Table of Contents Title of each class Trading Symbols Name of each exchange on which registered Class A Common Stock, no par value BH.A New York Stock Exchange Class B Common Stock, no par value BH New York Stock Exchange UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 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) Indiana 82-3784946 (State or other jurisdiction of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 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. | --- | --- | --- | |------------------------------------------------------------------------------ ...

Part I - Financial Information [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ending June 30, 2020, show a significant net loss, primarily due to investment partnership losses and the COVID-19 pandemic's impact on restaurant operations, with total assets decreasing from $1.14 billion to $989 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) - Total assets decreased to **$988.8 million** as of June 30, 2020, from **$1.14 billion** at December 31, 2019, primarily due to a reduction in investment partnership value, while total liabilities and shareholders' equity also declined[5](index=5&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$988,818** | **$1,139,309** | | Cash and cash equivalents | $36,438 | $67,772 | | Investment partnerships | $369,129 | $505,542 | | **Total Liabilities** | **$466,268** | **$523,011** | | Total current liabilities | $301,593 | $139,817 | | Long-term notes payable | $77,927 | $263,182 | | **Total Shareholders' Equity** | **$522,550** | **$616,298** | [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) - The company reported a net loss of **$95.4 million** for the first six months of 2020, a significant shift from **$31.8 million** net earnings in 2019, mainly driven by a **$116.5 million** loss from investment partnerships and nearly halved restaurant revenues due to COVID-19[6](index=6&type=chunk)[7](index=7&type=chunk) Key Earnings Data (in thousands) | Metric | Q2 2020 | Q2 2019 | First Six Months 2020 | First Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $96,502 | $168,343 | $232,202 | $350,202 | | Restaurant Operations Revenue | $78,764 | $160,061 | $192,908 | $333,836 | | Investment Partnership Gains (Losses) | $59,248 | $34,198 | $(116,494) | $68,352 | | **Net Earnings (Loss)** | **$42,466** | **$21,974** | **$(95,419)** | **$31,792** | | **EPS (Class A)** | **$121.51** | **$63.50** | **$(275.04)** | **$91.85** | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) - Net cash provided by operating activities for the first six months of 2020 was **$98.7 million**, a substantial improvement from the **$8.3 million** used in 2019, primarily due to **$83.8 million** in distributions from investment partnerships offsetting the net loss[9](index=9&type=chunk)[10](index=10&type=chunk)[137](index=137&type=chunk) Cash Flow Summary - First Six Months (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $98,685 | $(8,295) | | Net cash used in investing activities | $(103,360) | $(8,619) | | Net cash used in financing activities | $(24,156) | $(3,984) | | **Decrease in cash** | **$(28,834)** | **$(20,895)** | [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The COVID-19 pandemic significantly impacted operating businesses, leading to **$14.4 million** in impairment charges in the restaurant segment due to permanent closures and dining room shutdowns, while the company also acquired Southern Pioneer Property & Casualty Insurance Company in March 2020[15](index=15&type=chunk)[16](index=16&type=chunk)[35](index=35&type=chunk) - The company's investment partnerships experienced significant losses, with the carrying value of the company's interest dropping from **$505.5 million** at year-end 2019 to **$369.1 million** at June 30, 2020, with these partnerships accounted for under the equity method[25](index=25&type=chunk)[28](index=28&type=chunk) - Steak n Shake's senior secured term loan, with an outstanding balance of **$153.6 million**, is scheduled to mature on March 19, 2021, and the company is currently evaluating refinancing options[52](index=52&type=chunk) - Shareholder lawsuits alleging breach of fiduciary duty related to the company's dual-class stock structure were concluded in the company's favor, with the Indiana Supreme Court denying the plaintiffs' petition to transfer in April 2020[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the significant net loss in the first half of 2020 to volatile investment partnership results and the severe operational impact of the COVID-19 pandemic on its restaurant segment, which saw net sales decline 45.2% year-over-year, prompting a transition to a counter-service model and store closures, while the company maintains significant liquidity despite the upcoming maturity of Steak n Shake's $153.6 million term loan [Results of Operations - Restaurants](index=18&type=section&id=Results%20of%20Operations%20-%20Restaurants) - The COVID-19 pandemic severely impacted restaurant operations, with most dining rooms closing by March 17, 2020, resulting in a **45.2%** decrease in net sales for the first six months of 2020 compared to the same period in 2019[100](index=100&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - Steak n Shake is transitioning company-operated restaurants to a franchise partner model, increasing franchise partner units from **8 to 51** year-over-year, and moving to a counter-service model requiring significant equipment investment[100](index=100&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk) - The company recorded impairment charges of **$18.1 million** in the first six months of 2020, primarily due to the closure of Steak n Shake stores[112](index=112&type=chunk) Restaurant Revenue Performance - First Six Months (in thousands) | Revenue Category | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $174,215 | $317,693 | -45.2% | | Franchise royalties and fees | $9,283 | $13,379 | -30.6% | | Franchise partner fees | $7,881 | $679 | +1060.7% | | **Total revenue** | **$192,908** | **$333,836** | **-42.2%** | [Results of Operations - Insurance](index=19&type=section&id=Results%20of%20Operations%20-%20Insurance) - The insurance segment's contribution to net earnings increased to **$4.6 million** in the first six months of 2020 from **$2.7 million** in the prior-year period, supported by the acquisition of Southern Pioneer in March 2020[96](index=96&type=chunk)[114](index=114&type=chunk) Insurance Operations Performance - First Six Months (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Premiums written | $22,163 | $13,926 | | Pre-tax underwriting gain | $4,587 | $2,768 | | **Contribution to net earnings** | **$4,615** | **$2,675** | [Results of Operations - Other Segments](index=21&type=section&id=Results%20of%20Operations%20-%20Other%20Segments) - The Oil and Gas segment (Southern Oil) faced challenges from significantly decreased oil demand due to the COVID-19 pandemic, leading the company to cut production and expenses, and recorded a pre-tax loss of **$1.7 million** in Q2 2020[121](index=121&type=chunk) - The Media and Licensing segment (Maxim) saw its contribution to net earnings increase to **$351 thousand** for the first six months of 2020, up from **$48 thousand** in the same period of 2019[123](index=123&type=chunk) [Investment Partnership Gains (Losses)](index=21&type=section&id=Investment%20Partnership%20Gains%20(Losses)) Investment Partnership Contribution to Net Earnings (in thousands) | Period | Pre-Tax Gains (Losses) | Contribution to Net Earnings (Loss) | | :--- | :--- | :--- | | Q2 2020 | $59,248 | $45,365 | | Q2 2019 | $34,198 | $26,254 | | First Six Months 2020 | $(116,494) | $(88,994) | | First Six Months 2019 | $68,352 | $52,491 | - Gains and losses from investment partnerships are highly volatile and include changes in market values of underlying investments, with the company's pro-rata share of its own common stock held by the partnerships treated as treasury stock and related gains/losses eliminated from earnings[128](index=128&type=chunk)[129](index=129&type=chunk) [Financial Condition and Liquidity](index=22&type=section&id=Financial%20Condition%20and%20Liquidity) - The company maintains significant liquidity, with total cash and investments (at fair value) of **$583.2 million** as of June 30, 2020[136](index=136&type=chunk) - Steak n Shake's credit facility has an outstanding balance of **$153.6 million** as of June 30, 2020, maturing on March 19, 2021, and the company is actively evaluating refinancing options, noting potential adverse effects from the pandemic on financing availability[141](index=141&type=chunk) - During the first six months of 2020, the company retired **$26.8 million** of debt under Steak n Shake's credit facility[139](index=139&type=chunk)[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk stems from its equity investments held directly and through investment partnerships, where a hypothetical **10%** change in market price would impact carrying value by approximately **$45.4 million**, alongside interest rate risk on its variable-rate term loan, where a **100 basis point** increase would impact net earnings by about **$1.0 million** - The company's main market risk is from equity investments, where a hypothetical **10%** change in the market price of investments would result in a corresponding change in carrying value of **$45.4 million**[148](index=148&type=chunk)[149](index=149&type=chunk) - The company is exposed to interest rate risk on its term loan, where a hypothetical **100 basis point** increase in short-term interest rates would impact net earnings by approximately **$1.0 million**[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2020, the Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting occurring during the quarter - The Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[151](index=151&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2020[152](index=152&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 14 of the financial statements, which details the successful conclusion of shareholder litigation in the company's favor - The report refers to Note 14 of the Consolidated Financial Statements for information on legal proceedings[153](index=153&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2019, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 - No material changes to risk factors were reported for the quarter[153](index=153&type=chunk) [Other Items (2, 3, 4, 5)](index=25&type=section&id=Other%20Items%20(2,%203,%204,%205)) The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no other material information required to be disclosed under these items, with mine safety disclosures not applicable - The company reported 'None' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information), while Item 4 (Mine Safety Disclosures) was 'Not applicable'[154](index=154&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Interactive Data Files (XBRL) - Lists required certifications (31.01, 31.02, 32.01) and Interactive Data Files (101, 104) as exhibits[154](index=154&type=chunk)

PART I – FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Biglari Holdings Inc. for the first quarter ended March 31, 2020, including balance sheets, statements of earnings, comprehensive income, cash flows, and changes in shareholders' equity, along with detailed notes explaining significant accounting policies, business acquisitions, investment partnerships, and segment reporting [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets and shareholders' equity from December 31, 2019, to March 31, 2020, primarily driven by a significant reduction in investment partnerships and cash, while current liabilities saw a substantial increase Consolidated Balance Sheet Highlights (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | Change (vs. Dec 31, 2019) | | :-------------------- | :------------- | :---------------- | :------------------------ | | Total current assets | $142,783 | $145,391 | $(2,608) | | Total assets | $947,628 | $1,139,309 | $(191,681) | | Total current liabilities | $310,210 | $139,817 | $170,393 | | Total liabilities | $468,438 | $523,011 | $(54,573) | | Shareholders' equity | $479,190 | $616,298 | $(137,108) | - Cash and cash equivalents decreased from **$67,772 thousand** at December 31, 2019, to **$33,281 thousand** at March 31, 2020[5](index=5&type=chunk) - Investment partnerships decreased significantly from **$505,542 thousand** to **$318,689 thousand**[5](index=5&type=chunk) [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) The company reported a substantial net loss in the first quarter of 2020, a significant reversal from net earnings in the prior year, primarily due to large investment partnership losses and decreased restaurant revenues, despite a gain on debt extinguishment Consolidated Statements of Earnings Highlights (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | Change (YoY) | | :-------------------- | :----------- | :---------- | :----------- | | Total Revenues | $135,700 | $181,859 | $(46,159) | | Total Costs & Expenses| $141,745 | $199,384 | $(57,639) | | Investment partnership gains (losses) | $(175,742) | $34,154 | $(209,896) | | Net earnings (loss) | $(137,885) | $9,818 | $(147,703) | | Net earnings (loss) per equivalent Class A share | $(400.37) | $28.36 | $(428.73) | - Restaurant operations revenue decreased by **$59,631 thousand (34.3%)** from $173,775 thousand in Q1 2019 to $114,144 thousand in Q1 2020[6](index=6&type=chunk) - The company recorded a gain on debt extinguishment of **$4,346 thousand** in Q1 2020, compared to none in Q1 2019[6](index=6&type=chunk) [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The consolidated statements of comprehensive income reflect a significant total comprehensive loss in Q1 2020, primarily driven by the net loss, with a minor impact from foreign currency translation Consolidated Statements of Comprehensive Income (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Net earnings (loss) | $(137,885) | $9,818 | | Foreign currency translation | $(312) | $(304) | | Total comprehensive income (loss) | $(138,197) | $9,514 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated significant cash in Q1 2020, a reversal from cash usage in Q1 2019, largely due to distributions from investment partnerships, which was offset by increased cash used in investing and financing activities, leading to an overall decrease in cash Consolidated Statements of Cash Flows Highlights (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Net cash provided by (used in) operating activities | $50,477 | $(10,037) | | Net cash used in investing activities | $(65,574) | $(5,454) | | Net cash used in financing activities | $(19,408) | $(1,968) | | Decrease in cash, cash equivalents and restricted cash | $(34,491) | $(17,464) | - Operating cash flow benefited from **$42,300 thousand** in distributions from investment partnerships in Q1 2020, compared to none in Q1 2019[9](index=9&type=chunk) - Investing activities in Q1 2020 included **$34,240 thousand** for business acquisition and **$105,430 thousand** for purchases of investments[9](index=9&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity decreased significantly in Q1 2020, primarily due to the net loss incurred during the period, partially offset by an adjustment to treasury stock Consolidated Statements of Changes in Shareholders' Equity (First Quarter 2020 vs. 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Balance at beginning of year | $616,298 | $570,455 | | Net earnings (loss) | $(137,885) | $9,818 | | Accumulated Other Comprehensive (Loss) | $(3,122) | $(2,810) | | Balance at end of period | $479,190 | $581,354 | - An adjustment to treasury stock for holdings in investment partnerships increased equity by **$1,089 thousand** in Q1 2020[11](index=11&type=chunk) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies, business activities, recent acquisitions, and the impact of the COVID-19 pandemic, also elaborating on earnings per share, investment partnerships, asset valuations, revenue recognition, debt, leases, income taxes, legal proceedings, fair value measurements, related party transactions, and segment performance [Note 1. Summary of Significant Accounting Policies](index=7&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Biglari Holdings is a diversified holding company with subsidiaries in insurance, media, restaurants, and oil & gas, led by Sardar Biglari, which completed two acquisitions: Southern Pioneer Property & Casualty Insurance Company in March 2020 and Southern Oil of Louisiana Inc. in September 2019, with the COVID-19 pandemic expected to significantly impact operations in Q2 2020 - Biglari Holdings is a holding company with diverse business activities including property and casualty insurance, media and licensing, restaurants, and oil and gas[13](index=13&type=chunk) - Acquired Southern Pioneer Property & Casualty Insurance Company on **March 9, 2020**, which underwrites specialty insurance products[16](index=16&type=chunk) - The COVID-19 pandemic significantly affected operating businesses starting in **March 2020** and is expected to adversely affect nearly all operations in the second quarter[15](index=15&type=chunk) [Note 2. New Accounting Standards](index=7&type=section&id=Note%202.%20New%20Accounting%20Standards) The company adopted ASU 2016-13, Financial Instruments—Credit Losses, effective January 1, 2020, which requires credit losses on available-for-sale debt securities to be presented as an allowance, with the impact of this adoption not material to the financial statements - Adopted ASU 2016-13, Financial Instruments—Credit Losses, effective **January 1, 2020**[18](index=18&type=chunk) - The impact of ASU 2016-13 on the Company's financial statements and related disclosures is **not material**[18](index=18&type=chunk) [Note 3. Earnings Per Share](index=8&type=section&id=Note%203.%20Earnings%20Per%20Share) Earnings per share calculations exclude Company stock held by investment partnerships, which are treated as treasury stock, with the weighted average number of common shares for EPS calculation being 344,391 for Q1 2020 Common Stock Outstanding (March 31, 2020 vs. December 31, 2019) | Class | March 31, 2020 | December 31, 2019 | | :---- | :------------- | :---------------- | | Class A | 206,864 | 206,864 | | Class B | 2,068,640 | 2,068,640 | - The proportional ownership of Company's common stock held by investment partnerships is excluded from EPS calculation, treated as treasury stock[22](index=22&type=chunk) - Equivalent Class A weighted average common shares for Q1 2020 were **344,391**, down from 346,223 in Q1 2019[22](index=22&type=chunk) [Note 4. Investments](index=8&type=section&id=Note%204.%20Investments) Available-for-sale investments increased significantly in Q1 2020, with a notable portion acquired through the Southern Pioneer acquisition, and all investments are recorded at fair value Available for Sale Investments (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Available for sale investments | $76,789 | $40,393 | | Investments in equity securities and derivative position | $4,463 | N/A | - The fair value of investments acquired with Southern Pioneer was **$36,876 thousand**[23](index=23&type=chunk) [Note 5. Investment Partnerships](index=8&type=section&id=Note%205.%20Investment%20Partnerships) The company accounts for its limited partnership interests using the equity method, excluding its own common stock held by these partnerships, with investment partnerships recording significant losses in Q1 2020, a reversal from gains in Q1 2019, primarily due to market value changes, and Biglari Capital Corp., owned by Mr. Biglari, serving as the general partner Investment Partnership Gains (Losses) (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Gains (losses) on investment partnership | $(175,742) | $34,154 | | Tax expense (benefit) | $(41,383) | $7,917 | | Net earnings (loss) | $(134,359) | $26,237 | Carrying Value of Investment Partnerships (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Partnership interest carrying value | $318,689 | $505,542 | | Deferred tax liability related to investment partnerships | $(17,893) | $(56,518) | | Carrying value net of deferred taxes | $300,796 | $449,024 | - Biglari Holdings' ownership interest in The Lion Fund, L.P. was **66.1%** and in The Lion Fund II, L.P. was **93.1%** as of March 31, 2020[31](index=31&type=chunk) [Note 6. Property and Equipment](index=10&type=section&id=Note%206.%20Property%20and%20Equipment) Net property and equipment decreased in Q1 2020, with the company recording significant impairment charges for restaurant assets due to permanent closures and the COVID-19 impact, while oil and gas properties were not impaired but face future risk from low commodity prices Property and Equipment, Net (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Gross carrying amount | $720,512 | $729,059 | | Accumulated depreciation and amortization | $(382,887) | $(378,432) | | Property and equipment, net | $337,625 | $350,627 | - Impairment charges of **$10,300 thousand** were recorded in Q1 2020, primarily due to the decision to permanently close 51 Steak n Shake restaurants and the expected impact of COVID-19[34](index=34&type=chunk) - Depletion expense related to oil and gas properties was **$4,737 thousand** in Q1 2020[33](index=33&type=chunk) [Note 7. Goodwill and Other Intangible Assets](index=10&type=section&id=Note%207.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased due to the Southern Pioneer acquisition, and while the fair values of some restaurant reporting units declined due to COVID-19, no goodwill impairment was recorded in Q1 2020, though future impairments are possible, and intangible assets with definite lives are nearing full amortization Goodwill Carrying Value (March 31, 2020) | Metric (in thousands) | Amount | | :-------------------- | :----- | | Balance at beginning of year | $40,040 | | Goodwill from acquisition | $11,865 | | Balance at end of period | $51,894 | - No goodwill impairment charges were recorded in Q1 2020 or Q1 2019[38](index=38&type=chunk) - Intangible assets with definite lives, primarily franchise agreements, will fully amortize in **2020**[41](index=41&type=chunk) [Note 8. Restaurant Operations Revenues](index=12&type=section&id=Note%208.%20Restaurant%20Operations%20Revenues) Restaurant operations revenues significantly decreased in Q1 2020 compared to Q1 2019, primarily due to a sharp decline in net sales, however, franchise partner fees saw a substantial increase as Steak n Shake continues its transition to franchise partners Restaurant Operations Revenues (First Quarter 2020 vs. 2019) | Revenue Type (in thousands) | Q1 2020 | Q1 2019 | Change (YoY) | | :-------------------------- | :--------- | :--------- | :----------- | | Net sales | $104,728 | $165,631 | $(60,903) | | Franchise royalties and fees | $5,211 | $6,654 | $(1,443) | | Franchise partner fees | $3,344 | $258 | $3,086 | | Total | $114,144 | $173,775 | $(59,631) | - Net sales decreased by **36.8%** in Q1 2020 compared to Q1 2019[102](index=102&type=chunk) - Franchise partner fees increased significantly from **$258 thousand** in Q1 2019 to **$3,344 thousand** in Q1 2020, reflecting the transition of company-operated restaurants to franchise partners[47](index=47&type=chunk)[102](index=102&type=chunk) [Note 9. Accounts Payable and Accrued Expenses](index=12&type=section&id=Note%209.%20Accounts%20Payable%20and%20Accrued%20Expenses) Accounts payable and accrued expenses increased in Q1 2020, driven by higher self-insurance accruals and deferred revenue, partially offset by decreases in gift card liability, salaries, wages, and taxes payable Accounts Payable and Accrued Expenses (March 31, 2020 vs. December 31, 2019) | Category (in thousands) | March 31, 2020 | December 31, 2019 | | :---------------------- | :------------- | :---------------- | | Accounts payable | $36,289 | $32,626 | | Gift card liability | $17,063 | $20,745 | | Salaries, wages, and vacation | $5,328 | $10,667 | | Taxes payable | $20,030 | $29,275 | | Self-insurance accruals | $21,442 | $11,070 | | Deferred revenue | $25,395 | $10,454 | | Total | $133,840 | $121,079 | [Note 10. Notes Payable and Other Borrowings](index=13&type=section&id=Note%2010.%20Notes%20Payable%20and%20Other%20Borrowings) Current portion of notes payable and other borrowings increased substantially in Q1 2020, primarily due to the Steak n Shake credit facility maturing in March 2021, with the company evaluating refinancing options and having retired $21,729 thousand of debt in February 2020 Notes Payable and Other Borrowings (March 31, 2020 vs. December 31, 2019) | Category (in thousands) | March 31, 2020 | December 31, 2019 | | :---------------------- | :------------- | :---------------- | | Current portion of notes payable | $159,219 | $2,200 | | Total current portion | $164,632 | $7,103 | | Long-term notes payable | $0 | $179,298 | | Total long-term | $80,566 | $263,182 | - Steak n Shake's senior secured term loan facility, with an outstanding balance of **$159,219 thousand**, is scheduled to mature on **March 19, 2021**[53](index=53&type=chunk) - The Company retired **$21,729 thousand** of debt on **February 18, 2020**[56](index=56&type=chunk) [Note 11. Leased Assets and Lease Commitments](index=14&type=section&id=Note%2011.%20Leased%20Assets%20and%20Lease%20Commitments) The company's lease portfolio primarily consists of restaurant locations, with operating and finance leases recognized as right-of-use assets and liabilities, total lease costs slightly decreased in Q1 2020, and the weighted-average remaining lease terms are approximately 6 years for both finance and operating leases Total Lease Costs (First Quarter 2020 vs. 2019) | Lease Cost Type (in thousands) | Q1 2020 | Q1 2019 | | :----------------------------- | :------ | :------ | | Finance lease costs | $657 | $699 | | Operating lease costs | $3,736 | $3,857 | | Total lease costs | $4,393 | $4,556 | Weighted-Average Lease Terms and Discount Rates (March 31, 2020) | Metric | Value | | :-------------------------- | :---------- | | Weighted-average remaining lease terms: | | | Finance leases | 6.3 years | | Operating leases | 6.0 years | | Weighted-average discount rates: | | | Finance leases | 7.1% | | Operating leases | 6.9% | - Maturities of total lease liabilities as of March 31, 2020, are **$62,083 thousand** for operating leases and **$8,806 thousand** for finance leases[65](index=65&type=chunk) [Note 12. Accumulated Other Comprehensive Income](index=15&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Income) Accumulated other comprehensive losses increased slightly in Q1 2020 due to foreign currency translation adjustments Accumulated Other Comprehensive Loss (March 31, 2020 vs. 2019) | Metric (in thousands) | March 31, 2020 | March 31, 2019 | | :-------------------- | :------------- | :------------- | | Accumulated other comprehensive loss | $(3,122) | $(2,820) | - The decrease in accumulated other comprehensive losses was **$312 thousand** in Q1 2020 and **$304 thousand** in Q1 2019, both due to foreign currency translation adjustments[66](index=66&type=chunk) [Note 13. Income Taxes](index=15&type=section&id=Note%2013.%20Income%20Taxes) The company recorded an income tax benefit in Q1 2020, a significant change from an expense in Q1 2019, primarily driven by pretax losses from investment partnerships Income Tax Expense (Benefit) (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Income tax expense (benefit) | $(43,830) | $1,744 | - The variance is primarily attributable to investment partnership pretax losses of **$175,742 thousand** in Q1 2020, compared to pretax gains of **$34,154 thousand** in Q1 2019[68](index=68&type=chunk) [Note 14. Commitments and Contingencies](index=15&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings, including class action complaints alleging breach of fiduciary duty related to its dual-class structure, with all referenced cases concluded in the company's favor, and the Indiana Supreme Court denying a petition to transfer in April 2020 - Shareholders filed class action complaints alleging breach of fiduciary duty and unjust enrichment to Mr. Biglari due to the dual-class structure[71](index=71&type=chunk)[73](index=73&type=chunk) - The Indiana Supreme Court denied the shareholders' petition to transfer on **April 7, 2020**, concluding all related cases in the Company's favor[74](index=74&type=chunk) [Note 15. Fair Value of Financial Assets](index=16&type=section&id=Note%2015.%20Fair%20Value%20of%20Financial%20Assets) The company measures the fair value of financial instruments using a three-level hierarchy, with most financial assets, including cash equivalents, equity securities, and bonds, classified within Level 1, indicating unadjusted quoted prices in active markets Total Assets at Fair Value by Level (March 31, 2020 vs. December 31, 2019) | Category (in thousands) | March 31, 2020 Total | December 31, 2019 Total | | :---------------------- | :------------------- | :---------------------- | | Cash equivalents | $23,138 | $43,095 | | Equity securities | $11,319 | $6,422 | | Bonds | $52,018 | $38,911 | | Options on equity securities | $2,849 | $2,166 | | Non-qualified deferred compensation plan investments | $1,541 | $2,175 | | Total assets at fair value | $90,865 | $92,769 | - Cash equivalents, equity securities, and bonds are primarily classified within **Level 1** of the fair value hierarchy[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 16. Related Party Transactions](index=17&type=section&id=Note%2016.%20Related%20Party%20Transactions) The company has a services agreement with Biglari Entities, owned by Mr. Biglari, for which it paid $2,100 thousand in service fees in Q1 2020, and an incentive agreement amendment in March 2019 removed the annual limitation on Mr. Biglari's incentive compensation and the requirement to purchase company shares - The Company paid Biglari Enterprises LLC and Biglari Capital Corp. (Biglari Entities, owned by Mr. Biglari) **$2,100 thousand** in service fees during the first quarter of 2020 and 2019[83](index=83&type=chunk) - An Incentive Agreement amendment in **March 2019** removed the annual limitation on Mr. Biglari's incentive compensation and the requirement to use 30% of payments to purchase Company shares[84](index=84&type=chunk) [Note 17. Business Segment Reporting](index=17&type=section&id=Note%2017.%20Business%20Segment%20Reporting) The company reports across four operating segments: Restaurant Operations (Steak n Shake, Western Sizzlin), Insurance Operations (First Guard, Southern Pioneer), Southern Oil, and Maxim, with Restaurant operations reporting a significant loss in Q1 2020, while insurance and oil operations were profitable, and investment partnership losses heavily impacted overall results Segment Revenue (First Quarter 2020 vs. 2019) | Segment | Q1 2020 (in thousands) | Q1 2019 (in thousands) | | :---------------------- | :--------------------- | :--------------------- | | Restaurant Operations | $114,144 | $173,775 | | Insurance Operations | $9,674 | $7,207 | | Southern Oil | $11,374 | $0 | | Maxim | $508 | $877 | Segment Earnings (Loss) Before Income Taxes (First Quarter 2020 vs. 2019) | Segment | Q1 2020 (in thousands) | Q1 2019 (in thousands) | | :---------------------- | :--------------------- | :--------------------- | | Total Restaurant Operations | $(10,900) | $(18,475) | | Total Insurance Operations | $2,913 | $1,544 | | Southern Oil | $2,470 | $0 | | Maxim | $(32) | $(112) | | Investment partnership gains (losses) | $(175,742) | $34,154 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Biglari Holdings' diverse business activities and a detailed analysis of its financial performance for the first quarter of 2020 compared to 2019, highlighting the significant adverse impact of the COVID-19 pandemic on restaurant operations and investment partnerships, leading to a substantial net loss, and covering recent acquisitions, changes in segment performance, liquidity, and debt management [Overview](index=19&type=section&id=Overview) Biglari Holdings is a diversified holding company focused on maximizing per-share intrinsic value, with significant ownership by CEO Sardar Biglari, and recent acquisitions include Southern Pioneer (insurance) and Southern Oil, with the company experiencing a net loss in Q1 2020, primarily due to investment partnership losses, a reversal from net earnings in Q1 2019 - Biglari Holdings is a holding company with subsidiaries in property and casualty insurance, media and licensing, restaurants, and oil and gas[90](index=90&type=chunk) - Mr. Biglari's beneficial ownership was approximately **64.4%** of Class A common stock and **55.4%** of Class B common stock as of March 31, 2020[91](index=91&type=chunk) Net Earnings (Loss) Attributable to Biglari Holdings Shareholders (First Quarter 2020 vs. 2019) | Category (in thousands) | Q1 2020 | Q1 2019 | | :---------------------- | :----------- | :---------- | | Total operating businesses | $(3,450) | $(12,211) | | Corporate | $(1,490) | $(1,914) | | Investment partnership gains (losses) | $(134,359) | $26,237 | | Interest expense on notes payable and debt extinguishment | $1,414 | $(2,294) | | Total | $(137,885) | $9,818 | [Restaurants](index=19&type=section&id=Restaurants) Restaurant operations, primarily Steak n Shake, were severely impacted by the COVID-19 pandemic, leading to dining room closures and a significant decrease in net sales and overall revenue, with the company permanently closing 51 Steak n Shake restaurants, resulting in substantial impairment charges, despite which franchise partner fees increased due to the ongoing transition to a franchise partner model Restaurant Operations Revenue (First Quarter 2020 vs. 2019) | Revenue Type (in thousands) | Q1 2020 | Q1 2019 | Change (YoY) | | :-------------------------- | :--------- | :--------- | :----------- | | Net sales | $104,728 | $165,631 | $(60,903) | | Franchise royalties and fees | $5,211 | $6,654 | $(1,443) | | Franchise partner fees | $3,344 | $258 | $3,086 | | Total revenue | $114,144 | $173,775 | $(59,631) | - Net sales decreased by **36.8%** and franchise royalties and fees decreased by **21.7%** in Q1 2020 compared to Q1 2019[102](index=102&type=chunk) - The company recorded impairment charges of **$10,300 thousand** in Q1 2020 (vs. $1,900 thousand in Q1 2019) primarily due to the permanent closure of **51 Steak n Shake restaurants**[105](index=105&type=chunk) - As of March 31, 2020, there were **39 franchise partner units**, up from 3 in Q1 2019, reflecting the transition strategy[102](index=102&type=chunk) [Insurance](index=22&type=section&id=Insurance) Insurance operations, comprising First Guard and the newly acquired Southern Pioneer, showed growth in premiums earned and a significant increase in pre-tax underwriting gain in Q1 2020, with First Guard's direct response marketing contributing to its low-cost structure, while Southern Pioneer's results were not yet significant post-acquisition Insurance Operations Premiums and Underwriting Gain (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Premiums written | $8,842 | $6,861 | $1,981 |\ | Pre-tax underwriting gain | $2,530 | $1,201 | $1,329 |\ | Contribution to net earnings | $2,316 | $1,216 | $1,100 | - First Guard's premiums earned increased by **8.1%** and pre-tax underwriting gain increased by **93.4%** in Q1 2020 compared to Q1 2019[107](index=107&type=chunk) - Southern Pioneer's operating results since its **March 9, 2020** acquisition date were not significant for the quarter but are expected to have a major impact in future periods[108](index=108&type=chunk) [Oil and Gas](index=24&type=section&id=Oil%20and%20Gas) Southern Oil, acquired in September 2019, generated revenue and net earnings in Q1 2020, however, the COVID-19 pandemic significantly decreased oil demand and commodity prices, leading the company to cut production and expenses, and Southern Oil remains debt-free Southern Oil Earnings (First Quarter 2020) | Metric (in thousands) | Q1 2020 | | :-------------------- | :------ | | Oil and gas revenue | $11,374 | | Earnings before income taxes | $2,470 | | Contribution to net earnings | $2,201 | - The COVID-19 pandemic caused a significant decrease in oil demand, leading to lower commodity prices and margins, prompting Southern Oil to cut production and expenses[113](index=113&type=chunk) - Southern Oil is a **debt-free** company[113](index=113&type=chunk) [Media and Licensing](index=24&type=section&id=Media%20and%20Licensing) Media and licensing operations (Maxim) reported a net loss in Q1 2020, though it improved compared to the prior year, with the strategy focusing on leveraging the Maxim brand for non-magazine revenue through licensing consumer products, services, and events Media and Licensing Earnings (Loss) (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :--------- | :--------- | | Media and licensing revenue | $508 | $877 | | Earnings (loss) before income taxes | $(32) | $(112) | | Contribution to net earnings | $(25) | $(84) | - The company is utilizing the Maxim brand to generate non-magazine revenue, notably through licensing consumer products, services, and events[115](index=115&type=chunk) [Investment Partnership Gains (Losses)](index=25&type=section&id=Investment%20Partnership%20Gains%20(Losses)) Investment partnerships experienced significant losses in Q1 2020, a sharp reversal from gains in Q1 2019, primarily due to changes in market values of underlying investments, and these losses heavily impacted the company's overall net earnings Investment Partnership Gains (Losses) (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Investment partnership gains (losses) | $(175,742) | $34,154 | | Tax expense (benefit) | $(41,383) | $7,917 | | Contribution to net earnings | $(134,359) | $26,237 | - Gains/losses include changes in market values of underlying investments and dividends earned by the partnerships, with market value changes being highly volatile[117](index=117&type=chunk) [Interest Expense and Debt Extinguishment](index=25&type=section&id=Interest%20Expense%20and%20Debt%20Extinguishment) Interest expense decreased in Q1 2020, and the company recorded a gain on debt extinguishment related to Steak n Shake's debt retirement, with Steak n Shake's credit facility balance decreasing, and the company evaluating refinancing options ahead of its March 2021 maturity Interest Expense (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :------ | :------ | | Interest expense on notes payable and other borrowings | $2,474 | $3,058 | | Tax benefit | $628 | $764 | | Interest expense net of tax | $1,846 | $2,294 | - The Company recorded a gain on debt extinguishment of **$4,346 thousand** ($3,260 net of tax) in Q1 2020 from Steak n Shake's debt retirement of **$21,729 thousand**[120](index=120&type=chunk) - Steak n Shake's credit facility balance was **$159,219 thousand** as of March 31, 2020, with maturity scheduled for **March 19, 2021**[121](index=121&type=chunk)[128](index=128&type=chunk) [Corporate](index=25&type=section&id=Corporate) Corporate net losses remained relatively stable in Q1 2020 compared to the prior year - Corporate net losses during the first quarter of 2020 were relatively flat compared to the same period during 2019[122](index=122&type=chunk) [Income Taxes](index=25&type=section&id=Income%20Taxes) The company reported an income tax benefit in Q1 2020, a significant shift from an expense in Q1 2019, primarily due to substantial pretax losses from investment partnerships Income Tax Expense (Benefit) (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Income tax expense (benefit) | $(43,830) | $1,744 | - The variance is attributable to investment partnership pretax losses of **$175,742 thousand** in Q1 2020, compared to pretax gains of **$34,154 thousand** in Q1 2019[123](index=123&type=chunk) [Financial Condition](index=26&type=section&id=Financial%20Condition) Consolidated cash and investments decreased significantly in Q1 2020, primarily due to a reduction in the fair value of investment partnerships and cash and cash equivalents Consolidated Cash and Investments (March 31, 2020 vs. December 31, 2019) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $33,281 | $67,772 | | Investments | $81,252 | $44,856 | | Fair value of interest in investment partnerships | $392,215 | $666,123 | | Total cash and investments | $506,748 | $778,751 | | Carrying value of cash and investments on balance sheet | $433,222 | $618,170 | [Liquidity](index=26&type=section&id=Liquidity) Operating activities generated significant cash in Q1 2020, primarily from investment partnership distributions, reversing a cash outflow from the prior year, however, increased cash usage in investing (acquisitions, investments) and financing (debt payments) activities led to an overall decrease in cash, and the company plans to meet working capital needs through operations, cash on hand, credit facilities, and asset sales Consolidated Cash Flow Activities (First Quarter 2020 vs. 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :-------------------- | :----------- | :---------- | | Net cash provided by (used in) operating activities | $50,477 | $(10,037) | | Net cash used in investing activities | $(65,574) | $(5,454) | | Net cash used in financing activities | $(19,408) | $(1,968) | | Decrease in cash, cash equivalents and restricted cash | $(34,491) | $(17,464) | - The increase in cash from operations in Q1 2020 was primarily due to distributions from investment partnerships[125](index=125&type=chunk) - Investing activities in Q1 2020 included **$34,240 thousand** for business acquisition and **$26,685 thousand** for net purchases of investments[126](index=126&type=chunk) [Critical Accounting Policies](index=27&type=section&id=Critical%20Accounting%20Policies) Management's discussion and analysis relies on consolidated financial statements prepared under GAAP, involving estimates and judgments that may change, with no material changes to critical accounting policies reported since the last annual report - No material changes to critical accounting policies previously disclosed in the annual report on Form 10-K for the year ended December 31, 2019[132](index=132&type=chunk) [Recently Issued Accounting Pronouncements](index=27&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Information regarding recently issued accounting pronouncements and their expected impact is detailed in Note 2 of the consolidated financial statements - Refer to Note 2, 'New Accounting Standards' for detailed information regarding recently issued accounting pronouncements[133](index=133&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=27&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements based on current expectations, which are subject to various risks and uncertainties, including those described in the Form 10-K and this report, and the company does not undertake to update these statements unless required by law - Forward-looking statements are subject to various risks and uncertainties, many beyond the company's control, including those described in Item 1A, Risk Factors of the annual report on Form 10-K and Item 1A of this report[134](index=134&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are related to equity investments and interest rates, where a hypothetical 10% change in investment market prices would significantly impact carrying value and shareholders' equity, and a 100 basis point increase in short-term interest rates would have an approximate $1,200 thousand impact on net earnings - A hypothetical **10% increase or decrease** in the market price of investments would result in a respective increase or decrease of **$39,994 thousand** in carrying value and approximately **6%** in shareholders' equity[136](index=136&type=chunk) - A hypothetical **100 basis point increase** in short-term interest rates would have an impact of approximately **$1,200 thousand** on net earnings[137](index=137&type=chunk) - The company has minimal exposure to foreign currency exchange rate fluctuations[137](index=137&type=chunk) [ITEM 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) The Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting occurring during the quarter - Disclosure controls and procedures were **effective** as of March 31, 2020[138](index=138&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2020[139](index=139&type=chunk) PART II – OTHER INFORMATION [ITEM 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 14 to the Consolidated Financial Statements, which details the conclusion of shareholder lawsuits in the company's favor - Information on legal proceedings is included in Note 14 to the Consolidated Financial Statements[140](index=140&type=chunk) [ITEM 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company supplements its previously disclosed risk factors with new risks related to epidemics, pandemics (specifically COVID-19), and unfavorable general economic conditions, which could adversely affect operations, investments, supply chains, demand for products/services, and access to capital markets - The outbreak of COVID-19 has adversely affected, and may continue to affect, operations and investments due to closures, supply chain disruptions, reduced demand, credit losses, and market volatility[142](index=142&type=chunk) - Unfavorable general economic conditions, exacerbated by COVID-19, may significantly reduce operating earnings and impair access to capital markets at a reasonable cost[143](index=143&type=chunk)[144](index=144&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report [ITEM 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report [ITEM 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [ITEM 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item [ITEM 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, and Interactive Data Files - Exhibits include Certifications Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 (31.01, 31.02) and Certification Pursuant to 18 U.S.C. Section 1350 (32.01), as well as Interactive Data Files (101)[145](index=145&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report was duly signed on behalf of Biglari Holdings Inc. by Bruce Lewis, Controller, on May 8, 2020 - The report was signed by Bruce Lewis, Controller, on **May 8, 2020**[147](index=147&type=chunk)

Part I [Business](index=4&type=section&id=Item%201.%20Business) Biglari Holdings Inc. is a diversified holding company primarily operating in restaurants, insurance, media, and oil and gas, with significant investments in private funds controlled by its CEO - The company operates across **four main segments**: restaurants, insurance, media/licensing, and oil/gas[4](index=4&type=chunk) - Chairman and CEO Sardar Biglari beneficially owned approximately **64.4% of Class A** and **55.4% of Class B** common stock as of December 31, 2019, giving him significant control over the company[5](index=5&type=chunk) - On September 9, 2019, the company acquired Southern Oil of Louisiana Inc., entering the oil and gas business[19](index=19&type=chunk) Restaurant Units as of December 31, 2019 | Brand | Company-Operated | Franchise Partner | Traditional Franchise | Total | | :--- | :--- | :--- | :--- | :--- | | **Steak n Shake** | 368 (107 temporarily closed) | 29 | 213 | 610 | | **Western Sizzlin** | 4 | 0 | 48 | 52 | - The company has significant investments in The Lion Fund, L.P. and The Lion Fund II, L.P., with a fair value of **$666.1 million** as of December 31, 2019, subject to a rolling five-year lock-up period[22](index=22&type=chunk) [Risk Factors](index=6&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including heavy dependence on its controlling CEO, declining restaurant profitability, concentrated investment exposure, and upcoming debt maturities - The company is **highly dependent** on its Chairman and CEO, Sardar Biglari, who makes all major investment and capital allocation decisions and holds **over 50%** of voting stock[26](index=26&type=chunk)[27](index=27&type=chunk) - Steak n Shake's credit facility, with **$181.5 million** outstanding, matures on March 19, 2021, and the inability to refinance this debt could negatively impact operations[39](index=39&type=chunk) - The company's investments are **unusually concentrated**, primarily in the common stock of Cracker Barrel Old Country Store, Inc., held through investment partnerships, making shareholders' equity vulnerable to stock value declines[51](index=51&type=chunk) - Capital invested in The Lion Fund partnerships is subject to a **five-year lock-up period**, restricting access to a significant portion of the company's capital[48](index=48&type=chunk) - The restaurant business faces intense competition, and Steak n Shake has experienced declining sales and profitability, with **107 stores** temporarily closed as of year-end 2019[37](index=37&type=chunk)[41](index=41&type=chunk) [Unresolved Staff Comments](index=11&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[64](index=64&type=chunk) [Properties](index=12&type=section&id=Item%202.%20Properties) As of December 31, 2019, the company's restaurant operations comprised 662 locations, with 152 owned land and buildings, primarily in the United States, while oil and gas properties are offshore in the Gulf of Mexico Total Restaurant Locations by Type (as of Dec 31, 2019) | Type | Steak n Shake | Western Sizzlin | Total | | :--- | :--- | :--- | :--- | | **Company Operated** | 368 | 4 | 372 | | **Franchise Partner** | 29 | 0 | 29 | | **Traditional Franchise** | 213 | 48 | 261 | | **Total** | **610** | **52** | **662** | - Of the **368** company-operated Steak n Shake restaurants, **107** were temporarily closed at year-end[67](index=67&type=chunk) - The company owns the land and building for **152** of its restaurant locations[66](index=66&type=chunk) [Legal Proceedings](index=13&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a shareholder class action lawsuit regarding its dual-class stock structure and a settled class-action lawsuit with former restaurant managers - A shareholder class action lawsuit alleging breach of fiduciary duty concerning the dual-class stock structure was dismissed but is subject to a pending petition for review by the Indiana Supreme Court[72](index=72&type=chunk)[73](index=73&type=chunk) - On July 26, 2019, the company settled two class-action lawsuits (Drake v. Steak n Shake and Clendenen v. Steak n Shake) for **$8.35 million** related to the alleged improper classification of managerial employees as exempt[74](index=74&type=chunk) [Mine Safety Disclosures](index=13&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[75](index=75&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=13&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Biglari Holdings' Class A and Class B common stocks are traded on the NYSE, with no dividends ever declared, and the CEO made personal stock purchases in late 2019 - The company's Class A (BH.A) and Class B (BH) common stocks are listed on the New York Stock Exchange[76](index=76&type=chunk) - Biglari Holdings has never declared a dividend[77](index=77&type=chunk) - From November 5 to November 26, 2019, Sardar Biglari purchased **7,699 shares** of Class A common stock at an average price of **$557.33** per share[79](index=79&type=chunk) - The company does not have any equity compensation plans[82](index=82&type=chunk) [Selected Financial Data](index=15&type=section&id=Item%206.%20Selected%20Financial%20Data) The company's total revenues have declined over the past five years, while net earnings have been volatile, and total assets and shareholders' equity have shown modest growth Selected Financial Data (2015-2019, in thousands) | (in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $668,838 | $809,894 | $839,804 | $850,076 | $861,452 | | **Net earnings (loss)** | $45,380 | $19,392 | $50,071 | $99,451 | $(15,843) | | **Total assets** | $1,139,309 | $1,029,493 | $1,063,584 | $1,096,967 | $987,079 | | **Long-term notes payable** | $263,182 | $240,001 | $256,994 | $281,555 | $296,062 | | **Shareholders' equity** | $616,298 | $570,455 | $571,328 | $531,940 | $451,372 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2019, net earnings increased to $45.4 million, primarily driven by investment partnership gains, despite a larger loss in the restaurant segment and the acquisition of Southern Oil Net Earnings by Segment (After-Tax, in thousands) | (in thousands) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Restaurant** | $(10,734) | $(2,613) | $9,725 | | **Insurance** | $5,584 | $4,915 | $3,097 | | **Oil and gas** | $5,921 | — | — | | **Media** | $572 | $796 | $435 | | **Total operating businesses** | $2,085 | $3,570 | $13,763 | | **Investment partnership gains** | $60,773 | $33,240 | $11,080 | | **Total Net Earnings** | **$45,380** | **$19,392** | **$50,071** | - On September 9, 2019, the company acquired Southern Oil for **$51.5 million** in cash, marking its entry into the oil and gas sector[88](index=88&type=chunk) - Consolidated shareholders' equity increased by **$45.8 million** to **$616.3 million** at year-end 2019, primarily due to net income of **$45.4 million**[119](index=119&type=chunk) - Net cash from operating activities increased to **$93.7 million** in 2019 from **$20.7 million** in 2018, largely due to a **$99.7 million** increase in distributions from investment partnerships[122](index=122&type=chunk) [Results of Operations](index=17&type=section&id=7.1%20Results%20of%20Operations) The restaurant segment's loss widened in 2019 due to declining sales and traffic at Steak n Shake, while insurance gains grew, and the new oil and gas segment contributed positively Restaurant Operations Key Metrics (2019 vs 2018) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | **Net Sales** | $578.2M | $740.9M | | **Same-Store Sales Change** | -6.9% | N/A | | **Customer Traffic Change** | -11.2% | N/A | | **Earnings (loss) before tax** | $(16.8M) | $(8.6M) | Insurance Operations Pre-Tax Underwriting Gain | (in thousands) | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | **Pre-tax underwriting gain** | $6,477 | $5,634 | +15.0% | Oil and Gas Operations (Post-Acquisition 2019) | (in thousands) | Amount | | :--- | :--- | | **Oil and gas revenue** | $24,436 | | **Earnings before income taxes** | $8,032 | - Investment partnership gains, which are highly volatile and concentrated in Cracker Barrel stock, increased to **$78.1 million** pre-tax in 2019 from **$40.4 million** in 2018[113](index=113&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=22&type=section&id=7.2%20Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) The company maintains significant liquidity, primarily from investment partnerships, with cash from operations surging in 2019, while evaluating refinancing options for Steak n Shake's debt maturing in 2021 Consolidated Cash and Investments (in thousands) | Category | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $67,772 | $48,557 | | Investments | $44,856 | $33,860 | | Fair value of interest in investment partnerships | $666,123 | $715,102 | | **Total cash and investments** | **$778,751** | **$801,982** | Summary of Cash Flow Activities (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash from operating activities | $93,683 | $20,678 | | Net cash used in investing activities | $(69,982) | $(25,290) | | Net cash used in financing activities | $(8,010) | $(7,530) | - Steak n Shake's term loan of **$181.5 million** matures on March 19, 2021, and the company is evaluating refinancing options, but alternatives may not be available on commensurate terms[125](index=125&type=chunk) [Critical Accounting Policies](index=24&type=section&id=7.3%20Critical%20Accounting%20Policies) The company's critical accounting policies involve significant management judgment and estimates, particularly for consolidation, asset impairment, reserve estimation, and tax and lease accounting - Significant judgment is required for policies including: consolidation, impairment of restaurant assets, estimation of oil and gas reserves, income taxes, goodwill impairment testing, and lease accounting[130](index=130&type=chunk) - Impairment of restaurant assets is tested when events indicate a possible impairment by comparing the asset's carrying value to its undiscounted future cash flows[134](index=134&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually using both market and income approaches, which require significant management judgment[137](index=137&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces significant market risks from its concentrated equity investments, interest rate exposure on variable-rate debt, and commodity price volatility in its oil and gas segment - The company has significant equity price risk due to a concentrated investment in Cracker Barrel Old Country Store, Inc., where a hypothetical **10%** price change would alter investment fair value by **$55.0 million**[144](index=144&type=chunk)[145](index=145&type=chunk) - The company is exposed to interest rate risk on Steak n Shake's credit facility, where a hypothetical **100 basis point** rate increase would impact net earnings by approximately **$1.4 million**[146](index=146&type=chunk) - The Southern Oil business is exposed to commodity price risk, as its earnings are significantly affected by changes in oil and gas prices[148](index=148&type=chunk) [Financial Statements and Supplementary Data](index=28&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the independent auditor's unqualified opinion on the consolidated financial statements, which also highlight the adoption of a new lease accounting standard and significant related-party investments [Report of Independent Registered Public Accounting Firm](index=28&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on the company's consolidated financial statements, noting the adoption of ASC 842 and emphasizing significant related-party investment partnerships - The auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements[151](index=151&type=chunk) - The audit report emphasizes the matter of significant investments in related-party investment partnerships, which totaled **$505.5 million** at carrying value as of December 31, 2019[156](index=156&type=chunk) - The audit of internal controls excluded Southern Oil Company, which was acquired on September 9, 2019[161](index=161&type=chunk) [Consolidated Financial Statements](index=30&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position, results of operations, and cash flows, showing total assets of $1.14 billion and net earnings of $45.4 million for 2019 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | $1,139,309 | $1,029,493 | | Investment partnerships | $505,542 | $557,480 | | **Total Liabilities** | $523,011 | $459,038 | | Long-term notes payable | $263,182 | $240,001 | | **Shareholders' Equity** | $616,298 | $570,455 | Consolidated Statement of Earnings Highlights (in thousands) | Account | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $668,838 | $809,894 | $839,804 | | Restaurant operations revenue | $610,220 | $775,690 | $807,153 | | Investment partnership gains | $78,133 | $40,411 | $6,965 | | **Net Earnings** | $45,380 | $19,392 | $50,071 | [Notes to Consolidated Financial Statements](index=34&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, including the Southern Oil acquisition, concentrated related-party investments, ASC 842 adoption, and segment reporting highlighting restaurant losses versus investment gains - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of operating lease assets of **$63.3 million** and liabilities of **$69.7 million** on the balance sheet[219](index=219&type=chunk) - The carrying value of investments in The Lion Fund partnerships was **$505.5 million** at year-end 2019, controlled by CEO Sardar Biglari and subject to a rolling **5-year lock-up**[224](index=224&type=chunk)[227](index=227&type=chunk) - The company has a services agreement with entities owned by Mr. Biglari, paying a fixed fee of **$8.4 million** in 2019 for business and administrative services[283](index=283&type=chunk) Segment Earnings (Loss) Before Tax (in thousands) | Segment | 2019 | 2018 | | :--- | :--- | :--- | | **Restaurant Operations** | $(16,819) | $(8,611) | | **First Guard (Insurance)** | $7,103 | $6,215 | | **Southern Oil** | $8,032 | — | | **Maxim (Media)** | $742 | $1,068 | | **Investment partnership gains** | $78,133 | $40,411 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=58&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable - Not applicable[320](index=320&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019, excluding the recently acquired Southern Oil, with no material changes to internal controls during the fourth quarter - The CEO and Controller concluded that disclosure controls and procedures were effective as of December 31, 2019[321](index=321&type=chunk) - The assessment of internal controls over financial reporting excluded Southern Oil, which was acquired on September 9, 2019[321](index=321&type=chunk)[324](index=324&type=chunk) - The effectiveness of internal control over financial reporting was audited by Deloitte & Touche LLP, who issued an unqualified opinion[325](index=325&type=chunk) [Other Information](index=58&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[325](index=325&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Related Transactions](index=59&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Shareholders - The information for Part III (Items 10-14) is not included in this 10-K and is incorporated by reference from the company's 2020 definitive proxy statement[327](index=327&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements included in the report and provides a comprehensive list of exhibits filed with the 10-K, including governance documents and required certifications - This section lists all financial statements, the auditor's report, and management's report on internal control included in Item 8[329](index=329&type=chunk) - A list of exhibits filed with the report is provided, including governance documents, material contracts, and required certifications[331](index=331&type=chunk)[333](index=333&type=chunk) [Form 10-K Summary](index=61&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[334](index=334&type=chunk)

Part I – Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited consolidated financial statements and key events for the period ended September 30, 2019 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $1.15 billion, driven by property and equipment increases and new operating lease assets Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $19,058 | $48,557 | | Investment partnerships | $561,479 | $557,480 | | Property and equipment, net | $355,489 | $274,716 | | Operating lease assets | $65,939 | $— | | **Total Assets** | **$1,153,950** | **$1,029,493** | | **Liabilities & