279 $ 359,258 $ 566,021 Investment partnership gains (losses) (180,517) (220,928) 40,411 Distributions (net of contributions) (29,660) 0 (29,660) Increase in proportionate share of Company stock held 0 19,292 (19,292) Partnership interest at December 31, 2018 $ 715,102 $ 157,622 $ 557,480 Investment partnership gains (losses) 80,350 2,217 78,133 Distributions (net of contributions) (129,329) 0 (129,329) Increase in proportionate share of Company stock held 0 742 (742) Partnership interest at December 31, 2019 $ 666,123 $ 160,581 $ 505,542 Investment partnership gains (losses) (46,997) (3,965) (43,032) Distributions (net of contributions) (28,200) 0 (28,200) Increase in proportionate share of Company stock held 0 14,760 (14,760) Partnership interest at December 31, 2020 $ 590,926 $ 171,376 $ 419,550 December 31, 2018 2017 Carrying value of investment partnerships $ 557,480 $ 566,021 Deferred tax liability related to investment partnerships (92,703 ) (95,309 ) Carrying value of investment partnerships net of deferred taxes $ 464,777 $ 470,712 December 31, 2020 2019 Carrying value of investment partnerships $ 419,550 $ 505,542 Deferred tax liability related to investment partnerships (44,805) (56,518) Carrying value of investment partnerships net of deferred taxes $ 374,745 $ 449,024 $374,231$389,617 and $354,939$374,857 at December 31, 20182020 and 2017,2019, respectively, and is recorded as treasury stock.38 2018 2017 2016 Gains from investment partnerships $ 40,411 $ 6,965 $ 135,886 Loss on contribution of securities to investment partnerships — — (306 ) Investment partnership gains 40,411 6,965 135,580 Tax expense (benefit) 7,171 (4,115 ) 44,248 Contribution to net earnings $ 33,240 $ 11,080 $ 91,332 2020 2019 2018 Gains (losses) from investment partnerships $ (43,032) $ 78,133 $ 40,411 Tax expense (benefit) (10,526) 17,360 7,171 Contribution to net earnings $ (32,506) $ 60,773 $ 33,240 20182019 and 2017. The incentive reallocation on December 31, 2016 was $31,628 (including $11,514 for gains on Company common stock). Equity in Investment Partnerships Lion Fund Lion Fund II Total assets as of December 31, 2018 $ 107,207 $ 901,750 Total liabilities as of December 31, 2018 $ 447 $ 202,770 Revenue for the year ended December 31, 2018 $ (92,093 ) $ (120,431 ) Earnings for the year ended December 31, 2018 $ (92,159 ) $ (130,193 ) Biglari Holdings’ ownership interest 65.9 % 92.2 % Total assets as of December 31, 2017 $ 203,560 $ 1,060,737 Total liabilities as of December 31, 2017 $ 157 $ 199,974 Revenue for the year ended December 31, 2017 $ (13,322 ) $ (25,283 ) Earnings for the year ended December 31, 2017 $ (13,383 ) $ (35,740 ) Biglari Holdings’ ownership interest 64.3 % 92.3 % Total assets as of December 31, 2016 $ 221,676 $ 1,109,465 Total liabilities as of December 31, 2016 $ 2,694 $ 201,460 Revenue for the year ended December 31, 2016 $ 37,098 $ 282,242 Earnings for the year ended December 31, 2016 $ 36,933 $ 273,736 Biglari Holdings’ ownership interest 63.6 % 91.8 % Equity in Investment Partnerships Lion Fund Lion Fund II Total assets as of December 31, 2020 $ 112,970 $ 566,663 Total liabilities as of December 31, 2020 $ 189 $ 25,453 Revenue for the year ended December 31, 2020 $ (4,052) $ (48,544) Earnings for the year ended December 31, 2020 $ (4,120) $ (49,832) Biglari Holdings’ ownership interest 66.2 % 95.4 % Total assets as of December 31, 2019 $ 117,135 $ 758,663 Total liabilities as of December 31, 2019 $ 158 $ 114,639 Revenue for the year ended December 31, 2019 $ 10,637 $ 85,831 Earnings for the year ended December 31, 2019 $ 10,567 $ 78,604 Biglari Holdings’ ownership interest 66.1 % 92.9 % Total assets as of December 31, 2018 $ 107,207 $ 901,750 Total liabilities as of December 31, 2018 $ 447 $ 202,770 Revenue for the year ended December 31, 2018 $ (92,093) $ (120,431) Earnings for the year ended December 31, 2018 $ (92,159) $ (130,193) Biglari Holdings’ ownership interest 65.9 % 92.2 % 39 December 31, 2018 2017 Investment in equity security and related derivative position $ 4,463 $ — Deferred commissions on gift cards sold by third parties 3,218 3,946 Prepaid contractual obligations 1,555 3,068 Assets held for sale — 207 Other current assets $ 9,236 $ 7,221 December 31, 2020 2019 Deferred commissions on gift cards sold by third parties $ 3,491 $ 3,379 Prepaid contractual obligations 3,001 3,070 Other current assets $ 6,492 $ 6,449 December 31, 2018 2017 Land $ 146,015 $ 156,506 Buildings 142,658 152,610 Land and leasehold improvements 158,938 162,652 Equipment 201,738 203,145 Construction in progress 1,703 1,782 651,052 676,695 Less accumulated depreciation and amortization (376,336 ) (380,895 ) Property and equipment, net $ 274,716 $ 295,800 December 31, 2020 2019 Land $ 142,601 $ 150,147 Buildings 138,734 144,243 Land and leasehold improvements 141,351 157,141 Equipment 192,735 196,264 Oil and gas properties 75,900 77,475 Construction in progress 1,032 3,789 692,353 729,059 Less accumulated depreciation and amortization (376,231) (378,432) Property and equipment, net $ 316,122 $ 350,627 2017was $19,586, $18,881 and 2016$18,646, respectively. Depletion expense related to oil and gas properties was $18,646, $20,706$11,989 and $21,635,$8,077 during 2020 and 2019, respectively.$1,789during 2020, 2019 and $695 during 2018, 2017 and 2016, respectively. The fair value of the long-lived assets was determined based on Level 23 inputs using a discounted cash flow model and quoted prices for the properties.fair valueproperty and equipment cost related to finance obligations as of December 31, 2020 is as follows: $54,531 of buildings, $48,015 of land, $25,682 of land and leasehold improvements, and $54,976 of accumulated depreciation.assets impaired was not material for anyending aggregate carrying amount of asset retirement obligations is as follows.December 31 2020 2019 Beginning balance $ 10,631 $ 10,542 Liabilities settled (870) (88) Accretion expense 497 177 Asset retirement obligation $ 10,258 $ 10,631 applicable periods.consolidated balance sheets.6.7. Goodwill and Other Intangible Assets Restaurants Other Total Goodwill at December 31, 2015 $ 28,109 $ 11,913 $ 40,022 Change in foreign exchange rates during 2016 (19 ) — (19 ) Goodwill at December 31, 2016 $ 28,090 $ 11,913 $ 40,003 Change in foreign exchange rates during 2017 78 — 78 Goodwill at December 31, 2017 $ 28,168 $ 11,913 $ 40,081 Change in foreign exchange rates during 2018 (29 ) — (29 ) Goodwill at December 31, 2018 $ 28,139 $ 11,913 $ 40,052 Restaurants Insurance Total Goodwill at December 31, 2017 $ 28,168 $ 11,913 $ 40,081 Change in foreign exchange rates during 2018 (29) 0 (29) Goodwill at December 31, 2018 $ 28,139 $ 11,913 $ 40,052 Change in foreign exchange rates during 2019 (12) 0 (12) Goodwill at December 31, 2019 $ 28,127 $ 11,913 $ 40,040 Goodwill from acquisition 0 13,800 13,800 Impairments to goodwill (300) 0 (300) Change in foreign exchange rates during 2020 56 0 56 Goodwill at December 31, 2020 $ 27,883 $ 25,713 $ 53,596 are required to assessevaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value. The valuation methodology and underlying financial information included in our determination of fair value require significant management judgments. We use both market and income approaches to derive fair value. The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results. Nofor goodwillin future periods. There were 0 impairment charges recorded in 2018, 20172019 or 2016.40 Note 6. Goodwill and Other Intangible Assets(continued)Other Intangible Assets December 31, 2018 2017 Gross carrying amount Accumulated amortization Total Gross carrying amount Accumulated amortization Total Franchise agreement $ 5,310 $ (4,647 ) $ 663 $ 5,310 $ (4,116 ) $ 1,194 Other 810 (774 ) 36 810 (743 ) 67 Total 6,120 (5,421 ) 699 6,120 (4,859 ) 1,261 Intangible assets with indefinite lives: Trade names 15,876 — 15,876 15,876 — 15,876 Other assets with indefinite lives 11,539 — 11,539 9,427 — 9,427 Total intangible assets $ 33,535 $ (5,421 ) $ 28,114 $ 31,423 $ (4,859 ) $ 26,564 December 31, 2020 2019 Gross carrying
amountAccumulated
amortizationTotal Gross carrying
amountAccumulated
amortizationTotal Franchise agreement $ 5,310 $ (5,310) $ 0 $ 5,310 $ (5,178) $ 132 Other 810 (810) 0 810 (792) 18 Total 6,120 (6,120) 0 6,120 (5,970) 150 Intangible assets with indefinite lives: Trade names 15,876 — 15,876 15,876 — 15,876 Other assets with indefinite lives 8,189 — 8,189 11,323 — 11,323 Total intangible assets $ 30,185 $ (6,120) $ 24,065 $ 33,319 $ (5,970) $ 27,349 subject to amortizationwith indefinite lives consist of trade names, franchise agreements connected with the purchase of Western Sizzlinrights as well as lease rights. During 2020, the Company recorded impairment charges of $3,728 on lease rights to favorable leases related to prior acquisitions. These intangible assets are being amortized over their estimated weighted averageour international restaurant operations because of useful lives ranging from eight to twelve years.2017was $150, $549 and 2016 was $562, $567 and $571, respectively. The Company’s intangible assets with definite lives will fully amortizeamortized in 2020.During 2018, the Company purchased lease rights totaling $2,503. During 2016, the Company purchased lease rights totaling $3,367 and recorded an additional $1,657 indefinite life asset associated with the tax effect of the asset acquisition.7.8. Accounts Payable and Accrued Expenses December 31, 2018 2017 Accounts payable $ 41,967 $ 40,616 Gift card liability 22,685 27,436 Salaries, wages, and vacation 13,107 22,875 Deferred revenue 11,681 9,522 Taxes payable 11,214 10,571 Workers' compensation and other self-insurance accruals 8,394 9,047 Other 8,217 8,677 Accounts payable and accrued expenses $ 117,265 $ 128,744 December 31, 2020 2019 Accounts payable $ 26,537 $ 32,626 Gift card liability 21,822 20,745 Loss reserves 14,652 3,211 Unearned premiums 13,277 1,300 Other insurance accruals 6,559 6,559 Salaries, wages, and vacation 8,285 10,667 Deferred revenue 9,324 10,454 Taxes payable 10,922 29,275 Other 7,443 6,242 Accounts payable and accrued expenses $ 118,821 $ 121,079 8.9. Other Liabilities December 31, 2018 2017 Deferred rent expense $ 6,468 $ 6,726 Other 2,713 4,643 Other liabilities $ 9,181 $ 11,369 41 December 31, 2020 2019 Non qualified deferred compensation $ 1,368 $ 1,716 Other 312 348 Other liabilities $ 1,680 $ 2,064 9.10. Income Taxes 2018 2017 2016 Current: Federal $ (1,688 ) $ 544 $ 6,329 State 1,204 816 1,998 Deferred (2,153 ) (64,321 ) 38,485 Total income taxes $ (2,637 ) $ (62,961 ) $ 46,812 Reconciliation of effective income tax: Tax at U.S. statutory rates $ 3,519 $ (4,512 ) $ 51,227 State income taxes, net of federal benefit 741 259 3,332 Tax rate changes (1,342 ) (51,707 ) — Federal income tax credits (4,587 ) (3,158 ) (4,692 ) Dividends received deduction (2,142 ) (6,304 ) (5,851 ) Valuation allowance 658 742 905 Foreign tax rate differences 349 1,598 2,249 Other 167 121 (358 ) Total income taxes $ (2,637 ) $ (62,961 ) $ 46,812 On December 22, 2017, new federal income tax legislation, the Tax Cuts and Jobs Act (“Act”), was signed into law. Effective January 1, 2018, the U.S. corporate federal statutory income tax rate was reduced from 35.0% to 21.0% and required re-measurement of deferred balances to the new statutory rates as of December 31, 2017.The Act also imposed a mandatory one-time transition tax on undistributed international earnings. We do not expect to have any additional tax liability related to a transition tax. 2020 2019 2018 Current: Federal $ (472) $ 41,005 $ (1,688) State 476 7,301 1,204 Deferred (12,216) (38,545) (2,153) Income tax expense (benefit) $ (12,212) $ 9,761 $ (2,637) Reconciliation of effective income tax: Tax at U.S. statutory rates $ (10,542) $ 11,579 $ 3,519 State income taxes, net of federal benefit (1,750) 1,573 741 Tax rate changes 0 0 (1,342) Federal income tax credits (424) (3,004) (4,587) Dividends received deduction (233) (955) (2,142) Valuation allowance 733 441 658 Foreign tax rate differences 240 116 349 Other (236) 11 167 Income tax expense (benefit) $ (12,212) $ 9,761 $ (2,637) 2017were $(40,989), $57,877 and 2016 were $21,700, $(6,230) and $154,520, respectively. Losses before income taxes derived from international operations during 2020, 2019 and 2018 2017were $9,212, $2,736, and 2016 were $4,945, $6,660 and $8,257, respectively.2018,2020, we had $341$204 of