Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

September 30, 2022

or

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 001-38477

BIGLARI HOLDINGS INC.

(Exact name of registrant as specified in its charter)

INDIANA82-3784946BIGLARI HOLDINGS INC.
(Exact name of registrant as specified in its charter)

Indiana82-3784946
(State or other jurisdiction of incorporation)(I.R.S. Employer Identification No.)


17802 IH 10 West, Suite 400

San Antonio, Texas

78257

19100 Ridgewood Parkway,Suite 1200
San Antonio,TX78259
(Address of principal executive offices)(Zip Code)

(210) 344-3400

Registrant’s telephone number, including area code

Not Applicable

17802 IH 10 West, Suite 400, San Antonio, TX 78257
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Class A Common Stock, no par value BH.ANew York Stock Exchange
Class B Common Stock, no par valueBHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx    Noo

¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNoo

¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and an “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero

Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth companyo

Accelerated filerxNon-accelerated filero

Smaller reporting companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNox

Number of shares of common stock outstanding as of May 2, 2018:

November 1, 2022:
Class A common stock –206,864
Class B common stock –2,068,640



IndexTable of Contents

BIGLARI HOLDINGS INC.

INDEX

Page No.




PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


BIGLARI HOLDINGS INC.


CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

  March 31,
2018
 December 31, 2017
   (Unaudited)     
Assets        
Current assets:        
Cash and cash equivalents $45,444  $58,577 
Investments  24,157   23,289 
Receivables  12,187   16,284 
Inventories  7,312   7,268 
Other current assets  9,299   7,221 
Total current assets  98,399   112,639 
Property and equipment  291,625   295,800 
Goodwill and other intangible assets  66,774   66,645 
Investment partnerships  545,939   566,021 
Other assets  17,846   22,479 
Total assets $1,020,583  $1,063,584 
         
Liabilities and shareholders’ equity        
Liabilities        
Current liabilities:        
Accounts payable and accrued expenses $106,708  $128,744 
Current portion of notes payable and other borrowings  6,524   6,748 
Total current liabilities  113,232   135,492 
Long-term notes payable and other borrowings  254,988   256,994 
Deferred taxes  89,387   88,401 
Other liabilities  11,269   11,369 
Total liabilities  468,876   492,256 
Shareholders’ equity        
Common stock  1,071   1,071 
Additional paid-in capital  381,975   382,014 
Retained earnings  563,780   565,504 
Accumulated other comprehensive loss  (966)  (1,404)
Treasury stock, at cost  (394,153)  (375,857)
Biglari Holdings Inc. shareholders’ equity  551,707   571,328 
Total liabilities and shareholders’ equity $1,020,583  $1,063,584 

September 30,
2022
December 31,
2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$64,842 $42,349 
Investments70,032 83,061 
Receivables25,826 28,508 
Inventories3,704 3,803 
Other current assets13,147 7,088 
Total current assets177,551 164,809 
Property and equipment414,497 349,351 
Operating lease assets38,539 42,538 
Goodwill and other intangible assets75,933 77,010 
Investment partnerships144,864 250,399 
Other assets10,761 10,700 
Total assets$862,145 $894,807 
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Accounts payable and accrued expenses$101,503 $100,467 
Loss and loss adjustment expenses14,613 14,609 
Unearned premiums12,493 11,667 
Current portion of lease obligations17,093 16,898 
Total current liabilities145,702 143,641 
Lease obligations95,980 104,479 
Line of credit30,000 — 
Deferred taxes28,515 46,533 
Asset retirement obligations14,721 10,389 
Other liabilities1,819 2,069 
Total liabilities316,737 307,111 
Shareholders’ equity
Common stock1,138 1,138 
Additional paid-in capital381,788 381,788 
Retained earnings566,455 608,528 
Accumulated other comprehensive loss(3,777)(1,907)
Treasury stock, at cost(409,119)(401,851)
Biglari Holdings Inc. shareholders’ equity536,485 587,696 
Noncontrolling interests8,923 — 
Total shareholders' equity545,408 587,696 
Total liabilities and shareholders’ equity$862,145 $894,807 

See accompanying Notes to Consolidated Financial Statements.

1


1

BIGLARI HOLDINGS INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands except per share amounts)

  First Quarter
  2018 2017
  (Unaudited)
Revenues    
Restaurant operations $193,934  $195,694 
Insurance premiums and other  6,547   6,080 
Media advertising and other  1,744   1,619 
   202,225   203,393 
Cost and expenses        
Restaurant cost of sales  158,350   157,298 
Insurance losses and underwriting expenses  5,928   5,020 
Media cost of sales  1,517   1,493 
Selling, general and administrative  32,650   29,486 
Depreciation and amortization  4,946   5,621 
   203,391   198,918 
Other income (expenses)        
Interest expense  (2,754)  (2,824)
Interest on obligations under leases  (2,186)  (2,280)
Investment partnership gains (losses)  3,495   (24,968)
Total other income (expenses)  (1,445)  (30,072)
Earnings (loss) before income taxes  (2,611)  (25,597)
Income tax benefit  (797)  (9,776)
Net earnings (loss) $(1,814) $(15,821)
Earnings per share        
Net earnings (loss) per equivalent Class A share * $(5.15) $(42.72)

Third QuarterFirst Nine Months
2022202120222021
(Unaudited)(Unaudited)
Revenues  
Restaurant operations$59,437 $59,144 $179,608 $196,424 
Insurance premiums and other16,312 14,723 47,745 43,729 
Oil and gas14,380 7,353 38,632 24,310 
Licensing and media1,905 863 3,788 2,695 
92,034 82,083 269,773 267,158 
Cost and expenses
Restaurant cost of sales36,162 41,694 107,469 129,297 
Insurance losses and underwriting expenses13,245 10,672 40,812 31,733 
Oil and gas production costs4,090 2,050 11,752 6,957 
Licensing and media costs345 880 1,975 1,749 
Selling, general and administrative15,469 16,889 48,275 50,848 
Impairments— — 20 559 
Depreciation, depletion, and amortization8,456 7,682 24,127 22,239 
Interest expense on leases1,372 1,462 4,169 4,619 
Interest expense on borrowings67 — 67 1,121 
79,206 81,329 238,666 249,122 
Other income
Investment gains (losses)(849)4,534 (4,184)6,465 
Investment partnership gains (losses)29,658 (20,231)(82,244)27,344 
Total other income (expenses)28,809 (15,697)(86,428)33,809 
Earnings (loss) before income taxes41,637 (14,943)(55,321)51,845 
Income tax expense (benefit)9,598 (4,274)(13,282)11,544 
Net earnings (loss)32,039 (10,669)(42,039)40,301 
Earnings attributable to noncontrolling interest34 — 34 — 
Net earnings (loss) attributable to Biglari Holdings Inc. shareholders$32,005 $(10,669)$(42,073)$40,301 
Net earnings (loss) per equivalent Class A share *$109.13 $(33.74)$(140.30)$125.79 

*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $(1.03)$21.83 and $(28.06) for the third quarter and first quarternine months of 20182022, respectively, and $(8.54)$(6.75) and $25.16 for the third quarter and first quarternine months of 2017.        

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

  First Quarter
  2018 2017
  (Unaudited)
   
Net earnings (loss) $(1,814) $(15,821)
Other comprehensive income:        
Net change in unrealized gains and losses on investments  —     191 
Applicable income taxes  —     (67)
Reclassification to earnings    (73)  —   
Applicable income taxes  15   —   
Foreign currency translation  496   185 
Other comprehensive income, net  438   309 
Total comprehensive loss $(1,376) $(15,512)

2021, respectively.

See accompanying Notes to Consolidated Financial Statements.

2

2

BIGLARI HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

COMPREHENSIVE INCOME

(dollars in thousands)

  First Quarter
  2018 2017
  (Unaudited)
Operating activities        
Net earnings (loss) $(1,814) $(15,821)
Adjustments to reconcile net earnings (loss) to operating cash flows:        
Depreciation and amortization  4,946   5,621 
Provision for deferred income taxes  380   (10,281)
Asset impairments and other non-cash expenses  239   435 
Loss on disposal of assets  96   99 
Investment partnership (gains) losses  (3,495)  24,968 
Distributions from investment partnerships  5,200   5,015 
Changes in receivables and inventories  3,861   5,202 
Changes in other assets  1,121   (114)
Changes in accounts payable and accrued expenses  (19,979)  (5,261)
Net cash provided by (used in) operating activities  (9,445)  9,863 
Investing activities        
Capital expenditures  (2,452)  (1,990)
Proceeds from property and equipment disposals  1,524   50 
Purchases of investments  (18,340)  (16,945)
Redemptions of fixed maturity securities  17,492   18,653 
Net cash used in investing activities  (1,776)  (232)
Financing activities        
Payments on revolving credit facility  (39)  (20)
Principal payments on long-term debt  (550)  (15,550)
Principal payments on direct financing lease obligations  (1,400)  (1,356)
Proceeds from exercise of stock options  42   30 
Net cash used in financing activities  (1,947)  (16,896)
Effect of exchange rate changes on cash  35   17 
Decrease in cash, cash equivalents and restricted cash  (13,133)  (7,248)
Cash, cash equivalents and restricted cash at beginning of year  67,230   75,833 
Cash, cash equivalents and restricted cash at end of first quarter $54,097  $68,585 

 Third QuarterFirst Nine Months
 2022202120222021
 (Unaudited)(Unaudited)
Net earnings (loss)$32,039 $(10,669)$(42,039)$40,301 
Foreign currency translation(618)(49)(1,870)(378)
Comprehensive income (loss)31,421 (10,718)(43,909)39,923 
Comprehensive income attributable to noncontrolling interests34 — 34 — 
Total comprehensive income (loss) attributable to Biglari Holdings Inc. shareholders$31,387 $(10,718)$(43,943)$39,923 

See accompanying Notes to Consolidated Financial Statements.

3


3

BIGLARI HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
First Nine Months
20222021
(Unaudited)
Operating activities  
Net earnings (loss)$(42,039)$40,301 
Adjustments to reconcile net earnings (loss) to operating cash flows:
Depreciation, depletion, and amortization24,127 22,239 
Provision for deferred income taxes(22,289)16,625 
Asset impairments and other non-cash expenses20 696 
Gains on disposal of assets(905)(306)
Investment and investment partnership (gains) losses86,428 (34,461)
Distributions from investment partnerships51,200 172,420 
Changes in receivables, inventories and other assets7,240 3,608 
Changes in accounts payable and accrued expenses(4,028)(9,877)
Net cash provided by operating activities99,754 211,245 
Investing activities
Capital expenditures(23,437)(46,486)
Proceeds from property and equipment disposals2,201 2,749 
Acquisition of a business, net of cash acquired(54,899)— 
Purchases of limited partner interests(23,886)(4,800)
Purchases of investments(110,837)(81,923)
Sales of investments and redemptions of fixed maturity securities108,394 74,678 
Net cash used in investing activities(102,464)(55,782)
Financing activities
Proceeds from revolving credit facility30,000 — 
Principal payments on long-term debt— (149,952)
Principal payments on direct financing lease obligations(4,647)(4,634)
Net cash provided by (used in) financing activities25,353 (154,586)
Effect of exchange rate changes on cash(150)(85)
Increase in cash, cash equivalents and restricted cash22,493 792 
Cash, cash equivalents and restricted cash at beginning of year43,687 29,666 
Cash, cash equivalents and restricted cash at end of third quarter$66,180 $30,458 
First Nine Months
20222021
(Unaudited)
Cash and cash equivalents$64,842 $27,795 
Restricted cash in other long-term assets1,338 2,663 
Cash, cash equivalents and restricted cash at end of third quarter$66,180 $30,458 
See accompanying Notes to Consolidated Financial Statements.
4

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in thousands)

  Common Stock Additional Paid-In Capital Retained Earnings Accumulated 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 (loss)          (1,814)          (1,814)
Adoption of accounting standards          90           90 
Other comprehensive income, net              438       438 
Adjustment to treasury stock for holdings in investment partnerships                  (18,377)  (18,377)
Exercise of stock options      (39)          81   42 
Balance at March 31, 2018 $1,071  $381,975  $563,780  $(966) $(394,153) $551,707 
                         
                         
Balance at December 31, 2016 $1,071  $381,906  $515,433  $(3,584) $(362,886) $531,940 
Net earnings (loss)          (15,821)          (15,821)
Other comprehensive income, net              309       309 
Adjustment to treasury stock for holdings in investment partnerships      116           (1,600)  (1,484)
Exercise of stock options      (8)          38   30 
Balance at March 31, 2017 $1,071  $382,014  $499,612  $(3,275) $(364,448) $514,974 

Biglari Holdings Inc. Shareholders’ Equity
Common
Stock
Additional Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Treasury
Stock
Non-controlling InterestsTotal
Balance at December 31, 2021$1,138 $381,788 $608,528 $(1,907)$(401,851)$— $587,696 
Net earnings (loss)(298)(298)
Other comprehensive loss(231)(231)
Adjustment to treasury stock for holdings in investment partnerships130 130 
Balance at March 31, 2022$1,138 $381,788 $608,230 $(2,138)$(401,721)$— $587,297 
Net earnings (loss)(73,780)(73,780)
Other comprehensive loss(1,021)(1,021)
Adjustment to treasury stock for holdings in investment partnerships(6,760)(6,760)
Balance at June 30, 2022$1,138 $381,788 $534,450 $(3,159)$(408,481)$— $505,736 
Net earnings32,005 34 32,039 
Other comprehensive loss(618)(618)
Adjustment to treasury stock for holdings in investment partnerships(638)(638)
Transactions with noncontrolling interests8,889 8,889 
Balance at September 30, 2022$1,138 $381,788 $566,455 $(3,777)$(409,119)$8,923 $545,408 
5

Biglari Holdings Inc. Shareholders’ Equity
Common
Stock
Additional Paid-In CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock  
Non-controlling interestsTotal
Balance at December 31, 2020$1,138 $381,788 $573,050 $(1,531)$(389,617)$— $564,828 
Net earnings71,707 71,707 
Other comprehensive loss(444)(444)
Adjustment to treasury stock for holdings in investment partnerships3,049 3,049 
Balance at March 31, 2021$1,138 $381,788 $644,757 $(1,975)$(386,568)$— $639,140 
Net earnings (loss)(20,737)(20,737)
Other comprehensive income115 115 
Adjustment to treasury stock for holdings in investment partnerships(5,026)(5,026)
Balance at June 30, 2021$1,138 $381,788 $624,020 $(1,860)$(391,594)$— $613,492 
Net earnings (loss)(10,669)(10,669)
Other comprehensive loss(49)(49)
Adjustment to treasury stock for holdings in investment partnerships(4,208)(4,208)
Balance at September 30, 2021$1,138 $381,788 $613,351 $(1,909)$(395,802)$— $598,566 
See accompanying Notes to Consolidated Financial Statements.

4

6

BIGLARI HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

September 30, 2022
(dollars in thousands, except share and per share data)

Note 1. Summary of Significant Accounting Policies

Description of Business

The accompanying unaudited consolidated financial statements of Biglari Holdings Inc. (“Biglari Holdings” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal recurring adjustments. The results for the interim periods shown are not necessarily indicative of results for the entire fiscal year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017.

2021.

Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including media, property and casualty insurance, licensing and restaurants.media, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value.

Biglari Holdings’ management system combines decentralized operations with centralized finance decision-making. Operating decisions for the various business units are made by their respective managers. All major operating, investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.
As of March 31, 2018,September 30, 2022, Mr. Biglari’s beneficial ownershipBiglari beneficially owns shares of the Company’sCompany that represent approximately 66.3% of the economic interest and approximately 70.4% of the voting interest.

Business Acquisition
On September 14, 2022, the Company completed the purchase of 685,505 shares of Series A Preferred Stock (the "Preferred Shares") of Abraxas Petroleum Corporation ("Abraxas Petroleum") for a purchase price of $80,000. On October 26, 2022, the Company converted the preferred stock to 90% of the outstanding common stock was approximately 54.8%.

On March 5, 2018,of Abraxas Petroleum. We have concluded that Abraxas Petroleum is a consolidated entity and have recorded noncontrolling interests attributable to the interest held by other shareholders. The Company used working capital including its line of credit to fund the purchase of the Preferred Shares. Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. The Company’s financial results include the results of Abraxas Petroleum from the acquisition date to the end of the third quarter. The revenues and operating results for Abraxas Petroleum were not significant to the Company entered into an agreement with NBHSA Inc. (“New BH”), a direct, wholly owned subsidiary of the Company, and BH Merger Company (“Merger Sub”), a wholly owned subsidiary of New BH. Pursuant to the agreement, on April 30, 2018, Merger Sub merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of New BH. Upon completion of the merger, New BH changed its name to “Biglari Holdings Inc.” and replaced the Company as the publicly held corporation through which our collection of businesses is conducted.

New BH 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.

As a result of the April 30, 2018 transaction, the current shareholders of the Company became shareholders of New BH and received, for every ten (10) shares of common stock of the Company they owned on April 30, 2018, (i) ten (10) shares of Class B common stock of New BH and (ii) one (1) share of Class A common stock of New BH. In other words, shareholders received for a share of common stock of the Company (i) one (1) share of Class B common stock of New BH and (ii) 1/10th of one share of Class A common stock of New BH.

Starting on May 1, 2018, the shares of New BH Class A common stock trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “BH.A,” whereas the New BH Class B common stock trades on the NYSE under the ticker symbol “BH,” which is the former ticker symbol for the Company’s common stock.

For accounting purposes, the April 30, 2018 transaction will be treated as a merger of entities under common control. Accordingly, the consolidated financial position and results of operations of the Company will be included in the consolidated financial statements of New BH on the same basis as currently presented, except for earnings per share which is impacted by the issuance of the new common shares. The Company has applied the “two-class method” of computing earnings per share as prescribed in ASC 260, “Earnings Per Share.” 

third quarter.


Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, including Steak n Shake Inc. (“Steak n Shake”), Western Sizzlin Corporation, (“Western”), Maxim Inc. (“Maxim”) and First Guard Insurance Company, Maxim Inc., Southern Pioneer Property & Casualty Insurance Company, Southern Oil Company and its agency, 1st Guard Corporation (collectively “First Guard”).Abraxas Petroleum. Intercompany accounts and transactions have been eliminated in consolidation.

5

Note 2. New Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, 2020. The Company does not currently anticipate ASU 2017-04 will have a material impact on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13,Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP; however ASU 2016-13 will require 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. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and related disclosures.

In February 2016, 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. We are currently evaluating the effect this amended guidance will have on our consolidated balance sheet and results of operations. We anticipate the ASU will have a material impact on our balance sheet, but the ASU is non-cash in nature and will not affect our cash position.

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 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 the three months ended March 31, 2018.

  As Reported Adjustments
for the
Adoption of
ASC 606
 Amounts without the
Adoption of
ASC 606
Statements of Earnings            
Revenues            
Restaurant operations            
Net sales $185,571  $—    $185,571 
Franchise royalties and fees  7,102   2,369   4,733 
Other  1,261   279   982 
Selling, general and administrative  32,650   2,522   30,128 
Earnings (loss) before income taxes  (2,611)  126   (2,737)
Income tax expense (benefit)  (797)  31   (828)
Net earnings (loss)  (1,814)  95   (1,909)

The impact of ASC 606 on the Company’s balance sheet as of March 31, 2018 was not material. The cumulative change in retained earnings 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, and recognition of gift card revenue. See additional revenue disclosures in Note 8 Restaurant Operations Revenues. The adoption of ASC 606 did not have any significant impact on our insurance or media businesses.

6

Note 3.2. Earnings Per Share

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

On September 16, 2017,June 8, 2022, The Lion Fund II, L.P. entered into a Rule 10b5-1 trading plan to purchase up to an aggregate of 110,000transferred 83,465 shares of Biglari Holdings common stock at prevailing market prices. During the first quarter of 2018, 45,302 shares were purchased. All of the shares to be purchased under the trading plan remain legally outstanding.

On April 30, 2018 the Company’s shareholders exchanged their shares of Company common stock for dual common stock –Holdings’ Class A common stock and 890,272 shares of Biglari Holdings’ Class B common stock. stock to The Lion Fund, L.P.


7

Note 2. Earnings Per Share (continued)
The following table presents shares authorized, issued and outstanding on March 31, 2018September 30, 2022 and December 31, 2017.

  March 31,
2018
 December 31,
2017
Common stock authorized  2,500,000   2,500,000 
         
Common stock issued  2,142,202   2,142,202 
Treasury stock held by the Company  (73,667)  (74,589)
Outstanding shares  2,068,535   2,067,613 

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 the first quarters of 2018 and 2017 are impacted by the issuance of the new common shares. 2021.

 September 30, 2022December 31, 2021
 Class AClass BClass AClass B
Common stock authorized500,000 10,000,000 500,000 10,000,000 
Common stock issued and outstanding206,864 2,068,640 206,864 2,068,640 

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

As of March 31, 2018, the total outstanding shares of the Company were 2,068,535.. The calculation of earnings per share reflects an exchange of 2,068,535 outstanding shares of the Company for 206,854 shares of New BH Class A common stock and 2,068,535 shares of New BH Class B common stock. On an equivalent Class A common stock basis, there were 620,592 shares outstanding as of March 31, 2018 and 620,284 shares outstanding as of December 31, 2017.

For financial reporting purposes,applied for computing earnings per share excludes the proportional ownershipshares of the Company’s commonBiglari Holdings’ stock ownedheld by the investment partnershipspartnerships. In the tabulation below is excluded in the earnings per share calculation. After giving effect for the investment partnerships’ proportional ownership of New BH’s common stock, theweighted average equivalent Class A weighted average common shares during the first quarter of 2018 and 2017 were 352,191 and 370,344, respectively.

Each Class A common share is entitled to one vote. Class B common stock possesses economic rights equalfor earnings per share. There are no dilutive securities outstanding.

Third QuarterFirst Nine Months
2022202120222021
Equivalent Class A common stock outstanding620,592 620,592 620,592 620,592 
Proportional ownership of Company stock held by investment partnerships327,317 304,356 320,711 300,215 
Equivalent Class A common stock for earnings per share293,275 316,236 299,881 320,377 
Note 3. Investments
We classify investments in fixed maturity securities at the acquisition date as either available-for-sale or held-to-maturity and re-evaluate the classification at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to one-fifth (1/5th)hold the securities to maturity. Realized gains and losses on disposals of such rights of Class A common stock; however, Class B common stock has no voting rights.

Note 4. Investments

Investments consisted of the following.

  March 31,
2018
 December 31,
2017
Cost $24,099  $23,216 
Gross unrealized gains  58   73 
Fair value $24,157  $23,289 

Investments in equity securities and a related put option of $4,463 are included in other current assets as of March 31, 2018 and in other assets as of December 31, 2017. The investments are recorded at fair value.

7
determined on a specific identification basis. Dividends earned on investments are reported as investment income by our insurance companies. We consider investment income as a component of our aggregate insurance operating result. However, we consider investment gains and losses, whether realized or unrealized, as non-operating.
Investment losses for the third quarter and first nine months of 2022 were $849 and $4,184, respectively. Investment gains in the third quarter and first nine months of 2021 were $4,534 and $6,465, respectively.

Note 5.4. Investment Partnerships

The Company reports on the limited partnership interests in investment partnerships under the equity method of accounting. We record our proportional share of equity in the investment partnerships but exclude Company common stock held by said partnerships. The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though theythese shares are legally outstanding. The Company records gains/losses from investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses on their securities) in the consolidated statements of earnings based on our carrying value of these partnerships. The fair value is calculated net of the general partner’s accrued incentive fees. Gains and losses on Company common stock included in the earnings of these partnerships are eliminated because they are recorded as treasury stock. 

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


8

Note 4. Investment Partnerships(continued)

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

  Fair Value Company Common Stock Carrying Value
Partnership interest at December 31, 2017 $925,279  $359,258  $566,021 
Investment partnership gains (losses)  (1,850)  (5,345)  3,495 
Contributions (net of distributions) to investment partnerships  (5,200)      (5,200)
Increase in proportionate share of Company stock held      18,377   (18,377)
Partnership interest at March 31, 2018 $918,229  $372,290  $545,939 
             
   Fair Value   Company Common Stock   Carrying Value 
Partnership interest at December 31, 2016 $972,707  $395,070  $577,637 
Investment partnership gains (losses)  (59,517)  (34,549)  (24,968)
Contributions (net of distributions) to investment partnerships  (5,015)      (5,015)
Increase in proportionate share of Company stock held      1,484   (1,484)
Partnership interest at March 31, 2017 $908,175  $362,005  $546,170 

 Fair ValueCompany
Common Stock
Carrying Value
Partnership interest at December 31, 2021$474,201 $223,802 $250,399 
Investment partnership gains (losses)(119,864)(37,620)(82,244)
Distributions (net of contributions)(16,023)(16,023)
Changes in proportionate share of Company stock held7,268 (7,268)
Partnership interest at September 30, 2022$338,314 $193,450 $144,864 
 Fair ValueCompany
Common Stock
Carrying Value
Partnership interest at December 31, 2020$590,926 $171,376 $419,550 
Investment partnership gains (losses)110,690 83,346 27,344 
Distributions (net of contributions)(167,620)(167,620)
Changes in proportionate share of Company stock held6,185 (6,185)
Partnership interest at September 30, 2021$533,996 $260,907 $273,089 
The carrying value of the investment partnerships net of deferred taxes is presented below.

  March 31,
2018
 December 31,
2017
Carrying value of investment partnerships $545,939  $566,021 
Deferred tax liability related to investment partnerships  (96,327)  (95,309)
Carrying value of investment partnerships net of deferred taxes $449,612  $470,712 

 September 30,
2022
December 31, 2021
Carrying value of investment partnerships$144,864 $250,399 
Deferred tax liability related to investment partnerships(22,176)(44,532)
Carrying value of investment partnerships net of deferred taxes$122,688 $205,867 
The Company’s proportionate share of Company stock held by investment partnerships at cost is $373,316was $409,119 and $354,939$401,851 at March 31, 2018September 30, 2022 and December 31, 2017,2021, respectively, and iswas recorded as treasury stock.

The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock.  Fair value of our partnership interest is assessed according to our proportional ownership interest of the fair value of investments held by the investment partnerships. The fair value measurement is classified as level 3 withinUnrealized gains and losses on marketable securities held by the fair value hierarchy.

Gains (losses)investment partnerships affect our net earnings. 

Gains/losses from investment partnerships recorded in the Company’s consolidated statements of earnings are presented below.

    First Quarter 
   2018   2017 
Gains (losses) on investment partnership $3,495  $(24,968)
Tax expense (benefit)  420   (9,761)
Contribution to net earnings (loss) $3,075  $(15,207)

8

Index

 Third QuarterFirst Nine Months
 2022202120222021
Gains (losses) from investment partnerships$29,658 $(20,231)$(82,244)$27,344 
Tax expense (benefit)6,601 (4,946)(20,153)6,175 
Contribution to net earnings (loss)$23,057 $(15,285)$(62,091)$21,169 

On December 31 of each year, the general partner of the investment partnerships, Biglari Capital Corp. (“Biglari Capital”), will earn an incentive reallocation fee for the Company’s investments equal to 25% of the net profits above aan annual hurdle rate of 6% over the previous high-water mark. Our policy is to accrue an estimated incentive fee throughout the year. The Company did not accrue antotal incentive feereallocation from Biglari Holdings to Biglari Capital Corp. includes gains on the Company’s common stock. Gains and losses on the Company’s common stock and the related incentive reallocations are eliminated in our financial statements.
There were no incentive reallocations from Biglari Holdings to Biglari Capital Corp. during the first quarternine months of 2018 or 2017. Our investments in these partnerships are committed on a rolling 5-year basis. Biglari Capital is an entity solely owned by Mr. Biglari. 

2022 and 2021.


9

Note 4. Investment Partnerships(continued)

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

   Equity in Investment Partnerships 
   Lion Fund   Lion Fund II 
Total assets as of March 31, 2018 $198,286  $1,057,316 
Total liabilities as of March 31, 2018 $1,481  $200,831 
Revenue for the first quarter ended March 31, 2018 $(4,135) $3,069 
Earnings (loss) for the first quarter ended March 31, 2018 $(4,151) $922 
Biglari Holdings’ ownership interest as of March 31, 2018  65.1%  92.3%
         
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 first quarter ended March 31, 2017 $(15,696) $(52,652)
Earnings (loss) for the first quarter ended March 31, 2017 $(15,716) $(53,514)
Biglari Holdings’ ownership interest as of March 31, 2017  63.6%  92.5%

 Equity in Investment Partnerships
 Lion FundLion Fund II
Total assets as of September 30, 2022$247,357 $307,446 
Total liabilities as of September 30, 2022$9,973 $162,520 
Revenue for the first nine months of 2022$(46,341)$(88,378)
Earnings for the first nine months of 2022$(46,544)$(89,771)
Biglari Holdings’ ownership interest as of September 30, 202288.2 %87.7 %
Total assets as of December 31, 2021$114,749 $564,022 
Total liabilities as of December 31, 2021$7,763 $130,417 
Revenue for the first nine months of 2021$35,639 $94,078 
Earnings for the first nine months of 2021$35,584 $93,548 
Biglari Holdings’ ownership interest as of September 30, 202162.4 %93.9 %
Revenue in the above summarized financial information of the investment partnerships, summarized above, includes investment income and unrealized gains and losses on investments. The investments held by the investment partnerships are largely concentrated in the common stock of one investee, Cracker Barrel Old Country Store, Inc.

Note 6.5. Property and Equipment

Property and equipment is composed of the following.

  March 31, 2018 December 31, 2017
Land $156,176  $156,506 
Buildings  151,669   152,610 
Land and leasehold improvements  162,518   162,652 
Equipment  200,240   203,145 
Construction in progress  1,797   1,782 
   672,400   676,695 
Less accumulated depreciation and amortization  (380,775)  (380,895)
Property and equipment, net $291,625  $295,800 
 September 30,
2022
December 31,
2021
Land$142,813 $144,605 
Buildings151,138 148,605 
Land and leasehold improvements147,765 147,349 
Equipment230,712 224,581 
Oil and gas properties140,916 74,147 
Construction in progress5,744 2,815 
 819,088 742,102 
Less accumulated depreciation, depletion, and amortization(404,591)(392,751)
Property and equipment, net$414,497 $349,351 
Depletion expense related to oil and gas properties was $4,345 and $5,875 during the first nine months of 2022 and 2021, respectively.
The Company recorded an impairment to restaurant long-lived assets of $559 in the first nine months of 2021 related to underperforming stores. The fair value of the long-lived assets was determined based on Level 3 inputs using a discounted cash flow model and quoted prices for the properties. There were no impairments of property and equipment in 2022.

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

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Note 7.6. Goodwill and Other Intangible Assets

Goodwill

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

A reconciliation of the change in the carrying value of goodwill is as follows.

  Restaurants Other Total
Goodwill at December 31, 2017 $28,168  $11,913  $40,081 
Change in foreign exchange rates during first quarter 2018  18   —     18 
Goodwill at March 31, 2018 $28,186  $11,913  $40,099 

9
Goodwill
Goodwill at December 31, 2021$53,547 
Change in foreign exchange rates during the first nine months of 2022(83)
Goodwill at September 30, 2022$53,464 



We are required to assessevaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. When evaluating goodwill for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we test for potential impairment using a two-step approach. The first is the estimation of fair value of each reporting unit. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value.

GAAP allows entities testing for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit for the goodwill impairment test. We use both qualitative and quantitative assessments. The valuation methodology and underlying financial information included in our quantitative determination of fair value require significant management judgments. We use both market and income approaches to derive fair value.value of reporting units utilizing a quantitative assessment. The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results. No impairment charges for goodwill werewas recorded in the first threenine months of 20182022 or 2017.

2021. Western Sizzlin has experienced a decline in its franchised units for several years. If Western Sizzlin’s franchised units continue to decline, an impairment of its goodwill may be necessary.

Other Intangible Assets

Other intangible

Intangible assets with indefinite lives are composed of the following.

  March 31, 2018 December 31, 2017
  Gross carrying amount Accumulated amortization Total Gross carrying amount Accumulated amortization Total
Franchise agreement $5,310  $(4,248) $1,062  $5,310  $(4,116) $1,194 
Other  810   (751)  59   810   (743)  67 
Total  6,120   (4,999)  1,121   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  9,678   —     9,678   9,427   —     9,427 
Total intangible assets $31,674  $(4,999) $26,675  $31,423  $(4,859) $26,564 

Intangible assets subject to amortization consist of franchise agreements connected with the purchase of Western as well as rights to favorable leases related to prior acquisitions. These intangible assets are being amortized over their estimated weighted average of useful lives ranging from eight to twelve years.

Amortization expense for each of the first quarters of 2018 and 2017 was $140 and $142, respectively. The Company’s intangible assets with definite lives will fully amortize in 2020. Total annual amortization expense for 2019 is expected to be approximately $500.

 Trade NamesLease RightsTotal
Balance at December 31, 2021$15,876 $7,587 $23,463 
Impairment to lease rights— (20)(20)
Change in foreign exchange rates during the first nine months of 2022— (974)(974)
Balance at September 30, 2022$15,876 $6,593 $22,469 
Intangible assets with indefinite lives consist of trade names franchise rights as well asand lease rights.

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

Note 8.7. Restaurant Operations Revenues

Restaurant operations revenues were as follows.

   First Quarter 
   2018   2017 
Net sales $185,571  $189,051 
Franchise royalties and fees  7,102   5,556 
Other  1,261   1,087 
  $193,934  $195,694 

The Company’s accounting policies and practices related to restaurant operations revenues consist of the following under ASC 606.

10

Index

 Third QuarterFirst Nine Months
 2022202120222021
Net sales$37,448 $41,916 $113,345 $146,269 
Franchise partner fees15,880 11,508 47,929 31,744 
Franchise royalties and fees5,089 4,865 15,472 14,594 
Other1,020 855 2,862 3,817 
 $59,437 $59,144 $179,608 $196,424 

Net sales

Sales

Net sales were comprisedare 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 control of the food items are transferredour obligation to our customersperform 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.

11

Note 7. Restaurant Operations Revenues (continued)
Franchise royalties and fees

Partner Fees

Franchise royalties andpartner fees are comprisedcomposed of up to 15% of sales as well as 50% of profits. We are therefore fully affected by the operating results of the business, unlike in a traditional franchising arrangement, where the franchisor obtains a royalty fee based on sales only. We generate most of our revenue from our share of the franchise partners’ profits. An initial franchise fee of ten thousand dollars is recognized during the year the operator becomes a franchise partner. The Company recognizes franchise partner fees monthly as underlying restaurant sales occur.
The Company leases or subleases property and equipment to franchise partners under lease arrangements. Both real estate and equipment rental payments are charged to franchise partners and are recognized in accordance with ASC 842, “Leases”. During the third quarter of 2022 and 2021, restaurant operations recognized $5,362 and $4,277, respectively, in franchise partner fees related to rental income. During the first nine months ended September 30, 2022 and September 30, 2021, restaurant operations recognized $15,193 and $10,910, respectively, in franchise partner fees related to rental income.
Franchise Royalties and Fees
Franchise royalties and fees from Steak n Shake and Western Sizzlin franchisees. Royalty revenuesfranchisees are based onupon a percentage of sales of the franchise salesrestaurant and are recognized when the retail food itemsas earned. Franchise royalties are purchased by franchise customers.billed on a monthly basis. Initial franchise fees receivedwhen a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when amounts are received and recognized as revenue on a straight-line basis over the term of each respectivethe franchise agreement, which is typically 20 years. This represents a change in methodology for we have historically recognized initial franchise fees upon the opening of a franchise restaurant.

During the quarter ended March 31, 2018, restaurant operations recognized $369 in revenue related to initial franchise fees. As of March 31, 2018 and January 1, 2018, restaurant operations had deferred revenue related to franchise fees of $10,818 and $10,581, respectively. Restaurant operations expects to recognize approximately $450 of deferred revenue balance during the remainder of 2018, approximately $600 in 2019 and the balance in the years 2020 through 2037.

Our advertising arrangements with franchisees are reported in franchise royalties and fees. This represents a change in methodology as we have historically reported advertising funds from the franchisees as an offset to marketing expense in our consolidated statement of earnings.

During the quarter ended March 31, 2018, restaurant operations recognized $2,437 in revenue related to franchise advertising fees. As of March 31, 2018 and January 1, 2018, restaurant operations had deferred revenue related to franchisee advertising fees of $2,065 and $2,064, respectively. Restaurant operations expect to recognize approximately $900 of deferred revenue balance during the remainder of 2018 and the balance in 2019.

Gift card revenue

agreement.

Other Revenue
Restaurant operations sells gift cards to customers which can be redeemed for retail food sales within our stores. Gift cards are recorded as deferred revenuea liability when issued and are subsequently recorded as net sales upon redemption. Restaurant operations estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as other revenue in proportion to the rate of gift card redemptions by vintage. This represents a change in the methodology used to estimate breakage as we have historically recognized breakage for the portion of the gift card balances that remained outstanding following 48 months of issuance.

For the quarter ended March 31, 2018, restaurant operations recognized $9,287 of revenue from gift card redemptions. As of March 31, 2018 and January 1, 2018, restaurant operations had deferred revenue related to unredeemed gift cards of $14,993 and $20,968, respectively. The Company expects to recognize approximately $8,700 of deferred revenue balance during the remainder of 2018, approximately $4,200 in 2019, and the balance in the years 2020 through 2022.

11

Note 9.8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses include the following.

  March 31,
2018
 December 31,
2017
Accounts payable $36,342  $40,616 
Gift card liability  14,993   27,436 
Salaries, wages, and vacation  9,389   22,875 
Taxes payable  11,786   10,571 
Workers' compensation and other self-insurance accruals  7,915   9,047 
Deferred revenue  17,744   9,522 
Other  8,539   8,677 
Accounts payable and accrued expenses $106,708  $128,744 

 September 30,
2022
December 31,
2021
Accounts payable$34,288 $36,684 
Gift card and other marketing15,985 19,244 
Insurance accruals5,971 6,428 
Salaries, wages and vacation6,902 5,905 
Deferred revenue4,831 6,683 
Taxes payable21,583 11,392 
Professional fees1,998 11,731 
Oil and gas payable5,586 1,936 
Other4,359 464 
Accounts payable and accrued expenses$101,503 $100,467 

Note 10. Borrowings

Notes payable9. Line of Credit and other borrowings includeNote Payable

Bigari Holdings Line of Credit
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The line of credit will be available on a revolving basis until September 12, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants. The balance of the following.

Current portion of notes payable and other borrowings March 31,
2018
 December 31,
2017
Notes payable $2,200  $2,200 
Unamortized original issue discount  (324)  (321)
Unamortized debt issuance costs  (591)  (585)
Obligations under leases  5,103   5,279 
Western revolver  136   175 
Total current portion of notes payable and other borrowings $6,524  $6,748 
         
Long-term notes payable and other borrowings        
Notes payable $183,148  $183,698 
Unamortized original issue discount  (690)  (772)
Unamortized debt issuance costs  (1,255)  (1,405)
Obligations under leases  73,785   75,473 
Total long-term notes payable and other borrowings $254,988  $256,994 

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

Steak n Shake Credit Facility

On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000 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 $8,628 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 as restricted cash in the consolidated balance sheets.

$220,000. The term loan iswas scheduled to mature on March 19, 2021. It amortizes at an annual rateThe Company repaid the balance of 1.0% in equal quarterly installments, beginning June 30, 2014, at 0.25%Steak n Shake’s term facility on February 19, 2021.

12

Note 10. Lease Assets and Obligations
Lease obligations include the original principal amountfollowing.
Current portion of lease obligationsSeptember 30,
2022
December 31,
2021
Finance lease liabilities$1,214 $1,414 
Finance obligations5,119 4,944 
Operating lease liabilities10,760 10,540 
Total current portion of lease obligations$17,093 $16,898 
Long-term lease obligations
Finance lease liabilities$4,431 $5,347 
Finance obligations60,009 63,119 
Operating lease liabilities31,540 36,013 
Total long-term lease obligations$95,980 $104,479 
Nature 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.

12
Leases

Steak n Shake hasand Western Sizzlin operate restaurants that are located on sites owned by us or leased from third parties. In addition, they own sites and lease sites from third parties that are leased and/or subleased to franchise partners and franchisees.

Lease Costs
A significant portion of our operating and finance lease portfolio includes restaurant locations. We recognize fixed lease expense for operating leases on a straight-line basis over the 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.

The interest ratelease term. For finance leases, we recognize amortization expense on the term loan was 5.40%right-of-use asset and interest expense on the lease liability over the lease term.

Total lease cost consists of the following.
Third QuarterFirst Nine Months
2022202120222021
Finance lease costs:
Amortization of right-of-use assets$309 $404 $1,023 $1,205 
Interest on lease liabilities102 126 325 399 
Operating and variable lease costs3,577 4,011 10,782 11,189 
Sublease income(2,895)(3,771)(8,487)(9,786)
Total lease costs$1,093 $770 $3,643 $3,007 
Supplemental cash flow information related to leases is as follows.
 First Nine Months
 20222021
Cash paid for amounts included in the measurement of lease liabilities:  
Financing cash flows from finance leases$1,116 $1,226 
Operating cash flows from finance leases$324 $384 
Operating cash flows from operating leases$9,347 $9,806 



13

Note 10. Lease Assets and Obligations (continued)
Supplemental balance sheet information related to leases is as follows.
September 30,
2022
December 31,
2021
Finance leases:
Property and equipment, net$4,619 $5,634 
Weighted-average lease terms and discount rates are as follows.
September 30,
2022
Weighted-average remaining lease terms:
Finance leases4.56 years
Operating leases4.90 years
Weighted-average discount rates:
Finance leases7.0 %
Operating leases7.0 %
Maturities of lease liabilities as of March 31, 2018.

September 30, 2022 are as follows.

YearOperating
Leases
Finance
Leases
2022$4,215 $394 
202311,781 1,551 
20249,985 1,534 
20258,290 1,298 
20265,671 959 
After 20269,967 855 
Total lease payments49,909 6,591 
Less interest7,609 946 
Total lease liabilities$42,300 $5,645 
Lease Income
The credit agreement includes customary affirmativecomponents of lease income recorded in restaurant operations are as follows.
Third QuarterFirst Nine Months
2022202120222021
Operating lease income$4,085 $3,211 $11,737 $8,471 
Variable lease income1,556 1,370 4,312 3,375 
Total lease income$5,641 $4,581 $16,049 $11,846 


14

Note 10. Lease Assets and negative covenantsObligations (continued)
The following table displays the Company’s future minimum rental receipts for non-cancelable leases and eventssubleases as 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 allSeptember 30, 2022. Franchise partner leases and subleases are short-term leases and have been excluded from the assets of Steak n Shake. Biglari Holdings is not a guarantor under the credit facility. As of March 31, 2018, $185,348 was outstanding under the term loan.

Western Revolver

As of March 31, 2018, Western has $136 due June 13, 2018.

Fair Value of Debt

The fair value of long-term debt, excluding capitalized lease obligations, was approximately $165,000 at March 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.

table.

Operating Leases
YearSubleasesOwned Properties
2022$228 $62 
2023767 247 
2024503 247 
2025454 250 
2026134 247 
After 2026241 805 
Total future minimum receipts$2,327 $1,858 

Note 11. Accumulated Other Comprehensive Income

Accumulated other comprehensive income decreased by $618 and $49 during the third quarters of 2022 and 2021, respectively. During the first quartersnine months of 2018 and 2017, the changes in the balances of each component of2022, accumulated other comprehensive income net of tax, were as follows.

  Three months ended March 31, 2018 Three months ended March 31, 2017
   Foreign currency translation adjustments   

Investment gain (loss)
   Accumulated other comprehensive income (loss)   Foreign currency translation adjustments   

Investment gain (loss)
   Accumulated
other
comprehensive income (loss)
 
Beginning Balance   $(1,462) $58  $(1,404) $(3,447) $(137) $(3,584)
Other comprehensive income (loss) before reclassifications  —     —     —     —     124   124 
Reclassification to (earnings) loss  —     (58)  (58)  —     —     —   
Foreign currency translation  496       496   185       185 
Ending Balance $(966) $—    $(966) $(3,262) $(13) $(3,275)

Reclassifications made from accumulated other comprehensive income to the consolidated statement of earnings duringdecreased by $1,870 and $378 in the first quarternine months of 2018 was $58; there2021. There were no reclassifications from accumulated other comprehensive incomeloss to earnings during the first quarternine months of 2017.

2022 and 2021.  All changes in accumulated other comprehensive loss were due to foreign currency translation adjustments.

Note 12. Income Taxes

In determining the quarterly provision for income taxes, the Company usesused an estimated annual effective tax rate for the first nine months of 2022 and a discrete effective tax rate method based on expected annual income, statutory tax rates for the first nine months of 2021. Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and availableunderlying income tax planning opportunities inrates applicable to the various jurisdictions in whichtaxing jurisdictions.
Income tax expense for the Company operates. Unusual or infrequently occurring items are separately recognized duringthird quarter of 2022 was $9,598 compared to an income tax benefit of $4,274 for the third quarter in which they occur.

of 2021.  Income tax benefit for the first quarternine months of 20182022 was $797$13,282 compared to $9,776an income tax expense of $11,544 for the first quarternine months of 2017. The Tax Cuts and Jobs Act was signed into law on December 22, 2017. The U.S. corporate federal statutory income tax rate was reduced from 35.0% to 21.0% for tax years beginning in 2018.2021. The variance in income taxes between 20182022 and 20172021 is attributable to the reduced corporate tax rate and taxes on income and losses generated by the investment partnerships.

As  Investment partnership pre-tax gains were $29,658 during the third quarter of March 31, 2018 and December 31, 2017, we had approximately $363 and $357, respectively,2022 compared to pre-tax losses of unrecognized tax benefits, which are included in other liabilities in$20,231 during the consolidated balance sheets.

13
third quarter of 2021. Investment partnership pre-tax losses were $82,244 during the first nine months of 2022 compared to pre-tax gains of $27,344 during the first nine months of 2021. 

Note 13. Commitments and Contingencies


We are involved in various 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 flows.

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 for breach of fiduciary duty by the individual defendants and unjust enrichment to Mr. Biglari as a result of the agreement with NBHSA Inc. and the issuance of dual class common stock. The shareholder seeks, for himself and on behalf of all other shareholders as a class (other than the individual defendants and those related to or affiliated with them), to seek a declaration that the defendants breached their duty to the shareholder and the class and that Mr. Biglari would be unjustly enriched, and to recover unspecified damages, pre-judgment and post-judgment interest, and an award of their attorneys’ fees and other costs.

On March 26, 2018, a second shareholder of the Company filed a purported class action complaint against the Company, the members of our Board of Directors, New BH, and Merger Sub 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 28, 2018 to approve the agreement with NBHSA Inc. and the issuance of dual class common stock. On April 16, 2018, the shareholder withdrew his motion to enjoin the special meeting.

The Company believes the claims in each case are without merit and intends to defend these cases vigorously.

flow.

Note 14. Fair Value of Financial Assets

The fair values of substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.


15

Note 14. Fair Value of Financial Assets (continued)
The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.
Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.
Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and we may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

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 sheet:

sheets:

Cash equivalents: Cash equivalents primarily consist of money market funds which are classified withinas Level 1 of the fair value hierarchy.

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

Bonds: The Company’s investments in bonds consist of both corporate and government debt. Bonds are classified withinas Level l or Level 2 of the fair value hierarchy.

14

Non-qualified deferred compensation plan investments:The assets of the non-qualified plan are set up in a rabbi trust. They represent mutual funds and publicly traded securities, each of which are classified withinas Level 1 of the fair value hierarchy.

Derivative instruments: Options related to equity securities are marked to market each reporting period and are classified withinas Level 2 of the fair value hierarchy.

hierarchy depending on the instrument.

16

Note 14. Fair Value of Financial Assets (continued)
As of March 31, 2018September 30, 2022 and December 31, 2017,2021, the fair values of financial assets were as follows.

  March 31, 2018 December 31, 2017
     
   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
Assets                                
Cash equivalents $4,997  $—    $—    $4,997  $5,785  $—    $—    $5,785 
Equity securities: Consumer goods  2,290   —     —     2,290   2,445   —     —     2,445 
Bonds  —     26,767   —     26,767   —     25,901   —     25,901 
Options on equity securities  —     2,173   —     2,173   —     2,018   —     2,018 
Non-qualified deferred compensation plan investments  3,277   —     —     3,277   3,459   —     —     3,459 
Total assets at fair value $10,564  $28,940  $—    $39,504  $11,689  $27,919  $—    $39,608 

September 30, 2022December 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Cash equivalents$16,389 $— $— $16,389 $18,447 $— $— $18,447 
Equity securities
Consumer goods16,266 932 — 17,198 10,775 2,368 — 13,143 
Insurance49 — — 49 6,513 — — 6,513 
Technology1,832 — — 1,832 2,887 — — 2,887 
Bonds
Government44,914 — — 44,914 54,584 — — 54,584 
Corporate3,003 — — 3,003 4,512 — — 4,512 
Options on equity securities— 3,531 — 3,531 — 2,095 — 2,095 
Non-qualified deferred compensation plan investments1,299 — — 1,299 1,607 — — 1,607 
Total assets at fair value$83,752 $4,463 $— $88,215 $99,325 $4,463 $— $103,788 
There were no changes in our valuation techniques used to measure fair values on a recurring basis.

Note 15. Related Party Transactions

Services

Service Agreement

On September 15, 2017, the

The Company entered intois party to a servicesservice agreement with Biglari Enterprises LLC and Biglari Capital Corp. (collectively, the “Biglari Entities”). under which the Biglari Entities provide business and administrative related services to the Company. The Biglari Entities are owned by Mr. Biglari.

The services agreement replaces the shared services agreement between the Company andpaid Biglari Capital dated July 1, 2013. The services agreement was executedEnterprises $6,300 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-year term, effective on October 1, 2017. The fixed fee is $700 per month forservice fees during the first year with adjustments in years two through five.nine months of 2022 and 2021. The servicesservice agreement does not alter the hurdle rate connected with the incentive reallocation paid to Biglari Capital byCorp.  

Incentive Agreement
The Incentive Agreement establishes a performance-based annual incentive payment for Mr. Biglari contingent upon the Company.

Investmentsgrowth in The Lion Fund, L.P. and The Lion Fund II, L.P.
As of March 31, 2018, the Company’s investmentsadjusted equity in The Lion Fund, L.P. and The Lion Fund II, L.P. had a fair value of $918,229.

Distributions from The Lion Fund II, L.P. were $5,200 and $5,015 during the first quarters of 2018 and 2017, respectively.

As the general partner of the investment partnerships, Biglari Capital on December 31 of each year will earn an incentive reallocation feeattributable to our operating businesses. In order for the Company’s investments equal to 25% of the net profits above a hurdle rate of 6% over the previous high water mark. Our policy is to accrue an estimated incentive fee throughout the year. The Company did not accrue incentive fees for Biglari Capital during the first quarters of 2018 and 2017.

15

Incentive Agreement Amendment

During 2013, Biglari Holdings and Mr. Biglari entered into an amendment to the Incentive Agreement to exclude earnings by the investment partnerships from the calculation of Mr. Biglari’s incentive bonus. Under the Amended and Restated Incentive Agreement Mr. Biglari would receive a payment of approximately $13,000 if an event occurred entitling him to a severance payment.

License Agreement

On 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 receive any incentive, our operating businesses must achieve an annual increase in shareholders’ equity in excess of 6% (the “Hurdle Rate”) above 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”previous highest level (the “High Water Mark”) were to occur,. Mr. Biglari would be entitledwill receive 25% of any incremental book value created above the High Water Mark plus the Hurdle Rate. In any year in which book value declines, our operating businesses must completely recover their deficit from the previous High Water Mark, along with attaining the Hurdle Rate, before Mr. Biglari becomes eligible to receive 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 periodany further incentive payment.


17

Table 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.

“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 franchised 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 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, 2017, using revenue from 2017 as an estimate of future revenue and calculated according to terms of the License Agreement, Mr. Biglari would receive approximately $20,000 in royalty payments annually. At a minimum, the royalties would be earned on revenue generated from January 1, 2018 through December 21, 2024. Royalty payments beyond the minimum period would be subject to the licensee's continued use of the licensed marks.

17

Note 16. Business Segment Reporting

Our reportable business segments are organized in a manner that reflects how management views those business activities. Our restaurant operations includesinclude Steak n Shake and Western.Western Sizzlin. Our insurance operations include First Guard and Southern Pioneer.  Our oil and gas operations include Southern Oil and Abraxas Petroleum. The Company also reports segment information for First Guard and Maxim. 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 and earnings (losses) before income taxes

A disaggregation of our consolidated data for the third quarters and first quartersnine months of 20182022 and 2017 were as follows.

  Revenue
   First Quarter 
   2018   2017 
Operating Businesses:        
Restaurant Operations:        
Steak n Shake $190,293  $192,690 
Western  3,641   3,004 
Total Restaurant Operations  193,934   195,694 
First Guard  6,547   6,080 
Maxim  1,744   1,619 
  $202,225  $203,393 

  Earnings (Losses) Before Income Taxes
   First Quarter 
   2018   2017 
Operating Businesses:        
Restaurant Operations:        
Steak n Shake $(992) $3,352 
Western  374   450 
Total Restaurant Operations  (618)  3,802 
First Guard  510   969 
Maxim  (217)  (324)
Other  139   148 
Total Operating Businesses  (186)  4,595 
Corporate and Investments:        
Corporate  (3,166)  (2,400)
Investment partnership gains  3,495   (24,968)
Total Corporate and Investments  329   (27,368)
Interest expense on notes payable and other borrowings  (2,754)  (2,824)
  $(2,611) $(25,597)

18
2021 is presented in the tables which follow.

Revenue
Third QuarterFirst Nine Months
2022202120222021
Operating Businesses:
Restaurant Operations:
Steak n Shake$56,949 $56,993 $172,444 $190,517 
Western Sizzlin2,488 2,151 7,164 5,907 
Total Restaurant Operations59,437 59,144 179,608 196,424 
Insurance Operations:
Underwriting
First Guard9,112 8,458 26,858 24,760 
Southern Pioneer6,004 5,443 17,653 16,406 
Investment income and other1,196 822 3,234 2,563 
Total Insurance Operations16,312 14,723 47,745 43,729 
Oil and Gas Operations:
Southern Oil12,688 7,353 36,940 24,310 
Abraxas Petroleum1,692 — 1,692 — 
Total Oil and Gas Operations14,380 7,353 38,632 24,310 
Maxim1,905 863 3,788 2,695 
$92,034 $82,083 $269,773 $267,158 



18

Note 16. Business Segment Reporting (continued)
 Earnings (Losses) Before Income Taxes
 Third QuarterFirst Nine Months
 2022202120222021
Operating Businesses:
Restaurant Operations:
Steak n Shake$3,964 $(2,959)$11,777 $5,733 
Western Sizzlin369 247 997 707 
Total Restaurant Operations4,333 (2,712)12,774 6,440 
Insurance Operations:
Underwriting:
First Guard2,354 2,832 4,800 7,922 
Southern Pioneer(483)397 (1,101)1,511 
Investment income and other1,221 613 3,188 1,965 
Total Insurance Operations3,092 3,842 6,887 11,398 
Oil and Gas Operations:
Southern Oil6,795 2,982 19,137 9,047 
Abraxas Petroleum446 — 446 — 
Total Oil and Gas Operations7,241 2,982 19,583 9,047 
Maxim1,534 (56)1,699 867 
Interest expense not allocated to segments(67)— (67)(1,121)
Total Operating Businesses16,133 4,056 40,876 26,631 
Corporate and other(3,305)(3,302)(9,769)(8,595)
Investment gains (losses)(849)4,534 (4,184)6,465 
Investment partnership gains (losses)29,658 (20,231)(82,244)27,344 
 $41,637 $(14,943)$(55,321)$51,845 
19


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 
(dollars in thousands except per share data)

Overview

Biglari Holdings Inc. (“Biglari Holdings” or the “Company”) is a holding company owning subsidiaries engaged in a number of diverse business activities, including media, property and casualty insurance, licensing and restaurants.media, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value.

Biglari Holdings’ management system combines decentralized operations with centralized finance decision-making. Operating decisions for the various business units are made by their respective managers. All major operating, investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.

On March 5, 2018 the Company entered into an agreement with NBHSA Inc. (“New BH”), a direct, wholly owned subsidiary

As of September 30, 2022, Mr. Biglari beneficially owns shares of the Company that represent approximately 66.3% of the economic interest and BH Merger Company (“Merger Sub”), a wholly owned subsidiary70.4% of New BH. Pursuant to the agreement, on April 30, 2018, Merger Sub merged with and intovoting interest.
On September 14, 2022, the Company withcompleted the purchase of 685,505 shares of Series A Preferred Stock (the "Preferred Shares") of Abraxas Petroleum Corporation ("Abraxas Petroleum") for a purchase price of $80,000. On October 26, 2022, the Company continuing asconverted the surviving corporation and a wholly owned subsidiary of New BH. Upon completionpreferred stock to 90% of the merger, New BH changed its name to “Biglari Holdings Inc.” and replaced the Company as the publicly held corporation through which our collection of businesses is conducted.

New BH 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.

As a result of the April 30, 2018 transaction, the current shareholders of the Company became shareholders of New BH and received, for every ten (10) shares ofoutstanding common stock of Abraxas Petroleum. We have concluded that Abraxas Petroleum is a consolidated entity and have recorded noncontrolling interests attributable to the interest held by other shareholders. The Company used working capital including its line of credit to fund the purchase of the Preferred Shares. Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. The Company’s financial results include the results of Abraxas Petroleum from the acquisition date to the end of the third quarter. The revenues and operating results for Abraxas Petroleum were not significant to the Company they owned on April 30, 2018, (i) ten (10) shares of Class B common stock of New BH and (ii) one (1) share of Class A common stock of New BH. In other words, shareholders received for a share of common stock of the Company (i) one (1) share of Class B common stock of New BH and (ii) 1/10th of one share of Class A common stock of New BH.

Starting on May 1, 2018, the shares of New BH Class A common stock trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “BH.A,” whereas the New BH Class B common stock trade on the NYSE under the ticker symbol “BH,” which is the former ticker symbol for the Company’s common stock.

third quarter.

Net earnings (loss) attributable to Biglari Holdings shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.

   First Quarter 
   2018   2017 
Operating businesses:        
Restaurant $(456) $2,497 
Insurance  394   626 
Media  (168)  (208)
Other  102   90 
Total operating businesses  (128)  3,005 
Corporate  (2,695)  (1,868)
Investment partnership gains (losses)  3,075   (15,207)
Interest expense on notes payable and other borrowings  (2,066)  (1,751)
  $(1,814) $(15,821)

19

 Third QuarterFirst Nine Months
 2022202120222021
Operating businesses:  
Restaurant$3,320 $(1,515)$9,588 $5,146 
Insurance2,389 2,985 5,292 8,902 
Oil and gas5,574 2,325 14,867 7,016 
Brand licensing1,150 (43)1,274 662 
Interest expense(52)— (52)(841)
Corporate and other(2,742)(2,526)(7,630)(6,649)
Total operating businesses9,639 1,226 23,339 14,236 
Investment gains(657)3,390 (3,287)4,896 
Investment partnership gains (losses)23,057 (15,285)(62,091)21,169 
32,039 (10,669)(42,039)40,301 
Earnings attributable to noncontrolling interest34 — 34 — 
 $32,005 $(10,669)$(42,073)$40,301 


20


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurants
Our restaurant businesses, which include Steak n Shake Inc. (“Steak n Shake”) and Western Sizzlin, Corporation (“Western”). comprise 552 company-operated and franchise restaurants as of September 30, 2022.
Steak n ShakeWestern Sizzlin
 Company-
operated
Franchise
Partner
Traditional
Franchise
Company-
operated
FranchiseTotal
Total stores as of December 31, 2021199 159 178 38 577 
Corporate stores transitioned(12)12 — — — — 
Net restaurants opened (closed)(6)— (19)— — (25)
Total stores as of September 30, 2022181 171 159 38 552 
Total stores as of December 31, 2020276 86 194 39 598 
Corporate stores transitioned(54)54 — — — — 
Net restaurants opened (closed)(1)— (15)— (1)(17)
Total stores as of September 30, 2021221 140 179 38 581 
As of March 31, 2018,September 30, 2022, 39 of the 181 company-operated Steak n Shake comprised 415stores were closed. We plan to refranchise a majority of our closed company-operated restaurants.

21


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurant operations are summarized below.
Third QuarterFirst Nine Months
2022202120222021
Revenue
Net sales$37,448 $41,916 $113,345 $146,269 
Franchise partner fees15,880 11,508 47,929 31,744 
Franchise royalties and fees5,089 4,865 15,472 14,594 
Other revenue1,020 855 2,862 3,817 
Total revenue59,437 59,144 179,608 196,424 
Restaurant cost of sales
Cost of food11,359 30.3 %13,123 31.3 %33,684 29.7 %43,404 29.7 %
Restaurant operating costs20,745 55.4 %24,496 58.4 %61,127 53.9 %71,751 49.1 %
Occupancy costs4,058 10.8 %4,075 9.7 %12,658 11.2 %14,142 9.7 %
Total cost of sales36,162 41,694 107,469 129,297 
Selling, general and administrative
General and administrative9,556 16.1 %9,255 15.6 %28,327 15.8 %27,416 14.0 %
Marketing2,758 4.6 %2,302 3.9 %9,589 5.3 %10,212 5.2 %
Other expenses(825)(1.4)%1,332 2.3 %(1,141)(0.6)%2,266 1.2 %
Total selling, general and administrative11,489 19.3 %12,889 21.8 %36,775 20.5 %39,894 20.3 %
Impairments— — (20)(559)
Depreciation and amortization(6,081)(5,811)(18,401)(15,615)
Interest on finance leases and obligations(1,372)(1,462)(4,169)(4,619)
Earnings (loss) before income taxes4,333 (2,712)12,774 6,440 
Income tax expense (benefit)1,013 (1,197)3,186 1,294 
Contribution to net earnings (loss)$3,320 $(1,515)$9,588 $5,146 
Cost of food, restaurant operating costs, and occupancy costs are expressed as a percentage of net sales.
General and administrative, marketing and other expenses are expressed as a percentage of total revenue.

The novel coronavirus (“COVID-19”), declared a pandemic by the World Health Organization in March 2020, caused governments to impose restrictive measures to contain its spread. The COVID-19 pandemic adversely affected our restaurant operations and financial results. Our restaurants were required to close their dining rooms during the first quarter of 2020. The majority of Steak n Shake’s dining rooms were reopened during 2021, and 201 franchisedin doing so a self-service model has been implemented.

Net sales for the third quarter and first nine months of 2022 were $37,448 and $113,345, respectively, representing a decrease of $4,468 or 10.7% and $32,924 or 22.5%, compared to the third quarter and first nine months of 2021, respectively. The decrease in revenue of company-owned restaurants is primarily due to the shift of company units to franchise partner units. Western comprised 4For company-operated restaurantsunits, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue. Because we derive most of our revenue from our share of the profits, revenue will continue to decline as we transition from company-operated units to franchise partner units.

22


Item 2.  Management’s Discussion and 58 franchised units.

Analysis of Financial Condition and Results of Operations (continued)

Franchise partner fees were $15,880 during the third quarter of 2022, as compared to $11,508 during the third quarter of 2021.Franchise partner fees were $47,929 and $31,744 during the first nine months of 2022 and 2021, respectively. As of September 30, 2022, there were 171 franchise partner units, compared to 140 franchise partner units as of September 30, 2021. For a franchise partner to be awarded a restaurant, he or she must demonstrate the gold standard in service.

The franchise royalties and fees generated by the traditional franchising business were $5,089 during the third quarter of 2022, as compared to $4,865 during the third quarter of 2021. Franchise royalties and fees during the first nine months of 2022 were $15,472 compared to $14,594 during the first nine months of 2021.

The cost of food as a percentage of net sales during the third quarter and first nine months of 2022 was 30.3% and 29.7%, respectively, as compared to 31.3% and 29.7% of net sales during the third quarter and first nine months of 2021, respectively. Cost of food as a percentage of net sales were lower during the third quarter of 2022 compared to 2021 primarily because of higher menu prices.

Restaurant operating costs as a percentage of net sales during the third quarter of 2022 were 55.4%, as compared to 58.4% of net sales in the third quarter of 2021.Restaurant operating costs during the first nine months of 2022 were 53.9% of net sales, as compared to 49.1% of net sales in 2021. The increase during the first nine months was primarily the result of higher wages.

Selling, general and administrative costs during the third quarter and first nine months of 2022 were $11,489 and $36,775, respectively, compared to $12,889 and $39,894 in the third quarter and first nine months of 2021, respectively. Steak n Shake recorded gains on the disposal of assets of $1,084 and $1,749 in the third quarter and first nine months of 2022, respectively.

The Company recorded no impairment charges in the third quarter and $20 in the first nine months of 2022. The Company recorded no impairment charges in the third quarter and $559 in the first nine months of 2021, respectively. Impairments during 2021 are related to underperforming stores.
Insurance
We view our insurance businesses as possessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Our business units are operated under separate local management. Biglari Holdings’ insurance business is composedoperations consist of First Guard and Southern Pioneer.
Underwriting results of our insurance operations are summarized below.
Third QuarterFirst Nine Months
2022202120222021
Underwriting gain (loss) attributable to:
First Guard$2,354 $2,832 $4,800 $7,922 
Southern Pioneer(483)397 (1,101)1,511 
Pre-tax underwriting gain1,871 3,229 3,699 9,433 
Income tax expense392 681 776 1,984 
Net underwriting gain$1,479 $2,548 $2,923 $7,449 

23


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Earnings of our insurance operations are summarized below.
Third QuarterFirst Nine Months
2022202120222021
Premiums earned$15,116 $13,901 $44,511 $41,166 
Insurance losses8,814 6,657 27,646 20,040 
Underwriting expenses4,431 4,015 13,166 11,693 
Pre-tax underwriting gain1,871 3,229 3,699 9,433 
Other income and expenses 
Investment income362 195 832 652 
Other income (expenses)859 418 2,356 1,313 
Total other income1,221 613 3,188 1,965 
Earnings before income taxes3,092 3,842 6,887 11,398 
Income tax expense703 857 1,595 2,496 
Contribution to net earnings (loss)$2,389 $2,985 $5,292 $8,902 

Insurance Companypremiums and its agency, 1stother on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.

First Guard Corporation (collectively “First Guard”).

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

Our media business is composed of Maxim Inc. (“Maxim”). Maxim’s business lies principally in media and licensing.

Restaurants

Steak n Shake and Western comprise 678 company-operated and franchised restaurants as of March 31, 2018.

 Steak n Shake Western Sizzlin  
  Company- operated Franchised Company-operated Franchised Total
Total stores as of December 31, 2017  415   200   4   58   677 
Net restaurants opened (closed)  —     1   —     —     1 
Total stores as of March 31, 2018  415   201   4   58   678 
                     
Total stores as of December 31, 2016  417   173   3   64   657 
Net restaurants opened (closed)  —     9   —     (2)  7 
Total stores as of March 31, 2017  417   182   3   62   664 

20

Earnings of our restaurant operations are summarized below.

    First Quarter     
   2018       2017     
Revenue                
Net sales $185,571      $189,051     
Franchise royalties and fees  7,102       5,556     
Other revenue  1,261       1,087     
Total revenue  193,934       195,694     
                 
Restaurant cost of sales                
Cost of food  55,928   30.1%  54,401   28.8%
Restaurant operating costs  97,815   52.7%  98,347   52.0%
Rent  4,607   2.5%  4,550   2.4%
Total cost of sales  158,350       157,298     
                 
Selling, general and administrative                
General and administrative  15,087   7.8%  13,952   7.1%
Marketing  13,593   7.0%  12,435   6.4%
Other expenses  552   0.3%  678   0.3%
Total selling, general and administrative  29,232   15.1%  27,065   13.8%
                 
Depreciation and amortization  4,784   2.5%  5,249   2.7%
                 
Interest on obligations under leases  2,186       2,280     
                 
Earnings (loss) before income taxes  (618)      3,802     
                 
Income tax expense (benefit)  (162)      1,305     
                 
Contribution to net earnings $(456)     $2,497     
                 

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

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

Net sales during the first quarter of 2018 were $185,571, representing a decrease of $3,480 over the first quarter of 2017. The decreased performance of our restaurant operations was largely driven by Steak n Shake’s same-store sales, which decreased 1.7% whereas customer traffic decreased 7.2% during the first quarter. The term “same-store sales” refers to the sales of company-operated units open at least 18 months at the beginning of the current period and have remained open through the end of the period.

In the first quarter of 2018 franchise royalties and fees increased $1,546 or 27.8% compared to those in 2017.  The adoption of the new accounting guidance increased franchise fees and royalties by $2,369. The first quarter of 2017 included $987 in international decommitment fees. Steak n Shake opened eight franchise units and closed seven franchise units during the first quarter of 2018. There were 201 Steak n Shake franchise units as of March 31, 2018 compared to 182 franchise units as of March 31, 2017.

Cost of food in the first quarter of 2018 was $55,928 or 30.1% of net sales compared to the first quarter in 2017 of $54,401 or 28.8% of net sales. The increase during 2018 was attributable to increased costs primarily related to bacon, cheese and beef.

Restaurant operating costs during the first quarter of 2018 were $97,815 or 52.7% of net sales compared to $98,347 or 52.0% of net sales in 2017. The increase in costs as a percentage of net sales during the first quarter of 2018 compared to 2017 was principally due to higher wages and benefits.

21

General and administrative expenses during the first quarter of 2018 were $15,087 or 7.8% of total revenues compared to expenses in the first quarter of 2017, which were $13,952 or 7.1% of total revenues. The increase in general and administrative expenses during the first quarter of 2018 compared to 2017 was principally tied to higher recruiting expenses.

Marketing expenses during the first quarter of 2018 were $13,593 or 7.0% of total revenues compared to expenses in the first quarter of 2017, which were $12,435 or 6.4% of total revenues. The increase in marketing expenses during the first quarter of 2018 compared to 2017 was principally due to the adoption of the new accounting guidance. The new ASC 606 accounting guidance requires the Company to expense franchise ad funds and recognize franchise fees as revenue instead of marketing expenses.

Insurance

First Guard is a direct underwriter of commercial trucking insurance, selling physical damage and nontrucking liability insurance to truckers. Earnings of our insurance business are summarized below.

    First Quarter 
   2018   2017 
Premiums written $6,328  $5,907 
         
Insurance losses  4,360   3,762 
Underwriting expenses  1,568   1,258 
Pre-tax underwriting gain  400   887 
Other income and expenses        
Investment income and commissions  219   173 
Other expense  (109)  (91)
Total other income  110   82 
Earnings before income taxes  510   969 
Income tax expense  116   343 
Contribution to net earnings $394  $626 

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 trucking insurer.

Premiums written during the first quarter A summary of 2018 were $6,328, an increaseFirst Guard’s underwriting results follows.

Third QuarterFirst Nine Months
2022202120222021
Amount%Amount%Amount%Amount%
Premiums earned$9,112 100.0 %$8,458 100.0 %$26,858 100.0 %$24,760 100.0 %
Insurance losses4,815 52.8 %3,935 46.5 %16,468 61.3 %11,746 47.4 %
Underwriting expenses1,943 21.3 %1,691 20.0 %5,590 20.8 %5,092 20.6 %
Total losses and expenses6,758 74.1 %5,626 66.5 %22,058 82.1 %16,838 68.0 %
Pre-tax underwriting gain$2,354 $2,832 $4,800 $7,922 

Southern Pioneer

Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance. A summary of $421Southern Pioneer’s underwriting results follows.
Third QuarterFirst Nine Months
2022202120222021
Amount%Amount%Amount%Amount%
Premiums earned$6,004 100.0 %$5,443 100.0 %$17,653 100.0 %$16,406 100.0 %
Insurance losses3,999 66.6 %2,722 50.0 %11,178 63.3 %8,294 50.6 %
Underwriting expenses2,488 41.4 %2,324 42.7 %7,576 42.9 %6,601 40.2 %
Total losses and expenses6,487 108.0 %5,046 92.7 %18,754 106.2 %14,895 90.8 %
Pre-tax underwriting gain (loss)$(483)$397 $(1,101)$1,511 
24


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Insurance - Investment Income
A summary of net investment income attributable to our insurance operations follows.
Third QuarterFirst Nine Months
2022202120222021
Interest, dividends and other investment income:
First Guard$202 $54 $398 $84 
Southern Pioneer160 141 434 568 
Pre-tax investment income362 195 832 652 
Income tax expense76 41 175 137 
Net investment income$286 $154 $657 $515 
We consider investment income as a component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or 7.1% compared to 2017. Pre-tax underwriting gain was $400unrealized, as non-operating.
Oil and Gas
Southern Oil
Southern Oil primarily operates oil and natural gas properties offshore in the first quartershallow waters of 2018 compared to $887the Gulf of Mexico.  Earnings for Southern Oil are summarized below.
Third QuarterFirst Nine Months
2022202120222021
Oil and gas revenue$12,688 $7,353 $36,940 $24,310 
Oil and gas production costs3,484 2,050 11,146 6,957 
Depreciation, depletion and accretion1,873 1,717 4,926 6,286 
General and administrative expenses536 604 1,731 2,020 
Earnings before income taxes6,795 2,982 19,137 9,047 
Income tax expense1,564 657 4,613 2,031 
Contribution to net earnings$5,231 $2,325 $14,524 $7,016 

Abraxas Petroleum
Abraxas Petroleum operates oil and gas properties in the first quarterPermian Basin. Earnings for Abraxas Petroleum from the date of 2017.

Insurance premiums and otheracquisition on the statement of earnings includes premiums written, investment income and commissions. In the preceding table, commissionsSeptember 14, 2022 are included in other income.

summarized below.

22
Third Quarter
2022
Oil and gas revenue$1,692 
Oil and gas production costs606 
Depreciation, depletion and accretion360 
General and administrative expenses280 
Earnings before income taxes446 
Income tax expense103 
Contribution to net earnings343 
Earnings attributable to noncontrolling interests34 
Net earnings attributable to Biglari Holdings Inc. shareholders$309 



25

Media


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Brand Licensing
Maxim’s business lies principally in medialicensing and licensing.media. Earnings of our media operations are summarized below.

    First Quarter 
   2018   2017 
Revenue $1,744  $1,619 
         
Media cost of sales  1,517   1,493 
General and administrative expenses  436   437 
Depreciation and amortization  8   13 
Earnings (loss) before income taxes  (217)  (324)
Income tax expense (benefit)  (49)  (116)
Contribution to net earnings $(168) $(208)

Third QuarterFirst Nine Months
2022202120222021
Licensing and media revenue$1,905 $863 $3,788 $2,695 
Licensing and media costs345 880 1,975 1,749 
General and administrative expenses26 39 114 79 
Earnings (loss) before income taxes1,534 (56)1,699 867 
Income tax expense (benefit)384 (13)425 205 
Contribution to net earnings (loss)$1,150 $(43)$1,274 $662 
We acquired Maxim in 2014 with the idea of transforming its business model.  The magazine developed the Maxim brand, a franchise we are utilizing to generate nonmagazine revenue, notably through licensing, a cash-generating business related to consumer products, services, and events.

Investment Gains
Investment losses net of tax for the third quarter of 2022 were $657 compared to investment gains net of tax for the third quarter of 2021 of $3,390. Investment losses net of tax for the first nine months of 2022 were $3,287 compared to investment gains net of tax for the first nine months of 2021 of $4,896. Dividends earned on investments are reported as investment income by our insurance companies. We 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.

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

Investment Partnership Gains (Losses)

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

    First Quarter 
   2018   2017 
Investment partnership gains (losses) $3,495  $(24,968)
Tax expense (benefit)  420   (9,761)
Contribution to net earnings $3,075  $(15,207)

The Company recorded after-tax

 Third QuarterFirst Nine Months
 2022202120222021
Investment partnership gains (losses)$29,658 $(20,231)$(82,244)$27,344 
Tax expense (benefit)6,601 (4,946)(20,153)6,175 
Contribution to net earnings (loss)$23,057 $(15,285)$(62,091)$21,169 
Investment partnership gains from investment partnerships of $3,075 during the first quarter of 2018 and after-tax include gains/losses of $15,207 during the first quarter of 2017. The volatility of the gains and losses during the various periods is attributable tofrom changes in market values of underlying investments heldand dividends earned by the investment partnerships.  The investments held by the investment partnerships are largely concentratedDividend income has a lower effective tax rate than income from capital gains. These gains and losses have caused and will continue to cause significant volatility in the common stock of one investee, Cracker Barrel Old Country Store, Inc.

our periodic earnings.  

The investment partnerships hold the Company’s common stock as investments. The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding. Gains and losses on Company common stock included in the earnings of the partnerships are eliminated.

23
eliminated in the Company’s consolidated financial results.

26


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest Expense

The Company’s interest expense is summarized below.

    First Quarter 
   2018   2017 
Interest expense on notes payable and other borrowings $2,754  $2,824 
Tax benefit  688   1,073 
Interest expense net of tax $2,066  $1,751 

Interest expense during the first quarter of 2018 was $2,754 compared to $2,824 for the first quarter of 2017. The outstanding balance on Steak n Shake’s credit facility on March 31, 2018 was $185,348 compared to $187,548 on March 31, 2017. The interest rate was 5.40% as of March 31, 2018.

 Third QuarterFirst Nine Months
 2022202120222021
Interest expense on notes payable$67 $— $67 $1,121 
Tax benefit15 — 15 280 
Interest expense net of tax$52 $— $52 $841 
Corporate

and Other

Corporate expenses exclude the activities inof the restaurant, insurance, mediabrand licensing, and oil and gas businesses. Corporate and other companies. Corporate net losses during the third quarter and first nine months of 2022 were relatively flat compared to the same period in 2021.
Income Taxes
Income tax expense for the third quarter of 2018 were $2,695 versus net losses2022 was $9,598 compared to an income tax benefit of $1,868 during$4,274 for the firstthird quarter of 2017. Legal and professional expenses associated with shareholder lawsuits and the implementation of dual class stock increased expenses during the first quarter of 2018 as compared to 2017.

Income Tax Expense

2021. Income tax benefit for the first quarternine months of 20182022 was $797$13,282 compared to $9,776an income tax expense of $11,544 for the first quarternine months of 2017. The Tax Cuts and Jobs Act was signed into law on December 22, 2017. The U.S. corporate federal statutory income tax rate was reduced from 35.0% to 21.0% for tax years beginning in 2018.2021. The variance in income taxes between 20182022 and 20172021 is attributable to the reduced corporate tax rate and taxes on income and losses generated by the investment partnerships.

Financial Condition

Our consolidated shareholders’ equity on March 31, 2018 was $551,707, a decrease  Investment partnership pre-tax gains were $29,658 during the third quarter of $19,6212022 compared to pre-tax losses of $20,231 during the December 31, 2017 balance. The decreasethird quarter of 2021. Investment partnership pre-tax losses were $82,244 during the first quarternine months of 2018 was primarily attributable2022 compared to an increase in treasury stock. The increase in treasury stock was primarily a resultpre-tax gains of recording our proportionate interest in 45,302 shares of the Company’s stock purchased$27,344 during the first quarternine months of 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.

2021.

Financial Condition
Consolidated cash and investments are summarized below.

  March 31,
2018
 December 31,
2017
Cash and cash equivalents $45,444  $58,577 
Investments  28,620   27,752 
Fair value of interest in investment partnerships  918,229   925,279 
Total cash and investments  992,293   1,011,608 
Less portion of Company stock held by investment partnerships  (372,290)  (359,258)
Carrying value of cash and investments on balance sheet $620,003  $652,350 

24

 September 30,
2022
December 31,
2021
Cash and cash equivalents$64,842 $42,349 
Investments70,032 83,061 
Fair value of interest in investment partnerships338,314 474,201 
Total cash and investments473,188 599,611 
Less: portion of Company stock held by investment partnerships(193,450)(223,802)
Carrying value of cash and investments on balance sheet$279,738 $375,809 

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

27


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Liquidity

Our balance sheet continues to maintain significant liquidity.  Consolidated cash flow activities are summarized below.

   First Quarter 
   2018   2017 
Net cash provided by (used in) operating activities $(9,445) $9,863 
Net cash used in investing activities  (1,776)  (232)
Net cash used in financing activities  (1,947)  (16,896)
Effect of exchange rate changes on cash  35   17 
Decrease in cash, cash equivalents and restricted cash $(13,133) $(7,248)

 First Nine Months
 20222021
Net cash provided by operating activities$99,754 $211,245 
Net cash used in investing activities(102,464)(55,782)
Net cash provided by (used in) financing activities25,353 (154,586)
Effect of exchange rate changes on cash(150)(85)
Increase in cash, cash equivalents and restricted cash$22,493 $792 
Cash used inprovided by operating activities was $9,445$99,754 during the first quarter of 20182022 compared to $211,245 in 2021.  The decrease in cash provided by operating activities is mainly attributable to distributions from investment partnerships of $9,863$51,200 for 2022 and $172,420 for 2021. The distributions during the first quarter of 2017. Net earnings adjusted for non-cash items decreased by $4,669 because of lower revenues and earnings. Cash2021 were primarily used in working capital accounts increased $14,824 primarily due to the timing of the 2017 incentive fee payment of $7,353.

Net cashrepay Steak n Shake’s debt.

Cash used in investing activities during the first quarter of 2018 of $1,7762022 was primarily due$102,464 compared to $55,782 in 2021. Capital expenditures were lower during 2022 by $23,049 compared to 2021. Steak n Shake incurred higher capital expenditures of $2,452 and increases of fixed maturity securities (net of maturing securities) of $848 offsetduring 2021 for its transition to a self-service model.
Cash provided by proceeds from property and equipment disposals of $1,524. Net cashfinancing activities was $25,353 in 2022 compared to $154,586 used in investing activities2021. The Company repaid Steak n Shake’s debt during the first quarter of 2017 of $232 was primarily due to capital expenditures of $1,990 offset by reductions of fixed maturity securities (net of purchases) of $1,708.

During the first quarter of 2018 and 2017 we incurred debt payments of $589 and $15,570, respectively. Debt obligations were reduced during 2017 because of additional principal payments on long-term debt.

2021.

We intend to meet the working capital needs of our operating subsidiaries principally through anticipated cash flows generated from operations and cash on hand, existing credit facilities, and the sale of excess properties and investments.hand. We continually review available financing alternatives.

Biglari Holdings Line of Credit
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The line of credit will be available on a revolving basis until September 12, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants. As of September 30, 2022, we were in compliance with all covenants. The balance of the line of credit on September 30, 2022 was $30,000.
Steak n Shake Credit Facility

On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000 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 $8,628 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 as restricted cash in the consolidated balance sheets.

$220,000. The term loan iswas scheduled to mature on March 19, 2021. It amortizes at an annual rateThe Company repaid the balance 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.

The interest rate on the term loan was 5.40% as of March 31, 2018.

The credit agreement includes customary affirmative and negative covenants and events of default. As of March 31, 2018, we were in compliance with all covenants. Steak n Shake’s creditterm 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 assetsFebruary 19, 2021.



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Item 2.  Management’s Discussion and Analysis of March 31, 2018, $185,348 was outstanding under the term loan.

Western Revolver

AsFinancial Condition and Results of March 31, 2018, Western has $136 due June 13, 2018.

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Operations (continued)

Critical Accounting Policies

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. Certain accounting policies require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized in our consolidated financial statements from such estimates are necessarily based on numerous assumptions involving varying and potentially significant degrees of judgment and uncertainty. Accordingly, the amounts currently reflected in our consolidated financial statements will likely increase or decrease in the future as additional information becomes available.  There have been no material changes to critical accounting policies previously disclosed in our annual report on Form 10-K for the year ended December 31, 2017.

2021.

Recently Issued Accounting Pronouncements

For detailed information regarding

No recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2, “New Accounting Standards” in the accompanying notes to consolidated financial statements included in Part I, Item 1 ofwere applicable for this Quarterly Report on Form 10-Q.


Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In general, forward-looking statements include estimates of future revenues, cash flows, capital expenditures, or other financial items, and assumptions underlying any of the foregoing. Forward-looking statements reflect management’s current expectations regarding future events and use words such as “anticipate,” “believe,” “expect,” “may,” and other similar terminology. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Investors should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, many beyond our control, including, but not limited to, the risks and uncertainties described in Item 1A, Risk Factors of our annual report on Form 10-K.10-K and Item 1A of this report. We undertake no obligation to publicly update or revise them, except as may be required by law.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3.Quantitative and Qualitative Disclosures About Market Risk
The majority of our investments are conducted through investment partnerships which generally hold common stocks. We also hold marketable securities directly. Through investments in the investment partnerships we hold a 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.

We prefer to hold equity investments for very long periods of time so we are not troubled by short-term price volatility with respect to our investments. Our interests in the investment partnerships are committed on a rolling 5-year basis, and any distributions upon our withdrawal of funds will be paid out over two years (and may be paid in kind rather than in cash). Market prices for equity securities are subject to fluctuation. Consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. A hypothetical 10% increase or decrease in the market price of our investments would result in a respective increase or decrease in the carrying value of our investments of $57,456$21,490 along with a corresponding change in shareholders’ equity of approximately 8%.

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%3%Interest on loans under the revolver is based on a Eurodollar rate plus an applicable margin ranging from 2.75% to 4.25% or on the prime rate plus an applicable margin ranging from 1.75% to 3.25%. At March 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.

We have had minimal exposure to foreign currency exchange rate fluctuations in the first quartersnine months of 20182022 and 2017.

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2021.

Index

Our oil and natural gas business is fundamentally a commodity business. This means our 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 our operations.

ITEM 4.CONTROLS AND PROCEDURES

Item 4.Controls and Procedures
Based on an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), our Chief Executive Officer and Controller have concluded that our disclosure controls and procedures were effective as of March 31, 2018.

September 30, 2022.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2018September 30, 2022 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II Other Information

Item 1.lEGALPROCEEDINGS

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
Information in response to this Item is included in Note 13 to the Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q and is incorporated herein by reference.

Item 1A.Risk Factors

The following are

ITEM 1A. RISK FACTORS
There have been no material changes infrom the risk factors as previously disclosed in Item 1A to the Company’s Annual Report on Form 10-K for 2017.

The Class B common stock may not be attractive as acquisition currency.

We may use shares of Class B common stock from time to time as consideration in connection with the acquisition of other companies. It is possible that companies that we are interested in acquiring will not agree to accept shares of Class B common stock because such shares of stock carry no voting rights or because of the then prevailing trading characteristics of such shares.

The trading price for Class A and Class B common stock will depend on a variety of factors.

The trading prices of shares of Class A common stock and Class B common stock will depend on many factors, including the future performance of Biglari Holdings, general market conditions, market activity in the Class A and Class B shares, the number of shares of each class outstanding, the relative rights between the two classes of stock, and other pertinent factors. Accordingly, we cannot predict the prices at which shares of Class A common stock and Class B common stock will trade.

The issuance of dual stock may negatively affect the decision of institutional investors to invest in the Company, and could have implications for the inclusion of shares of Class A common stock or Class B common stock in certain stock indices.

The issuance of dual class stock may negatively affect the decision by certain institutional investors to purchase or hold shares of the Company’s common stock. The holding of non-voting stock, such as the Class B common stock, may not be permitted by the investment policies of certain institutional investors or may be less attractive to the portfolio managers of certain institutional investors. Significant sales of shares of Class A and Class B common stock by investors who receive such shares as part of the recapitalization may occur if such investors are unwilling, unable or choose not to hold such shares. These sales could depress trading prices for our common stocks, particularly in the period immediately following the recapitalization. Some stock index providers have announced decisions to exclude companies with multi-class capital structures or limited public voting rights from their indices. There can be no assurance that either class of our stock will be listed in the indices.

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year ended December 31, 2021.

Potential changes in law or regulations may have a negative impact on our Class A and Class B common stock.

In prior years, bills have been introduced in Congress that, if enacted, would have prohibited the listing of common stock on a national securities exchange if such common stock was part of a class of securities that has no voting rights or carried disproportionate voting rights. Although these bills have not been acted upon by Congress, there can be no assurance that such a bill (or a modified version thereof) will not be introduced in Congress in the future. Legislation or other regulatory developments could make the shares of Class A common stock and Class B common stock ineligible for trading on the NYSE or other national securities exchanges. We are unable to predict whether any such legislation or regulatory proposals will be adopted or whether they will have such effect.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

On September 16, 2017, The Lion Fund II, L.P. entered into a Rule 10b5-1 trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. Under the Rule 10b5-1 trading plan, a broker dealer will make periodic purchases of up to an aggregate of 110,000 shares of the Company’s common stock on behalf of The Lion Fund II, L.P. at prevailing market prices, subject to the terms of the Purchase Plan. The trading plan was terminated upon the issuance of dual class stock.

  (a)
Total Number
of Shares
Purchased
 (b)
Average
Price Paid
per Share
 (c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
 (d)
Maximum Number
of Shares That May
Yet Be Purchased
Under Plans or
Programs
         
 January 1, 2018 – January 31, 2018    20,385  $416.34   20,385   62,936 
 February 1, 2018 – February 28, 2018    21,439  $405.98   21,439   41,497 
 March 1, 2018 – March 31, 2018    3,478  $419.09   3,478   38,019 
 Total    45,302       45,302     

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
Item 3.Defaults Upon Senior Securities

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

Item 4.Mine Safety Disclosures

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

Item 5.Other Information

None.

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ITEM 5. OTHER INFORMATION

Index

None.

ITEM 6. EXHIBITS
Item 6.Exhibits

Exhibit NumberDescription
Exhibit NumberDescription
101Interactive Data Files.

_________________

*Furnished herewith.

29104Cover page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

Index

_________________

*Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  May 4, 2018
Biglari Holdings Inc.
Biglari Holdings inc.
Date: November 4, 2022By:
/s/ BRUCE LEWIS
By:/s/Bruce Lewis
ControllerBruce Lewis
Controller

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