unrecognized tax benefits, including $43$59 of interest and penalties, which are included in other long-term liabilities in the consolidated balance sheet. As of December 31, 2017,2019, we had $357$348 of unrecognized tax benefits, including $29$62 of interest and penalties, which are included in other long-term liabilities in the consolidated balance sheet. Our continuing practice is to recognize interest expense and penalties related to income tax matters in income tax expense. The unrecognized tax benefits of $341$204 would impact the effective income tax rate if recognized. Adjustments to the Company’s unrecognized tax benefit for gross increases for the current period tax position, gross decreases for prior period tax positions and the lapse of statute of limitations during 2018, 20172020, 2019 and 20162018 were not significant.2015.2017. We believe we have certain state income tax exposures related to fiscal years 20142016 through 2018.2020. Because of the expiration of the various state statutes of limitations for these fiscal years, it is possible that the total amount of unrecognized tax benefits will decrease by approximately $14$190 within 12 months.42 9. Income10. Taxes(continued) December 31, 2018 2017 Deferred tax assets: Insurance reserves $ 1,816 $ 2,011 Compensation accruals 677 729 Gift card accruals 2,515 3,149 Net operating loss credit carryforward 5,547 5,273 Valuation allowance on net operating losses (4,978 ) (5,031 ) Income tax credit carryforward 4,965 5,707 Other 953 629 Total deferred tax assets 11,495 12,467 Deferred tax liabilities: Investments 92,743 95,324 Fixed asset basis difference 934 554 Goodwill and intangibles 4,689 4,990 Total deferred tax liabilities 98,366 100,868 Net deferred tax liability $ (86,871 ) $ (88,401 ) ReceivablesDecember 31, 2020 2019 Deferred tax assets: Insurance reserves $ 1,621 $ 1,304 Compensation accruals 1,439 438 Gift card accruals 2,387 3,280 Net operating loss credit carryforward 7,121 6,017 Valuation allowance on net operating losses (6,152) (5,419) Fixed assets and depletable assets basis difference 8,234 6,300 Income tax credit carryforward 2,178 4,776 Other 2,516 (36) Total deferred tax assets 19,344 16,660 Deferred tax liabilities: Investments 45,470 56,519 Goodwill and intangibles 15,220 14,371 Total deferred tax liabilities 60,690 70,890 Net deferred tax liability $ (41,346) $ (54,230) receivablepayable of $2,022$2,436 and $751$17,767 as of December 31, 20182020 and 2017,2019, respectively. Income taxes paid during 2020, 2019 and 2018 2017were $15,402, $30,375 and 2016 were $810, $3,211 and $6,961, respectively. Income tax refunds during 2020, 2019 and 2018 2017were $68, $1,546 and 2016 were $8, $0 and $233, respectively.10.11. Notes Payable and Other Borrowings December 31, 2018 2017 Current portion of notes payable and other borrowings Notes payable $ 2,200 $ 2,200 Unamortized original issue discount (334 ) (321 ) Unamortized debt issuance costs (609 ) (585 ) Obligations under leases 4,463 5,279 Western revolver — 175 Total current portion of notes payable and other borrowings $ 5,720 $ 6,748 Long-term notes payable and other borrowings Notes payable $ 181,498 $ 183,698 Unamortized original issue discount (438 ) (772 ) Unamortized debt issuance costs (796 ) (1,405 ) Obligations under leases 59,737 75,473 Total long-term notes payable and other borrowings $ 240,001 $ 256,994 December 31, 2020 2019 Current portion of notes payable and other borrowings Notes payable $ 152,506 $ 2,200 Unamortized original issue discount (87) (348) Unamortized debt issuance costs (158) (634) Finance obligations 4,854 4,252 Finance lease liabilities 1,897 1,633 Total current portion of notes payable and other borrowings $ 159,012 $ 7,103 Long-term notes payable and other borrowings Notes payable $ 0 $ 179,298 Unamortized original issue discount 0 (89) Unamortized debt issuance costs 0 (163) Finance obligations 68,148 74,497 Finance lease liabilities 7,034 9,639 Total long-term notes payable and other borrowings $ 75,182 $ 263,182 $220,000 and a senior secured revolving credit facility in an aggregate principal amount of up to $30,000. On October 27, 2017, Steak n Shake determined to end the use of its senior secured revolving credit facility. In 2017, Steak n Shake deposited cash to satisfy required collateral for casualty insurance previously collateralized by letters of credit issued through the revolving credit facility.43 Note 10. Notes Payable and Other Borrowings(continued)iswas scheduled to mature on March 19, 2021. It amortizes at an annual rate of 1.0% in equal quarterly installments, beginning June 30, 2014, at 0.25% of the original principal amount of the term loan, subject to mandatory prepayments from excess cash flow, asset sales and other events described in the credit agreement. The balance will be due at maturity.Steak n Shake has the right to request an incremental term loan facility from participating lenders and/or eligible assignees at any time, up to an aggregate total principal amount not to exceed $70,000 if certain customary conditions within the credit agreement are met.Borrowings bear interest at a rate per annum equal to a base rate or a Eurodollar rate (minimum of 1%) plus an applicable margin. Interest on the term loan is based on a Eurodollar rate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. The interest rate on the term loan was 6.28% as of December 31, 2018.The credit agreement includes customary affirmative and negative covenants and events of default. Steak n Shake’s credit facility contains restrictions on its ability to pay dividends to Biglari Holdings.The term loan is secured by first priority security interests in substantially all the assets of Steak n Shake. Disruptions in debt capital markets that restrict access to funding when needed could adversely affect the results of operations, liquidity and capital resources of Steak n Shake. Biglari Holdings is not a guarantor under the credit facility. As of December 31, 2018, $183,6982020, $152,506 was outstanding. The Company repaid Steak n Shake's outstanding under the term loan.2018,2020 and 2019, Western Sizzlin had no debt outstanding under theits revolver.Expected principal payments for notes payable as of December 31, 2018, are as follows.2019 $ 2,200 2020 2,200 2021 179,298 Total $ 183,698 The fair value of long-term debt, excluding capitalized lease obligations, was approximately $147,000 at December 31, 2018. The fair value of our debt was estimated based on quoted market prices. The fair value was determined to be a Level 3 fair value measurement. 2018 2017 2016 Interest paid on debt $ 10,655 $ 9,969 $ 10,508 Interest paid on obligations under leases $ 8,207 $ 9,132 $ 9,475 2020 2019 2018 Interest paid on debt $ 9,397 $ 11,273 $ 10,655 Interest paid on obligations under leases $ 6,274 $ 7,816 $ 8,207 11.12. Leased Assets and Lease CommitmentsWephysical facilities under non-cancelablethat the option will be exercised. The Company applied an incremental borrowing rate to determine the present value of lease agreements. These leases requirepayments. Finance lease agreements include an interest rate that is used to determine the paymentpresent value of real estate taxes, insurancefuture lease payments.maintenance costs. Certain leased facilities, which are no longer operated but are subleased to third parties or franchisees, are classified below as non-operating properties. Minimum future rental payments for non-operating properties have not been reduced by minimum sublease rentals of $6,850 related tofinance lease portfolio includes restaurant locations. The Company’s operating leases receivablewith a term of 12 months or greater were recognized as operating right-of-use assets and liabilities and recorded as operating lease assets and operating lease liabilities. Historical capital leases and certain historical build-to-suit leases were reclassified from obligations under non-cancelable subleases. Theleases to finance lease assets and liabilities. Finance lease assets are recorded in property and equipment costand finance lease liabilities are recorded in notes payable and other borrowings. Historical sale-and-leaseback transactions in which the Company is deemed to have a continued interest in the leased asset are recorded as property and equipment and as finance obligations. Finance obligations are recorded in notes payable and other borrowings.finance obligationsthe COVID-19 pandemic and capitalhas accounted for these under the ASC 842 COVID-19 Election.2020 2019 Finance lease costs: Amortization of right-of-use assets $ 1,404 $ 1,952 Interest on lease liabilities 582 828 Operating lease costs * 9,995 16,483 Total lease costs $ 11,981 $ 19,263 Year Ended December 31, 2020 Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases $ 1,512 $ 1,610 Operating cash flows from finance leases $ 632 $ 828 Operating cash flows from operating leases $ 13,627 $ 16,863 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities $ 0 $ 1,097 Operating lease liabilities $ 73 $ 11,069 December 31, 2020 December 31, 2019 Finance leases: Property and equipment, net $ 6,501 $ 10,783 Current portion of notes payable and other borrowings $ 1,897 $ 1,633 Long-term notes payable and other borrowings 7,034 9,639 Total finance lease liabilities $ 8,931 $ 11,272 2020 Weighted-average remaining lease terms: Finance leases 5.7 years Operating leases 5.6 years Weighted-average discount rates: Finance leases 7.1% Operating leases 6.9% 2018 is2020 are as follows: $56,311 of buildings, $45,017 of land, $21,351 of land and leasehold improvements, $1,952 of equipment and $64,036 of accumulated depreciation.44 Year Operating Leases Finance
Leases2021 $ 13,521 $ 2,452 2022 10,949 1,864 2023 9,604 1,669 2024 7,678 1,633 2025 5,870 1,292 After 2025 9,447 1,906 Total lease payments 57,069 10,816 Less interest 9,992 1,885 Total lease liabilities $ 47,077 $ 8,931 11.12. Leased Assets and Lease Commitments(continued)On December 31, 2018, obligations under non-cancelable finance obligations, capital leases, and operating leases (excluding real estate taxes, insurance and maintenance costs) require the following minimum future rental payments. Operating Leases Year Finance Obligations Capital Leases Total Operating Property Non-Operating Property 2019 $ 11,114 $ 55 $ 11,169 $ 17,914 $ 483 2020 8,040 55 8,095 16,691 554 2021 5,925 55 5,980 16,787 578 2022 2,951 5 2,956 15,603 599 2023 1,587 — 1,587 14,071 539 After 2023 1,673 — 1,673 36,709 1,790 Total minimum future rental payments 31,290 170 31,460 $ 117,775 $ 4,543 Less amount representing interest 18,004 60 18,064 Total principal obligations under leases 13,286 110 13,396 Less current portion 4,433 30 4,463 Non-current principal obligations under leases 8,853 80 8,933 Residual value at end of lease term 50,744 60 50,804 Obligations under leases $ 59,597 $ 140 $ 59,737 2018 2017 2016 Minimum rent $ 20,158 $ 18,157 $ 17,906 Contingent rent 1,470 1,839 1,841 Rent expense $ 21,628 $ 19,996 $ 19,747 Non-cancellable finance obligations were created when the Company entered into certain build-to-suit or sale leaseback arrangements. As a result of continuing involvement in the underlying leases (generally due to right of substitution or purchase option provisions of the leases), the Company accounts for the leases as financings.2020 2019 2018 Minimum rent $ 15,672 $ 17,968 $ 20,158 Contingent rent 137 1,050 1,470 Rent expense $ 15,809 $ 19,018 $ 21,628 12.13. Related Party TransactionsOn September 15,. under which the Biglari Entities provide business and administrative related services to the Company. The Biglari Entities are owned by Mr. Biglari. The services agreement replaces the shared services agreement between the Company and Biglari Capital dated July 1, 2013. The services agreement was executed in connection with a review of the relationships and transactions between the Company and Biglari Capital. After careful consideration, including an assessment by a public accounting firm of administrative-related costs incurred by the Company in connection with its investments, the Company’s Governance, Compensation and Nominating Committee, comprised solely of independent board members, approved the services agreement. Under the terms of the services agreement, the Company will no longer provide business and administrative-related services to Biglari Capital. Instead, the Biglari Entities will assume the responsibility to provide the services and the Company will pay a fixed fee to the Biglari Entities.The services agreement has a five-yearfive-year term, effective on October 1, 2017. The fixed fee is $700 per month for the first year with adjustments in years two through five. The monthly fee remained at $700 during 2020.2018,2020, the Company’s investments in The Lion Fund, L.P. and The Lion Fund II, L.P. had a fair value of $715,102.45 Note 12. Related Party Transactions(continued) 2018 2017 2016 Contributions of cash $ 39,040 $ 3,707 $ 14,150 Contributions of securities — — 5,682 Distributions of cash (68,700 ) (9,395 ) (26,265 ) Distributions of securities — — (4,463 ) $ (29,660 ) $ (5,688 ) $ (10,896 ) 2020 2019 2018 Contributions of cash $ 70,130 $ 40,000 $ 39,040 Distributions of cash (98,330) (169,329) (68,700) $ (28,200) $ (129,329) $ (29,660) Our policy is to accrue an estimatedThere were $987 of incentive fee throughout the year. In 2018 and 2017, no incentive reallocation was earned. Based on Biglari Holdings’ $280,563 of earnings from the investment partnerships for 2016, the total incentive reallocationreallocations from Biglari Holdings to Biglari Capital was $31,628,during 2020, including $11,514$253 associated with gains on the Company’sCompany's common stock.AmendmentDuring 2013, Biglari Holdings andestablishes a performance-based annual incentive payment for Mr. Biglari entered intocontingent upon the growth in adjusted equity in each year attributable to our operating businesses. In order for Mr. Biglari to receive any incentive, our operating businesses must achieve an amendment toannual increase in shareholders’ equity in excess of 6% (the “Hurdle Rate”) above the Incentive Agreement to exclude earnings byprevious highest level (the “High Water Mark”). Mr. Biglari will receive 25% of any incremental book value created above the investment partnershipsHigh Water Mark plus the Hurdle Rate. In any year in which book value declines, our operating businesses must completely recover their deficit from the calculation ofprevious High Water Mark, along with attaining the Hurdle Rate, before Mr. Biglari’sBiglari becomes eligible to receive any further incentive fee. payment. in 2018during 2020, 2019 and 2016. In 2017, Mr. Biglari earned an incentive fee of $7,353. Under the Amended and Restated Incentive Agreement Mr. Biglari would receive a payment of approximately $7,000 if an event occurred entitling him to a severance payment.License AgreementOn January 11, 2013, the Company entered into a Trademark License Agreement (the “License Agreement”) with Mr. Biglari. The License Agreement was unanimously approved by the Governance, Nominating and Compensation Committee (comprised of independent members of the Company’s Board of Directors). In addition, the license under the License Agreement is provided on a royalty-free basis in the absence of specified extraordinary events described below. Accordingly, the Company and its subsidiaries have paid no royalties to Mr. Biglari under the License Agreement since its inception.Under the License Agreement, Mr. Biglari granted to the Company an exclusive license to use the Biglari and Biglari Holdings names (the “Licensed Marks”) in association with various products and services (collectively the “Products and Services”). Upon (a) the expiration of twenty years from the date of the License Agreement (subject to extension as provided in the License Agreement), (b) Mr. Biglari’s death, (c) the termination of Mr. Biglari’s employment by the Company for Cause (as defined in the License Agreement), or (d) Mr. Biglari’s resignation from his employment with the Company absent an Involuntary Termination Event (as defined in the License Agreement), the Licensed Marks for the Products and Services will transfer from Mr. Biglari to the Company, without any compensation, if the Company is continuing to use the Licensed Marks in the ordinary course of its business. Otherwise, the rights will revert to Mr. Biglari.If (i) a Change of Control (as defined in the License Agreement) of the Company; (ii) the termination of Mr. Biglari’s employment by the Company without Cause; or (iii) Mr. Biglari’s resignation from his employment with the Company due to an Involuntary Termination Event (each, a “Triggering Event”) were to occur, Mr. Biglari would be entitled to receive a 2.5% royalty on “Revenues” with respect to the “Royalty Period.” The royalty payment to Mr. Biglari would not apply to all revenues received by Biglari Holdings and its subsidiaries nor would it apply retrospectively (i.e., to revenues received with respect to the period prior to the Triggering Event). The royalty would apply to revenues recorded by the Company on an accrual basis under GAAP, solely with respect to the defined period of time after the Triggering Event equal to the Royalty Period, from a covered Product, Service or business that (1) has used the Biglari Holdings or Biglari name at any time during the term of the License Agreement, whether prior to or after a Triggering Event, or (2) the Company has specifically identified, prior to a Triggering Event, will use the name Biglari or Biglari Holdings.46 Note 12. Related Party Transactions(continued)“Revenues” means all revenues received, on an accrual basis under GAAP, by the Company, its subsidiaries and affiliates from the following: (1) all Products and Services covered by the License Agreement bearing or associated with the names Biglari and Biglari Holdings at any time (whether prior to or after a Triggering Event). This category would include, without limitation, the use of Biglari or Biglari Holdings in the public name of a business providing any covered Product or Service; and (2) all covered Products, Services and businesses that the Company has specifically identified, prior to a Triggering Event, will bear, use or be associated with the name Biglari or Biglari Holdings.The Governance, Nominating and Compensation Committee unanimously approved the association of the Biglari name and mark with all of Steak n Shake’s restaurants (including Company operated and franchise locations), products and brands. On May 14, 2013, the Company, Steak n Shake, LLC and Steak n Shake Enterprises, Inc. entered into a Trademark Sublicense Agreement in connection therewith. Accordingly, revenues received by the Company, its subsidiaries and affiliates from Steak n Shake’s restaurants, products and brands would come within the definition of Revenues for purposes of the License Agreement.The “Royalty Period” is a defined period of time, after the Triggering Event, calculated as follows: (i) if, following three months after a Triggering Event, the Company or any of its subsidiaries or affiliates continues to use the Biglari or Biglari Holdings name in connection with any covered Product or Service, or continues to use Biglari as part of its corporate or public company name, then the Royalty Period will equal (a) the period of time during which the Company or any of its subsidiaries or affiliates continues any such use, plus (b) a period of time after the Company, its subsidiaries and affiliates have ceased all uses of the names Biglari and Biglari Holdings equal to the length of the term of the License Agreement prior to the Triggering Event, plus three years. As an example, if a Triggering Event occurs five years after the date of the License Agreement, and the Company ceases all uses of the Biglari and Biglari Holdings names two years after the Triggering Event, the Royalty Period will equal a total of ten years (the sum of two years after the Triggering Event during which the Biglari and Biglari Holdings names are being used, plus a period of time equal to the five years prior to the Triggering Event, plus three years); or (ii) if the Company, its subsidiaries and affiliates cease all uses of the Biglari and Biglari Holdings names within three months after a Triggering Event, then the Royalty Period will equal the length of the term of the License Agreement prior to the Triggering Event, plus three years. As an example, if a Triggering Event occurs five years after the date of the License Agreement, and the Company ceases all uses of the Biglari and Biglari Holdings names two months after the Triggering Event, the Royalty Period will equal a total of eight years (the sum of the period of time equal to the five years prior to the Triggering Event, plus three years). Notwithstanding the above methods of determining the Royalty Period, the minimum Royalty Period is five years after a Triggering Event.The Company and its subsidiaries have paid no royalties to Mr. Biglari under the License Agreement since its execution.The actual amount of royalties paid to Mr. Biglari following the occurrence of a Triggering Event (as defined in the License Agreement) would depend on the Company’s revenues during the applicable period following the Triggering Event, and, therefore, depends on material assumptions and estimates regarding future operations and revenues. Assuming for purposes of illustration a Triggering Event occurred on December 31, 2018, using revenue from 2018 as an estimate of future revenue and calculated according to terms of the License Agreement, Mr. Biglari would receive approximately $19,000 in royalty payments annually. At a minimum, the royalties would be earned on revenue generated from January 1, 2019 through December 21, 2025. Royalty payments beyond the minimum period would be subject to the licensee’s continued use of the licensed marks.13.14. Commitments and Contingenciesallegesalleged claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari as a result of the issuance of a dual class structure.47 Note 13. Commitments and Contingencies(continued)allegesalleged claims of breach of fiduciary duty by the members of our Board of Directors. This shareholder sought to enjoin the shareholder vote on April 26, 2018 to approve the issuance of the dual class structure. On April 16, 2018, the shareholders withdrew their motions to enjoin the shareholder vote on April 26, 2018.On May 17, 2018, the shareholders who filed the January 29, 2018 complaint and the March 26, 2018 complaint filed a new, consolidated complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholders generally allegealleged claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari arising out of the issuance of the dual class structure. The shareholders seek,structure, including the ability to vote the Company’s shares that are eliminated for themselves and on behalf of all other shareholders as a class, a declaration that the defendants breached their duty to the shareholders and the class, and to recover unspecified damages, pre-judgment and post-judgment interest, and an award of their attorneys’ fees and other costs.Judgejudge of the Superior Court of Hamilton County, Indiana issued an order granting the Company’s motion to dismiss the shareholders’ lawsuits. On January 11, 2019, the shareholders filed an appeal of the Judge’sjudge’s order dismissing the lawsuits.believesopposed the claims inpetition. On April 7, 2020, the Indiana Supreme Court denied the petition to transfer.are without meritwas concluded in the Company’s favor.intends to defend these cases vigorously.the Court approved the terms of the settlement. The settlement is reflected in selling, general and administrative expenses in the 2019 consolidated statement of earnings.14.15. Fair Value of Financial Assets48 Note 14. Fair Value of Financial Assets(continued)sheet:LevelLevels 1 and 2 of the fair value hierarchy. withinas Level 1 or Level 2 of the fair value hierarchy depending on the instrument.hierarchy.20182020 and 20172019 the fair values of financial assets were as follows. December 31, 2018 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 21,448 $ — $ — $ 21,448 $ 5,785 $ — $ — $ 5,785 Equity securities: Consumer goods 1,708 4,100 — 5,808 2,445 — — 2,445 Bonds 32,404 — — 32,404 — 25,901 — 25,901 Options on equity securities — 2,775 — 2,775 — 2,018 — 2,018 Non-qualified deferred compensation plan investments 2,149 — — 2,149 3,459 — — 3,459 Total assets at fair value $ 57,709 $ 6,875 $ — $ 64,584 $ 11,689 $ 27,919 $ — $ 39,608 December 31, 2020 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 23,885 $ 0 $ 0 $ 23,885 $ 43,095 $ 0 $ 0 $ 43,095 Equity securities: Consumer goods 7,274 5,652 0 12,926 0 6,397 0 6,397 Insurance 261 0 0 261 25 0 0 25 Bonds: Government 39,472 14,043 0 53,515 38,911 0 0 38,911 Corporate 0 5,406 0 5,406 0 0 0 0 Options on equity securities 0 2,911 0 2,911 0 2,166 0 2,166 Non-qualified deferred compensation plan investments 1,368 0 0 1,368 2,175 0 0 2,175 Total assets at fair value $ 72,260 $ 28,012 $ 0 $ 100,272 $ 84,206 $ 8,563 $ 0 $ 92,769 15.16. Accumulated Other Comprehensive Income 2018 2017 Foreign Currency Translation Adjustments Investment
Gain (Loss) Accumulated
Other
Comprehensive
Loss Foreign Currency Translation Adjustments Investment
Gain (Loss) Accumulated
Other
Comprehensive
Loss Beginning Balance $ (1,462 ) $ 58 $ (1,404 ) $ (3,447 ) $ (137 ) $ (3,584 ) Other comprehensive income (loss) before reclassifications — — 195 195 Reclassification to (earnings) loss (58 ) (58 ) Foreign currency translation (1,054 ) (1,054 ) 1,985 1,985 Ending Balance $ (2,516 ) $ — $ (2,516 ) $ (1,462 ) $ 58 $ (1,404 ) 49 2020 2019 Foreign
Currency
Translation
AdjustmentsInvestment
Gain (Loss)Accumulated
Other
Comprehensive
LossForeign
Currency
Translation
AdjustmentsInvestment
Gain
(Loss)Accumulated
Other
Comprehensive
LossBeginning Balance $ (2,810) $ 0 $ (2,810) $ (2,516) $ 0 $ (2,516) Foreign currency translation 1,279 0 1,279 (294) 0 (294) Ending Balance $ (1,531) $ 0 $ (1,531) $ (2,810) $ 0 $ (2,810) Note 15. Accumulated Other Comprehensive Income(continued) 2016 Foreign Currency Translation Adjustments Investment
Gain (Loss) Accumulated
Other
Comprehensive
Loss Beginning Balance $ (2,992 ) $ (687 ) $ (3,679 ) Other comprehensive income (loss) before reclassifications 357 357 Reclassification to (earnings) loss 193 193 Foreign currency translation (455 ) (455 ) Ending Balance $ (3,447 ) $ (137 ) $ (3,584 ) 2018 Foreign Currency
Translation AdjustmentsInvestment
Gain (Loss)Accumulated
Other
Comprehensive
LossBeginning Balance $ (1,462) $ 58 $ (1,404) Reclassification to (earnings) loss 0 (58) (58) Foreign currency translation (1,054) 0 (1,054) Ending Balance $ (2,516) $ 0 $ (2,516) 2018 and $193 of losses to earnings during 2016; there were no reclassifications from accumulated other comprehensive income to earnings during 2017.2018.16.17. Business Segment ReportingFirst GuardMaxim and Maxim.Southern Oil. Other business activities not specifically identified with reportable business segments are presented in “other” within total operating businesses.corporate. We report our earnings from investment partnerships separate from our corporate expenses. We assess and measure segment operating results based on segment earnings as disclosed below. Segment earnings from operations are neither necessarily indicative of cash available to fund cash requirements, nor synonymous with cash flow from operations. The tabular information that follows shows data of our reportable segments reconciled to amounts reflected in the consolidated financial statements.Revenue for 2018, 2017 and 2016 were as follows. Revenue 2018 2017 2016 Operating Businesses: Restaurant Operations: Steak n Shake $ 760,565 $ 792,827 $ 804,423 Western 15,125 14,326 13,491 Total Restaurant Operations 775,690 807,153 817,914 First Guard 27,628 24,943 22,997 Maxim 6,576 7,708 9,165 $ 809,894 $ 839,804 $ 850,076 50 16.17. Business Segment Reporting(continued)Earnings (loss) before income taxes for 2018, 2017 and 2016 were as follows. Earnings (Loss) Before Income Taxes 2018 2017 2016 Operating Businesses: Restaurant Operations: Steak n Shake $ (10,657 ) $ 431 $ 34,717 Western 2,046 1,860 2,506 Total Restaurant Operations (8,611 ) 2,291 37,223 First Guard 6,215 4,770 5,135 Maxim 1,068 (439 ) (10,078 ) Other 635 669 94 Total Operating Businesses (693 ) 7,291 32,374 Corporate and investments: Corporate (11,286 ) (16,106 ) (10,241 ) Investment partnership gains 40,411 6,965 135,580 Total corporate 29,125 (9,141 ) 125,339 Interest expense on notes payable and other borrowings (11,677 ) (11,040 ) (11,450 ) $ 16,755 $ (12,890 ) $ 146,263 capital expendituresdata for 2018, 2017 and 2016each of the three most recent years is presented in the tables thatwhich follow. Capital Expenditures 2018 2017 2016 Operating Businesses: Restaurant Operations: Steak n Shake $ 14,982 $ 7,565 $ 8,257 Western 61 410 306 Total Restaurant Operations 15,043 7,975 8,563 First Guard 236 43 7 Maxim — — 42 Other 14 16 51 Total Operating Businesses 15,293 8,034 8,663 Corporate — — — Consolidated results $ 15,293 $ 8,034 $ 8,663 51 Revenue 2020 2019 2018 Operating Businesses: Restaurant Operations: Steak n Shake $ 344,305 $ 595,004 $ 760,565 Western 6,361 15,216 15,125 Total Restaurant Operations 350,666 610,220 775,690 Insurance Operations: First Guard 30,958 30,083 27,628 Southern Pioneer 21,721 0 0 Total Insurance Operations 52,679 30,083 27,628 Southern Oil 26,255 24,436 0 Maxim 4,083 4,099 6,576 $ 433,683 $ 668,838 $ 809,894 Earnings (Loss) Before Income Taxes 2020 2019 2018 Operating Businesses: Restaurant Operations: Steak n Shake $ (4,587) $ (18,575) $ (10,657) Western (765) 1,756 2,046 Total Restaurant Operations (5,352) (16,819) (8,611) Insurance Operations: First Guard 9,632 7,103 6,215 Southern Pioneer 2,799 0 0 Total Insurance Operations 12,431 7,103 6,215 Southern Oil 2,018 8,032 0 Maxim 1,784 742 1,068 Interest expense on notes payable and other borrowings (9,262) (12,442) (11,677) Total Operating Businesses 1,619 (13,384) (13,005) Corporate and investments: Corporate and other (12,432) (9,608) (10,651) Investment gains 3,644 0 0 Investment partnership gains (losses) (43,032) 78,133 40,411 Total corporate (51,820) 68,525 29,760 $ (50,201) $ 55,141 $ 16,755 16.17. Business Segment Reporting(continued)Capital Expenditures 2020 2019 2018 Operating Businesses: Restaurant Operations: Steak n Shake $ 17,852 $ 9,951 $ 14,982 Western 6 72 61 Total Restaurant Operations 17,858 10,023 15,043 Insurance Operations: First Guard 5 43 236 Southern Pioneer 0 0 0 Total Insurance Operations 5 43 236 Southern Oil 2,806 7,594 0 Maxim 0 0 0 Total Operating Businesses 20,669 17,660 15,279 Corporate and other 33 19 14 Consolidated results $ 20,702 $ 17,679 $ 15,293 Depreciation and Amortization 2020 2019 2018 Operating Businesses: Restaurant Operations: Steak n Shake $ 18,811 $ 20,533 $ 18,180 Western 231 641 651 Total Restaurant Operations 19,042 21,174 18,831 Insurance Operations: First Guard 96 85 76 Southern Pioneer 318 0 0 Total Insurance Operations 414 85 76 Southern Oil: Depletion 11,989 7,900 0 Accretion 497 177 0 Depreciation 41 141 0 Total Southern Oil 12,527 8,218 0 Maxim 0 0 27 Total Operating Businesses 31,983 29,477 18,934 Corporate and other 239 101 384 Consolidated results $ 32,222 $ 29,578 $ 19,318 depreciation and amortization captions for 2018, 2017 and 2016 is presented in the tables that follow. Depreciation and Amortization 2018 2017 2016 Operating Businesses: Restaurant Operations: Steak n Shake $ 18,180 $ 19,987 $ 20,968 Western 651 636 605 Total Restaurant Operations 18,831 20,623 21,573 First Guard 76 56 64 Maxim 27 50 409 Other 287 287 431 Total Operating Businesses 19,221 21,016 22,477 Corporate 97 432 448 Consolidated results $ 19,318 $ 21,448 $ 22,925 A disaggregation of our consolidated asset captionsassets is presented in the table that follows. Identifiable Assets December 31, 2018 2017 Reportable segments: Restaurant Operations: Steak n Shake $ 330,100 $ 373,654 Western 16,444 17,027 Total Restaurant Operations 346,544 390,681 First Guard 51,565 46,693 Maxim 18,143 19,155 Other 19,774 20,514 Corporate 35,987 20,520 Investment partnerships 557,480 566,021 Total assets $ 1,029,493 $ 1,063,584 52 Identifiable Assets December 31, 2020 2019 Reportable segments: Restaurant Operations: Steak n Shake $ 341,190 $ 385,259 Western 16,512 18,322 Total Restaurant Operations 357,702 403,581 Insurance Operations: First Guard 64,764 58,808 Southern Pioneer 74,063 0 Total Insurance Operations 138,827 58,808 Southern Oil 61,017 82,257 Maxim 16,485 16,549 Corporate 24,387 72,572 Investment partnerships 419,550 505,542 Total assets $ 1,017,968 $ 1,139,309 For the year ended December 31, 2020 Total revenues $ 135,700 $ 96,502 $ 101,835 $ 99,646 Gross profit 35,890 32,719 33,764 34,578 Costs and expenses 146,019 101,396 102,689 94,392 Earnings (loss) before income taxes (181,715) 57,230 26,718 47,566 Net earnings (loss) (137,885) 42,466 21,101 36,329 Net earnings (loss) per equivalent Class A share $ (400.37) $ 121.51 $ 60.07 $ 108.23 For the year ended December 31, 2019 Total revenues $ 181,859 $ 168,343 $ 160,216 $ 158,420 Gross profit 22,837 30,454 38,467 43,307 Costs and expenses 204,451 174,671 162,296 150,412 Earnings (loss) before income taxes 11,562 27,870 (631) 16,340 Net earnings (loss) 9,818 21,974 (17) 13,605 Net earnings (loss) per equivalent Class A share $ 28.36 $ 63.50 $ (0.05) $ 39.64 Note 17. Quarterly Financial Data(Unaudited) 1stQuarter 2ndQuarter 3rdQuarter 4thQuarter For the year ended December 31, 2018 Total revenues $ 202,225 $ 208,739 $ 203,582 $ 195,348 Gross profit 36,430 42,727 36,153 33,145 Costs and expenses 203,391 203,778 204,518 201,979 Earnings (loss) before income taxes (2,611 ) (8,429 ) (24,902 ) 52,697 Net earnings (loss) (1,814 ) (7,539 ) (13,703 ) 42,448 Net earnings (loss) per equivalent Class A share $ (5.15 ) $ (21.73 ) $ (39.50 ) $ 122.53 For the year ended December 31, 2017 Total revenues $ 203,393 $ 212,954 $ 214,234 $ 209,223 Gross profit 39,582 39,992 36,664 36,285 Costs and expenses 198,918 210,050 215,327 215,242 Earnings (loss) before income taxes (25,597 ) 35,043 (49,926 ) 27,590 Net earnings (loss) (15,821 ) 21,126 (24,700 ) 69,466 Net earnings (loss) per equivalent Class A share $ (42.72 ) $ 57.27 $ (66.96 ) $ 190.05 We define gross profit as net revenue less restaurant cost of sales, media cost of sales, and insurance losses and underwriting expenses, which excludes depreciation and amortization. 18.19. Supplemental Disclosures of Cash Flow Information2017were $2,399, $339 and 2016 were $1,776, $1,036respectively.$480, respectively. In 2017, we had new capital lease obligations of $1,952 and lease retirements of $5,030. During 2016, we had new capital lease obligations of $258 and lease retirements of $1,006.In 2016, the Company made a non-cash contribution of securities of $5,682 to the investment partnerships and received a non-cash distribution of securities of $4,463 from the investment partnerships.53 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A.Controls and Procedures2018.20182020 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.20182020 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2018.20182020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.23, 201927, 2021Item 9B.Other InformationItem 10.Directors, Executive Officers and Corporate GovernanceItem 11.Executive CompensationItem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13.Certain Relationships and Related Transactions, and Director IndependenceItem 14.Principal Accountant Fees and Services20192021 Annual Meeting of Shareholders, to be filed on or before April 25, 2019,29, 2021, and such information is incorporated herein by reference.54 Item 15.Exhibits and Financial Statement SchedulesPAGE PAGE Reports of Independent Registered Public Accounting Firm 25-2623-25Consolidated Balance Sheets 2726Consolidated Statements of Earnings 2827Consolidated Statements of Comprehensive Income 2827Consolidated Statements of Cash Flows 2928Consolidated Statements of Changes in Shareholders’ Equity 3029Notes to Consolidated Financial Statements 3130Management’s Report on Internal Control over Financial Reporting 5453(b)Exhibits55 10.07*10.04*10.0810.0510.0910.0610.1010.0710.1110.0821.01** 10.09*21.01 31.01**31.0131.02**31.0232.01** 101*Files.104 Cover page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) * Indicates management contract or compensatory plans or arrangements required to be filed as an exhibit to the Annual Report on Form 10-K. ** Furnished herewith. Item 16.Form 10-K Summary56 23, 2019.27, 2021.Biglari Holdings inc.By: Bruce LewisBRUCELEWISBruce Lewis
Controller23, 2019.27, 2021.Signature Title Sardar BiglariSARDARBIGLARIChairman of the Board and Chief Executive Officer (Principal Executive Officer) Sardar Biglari Bruce LewisBRUCELEWISController (Principal Financial and Accounting Officer) Bruce Lewis /s/ Philip CooleyJOHN G. CARDWELLDirector Philip CooleyJohn G. CardwellDirector - Vice Chairman Philip Cooley Director Kenneth R. Cooper Director Ruth J. Person Director Ruth J. Person/s/ Kenneth R. CooperDirectorKenneth R. Cooper/s/ James P. MastrianDirectorJames P. Mastrian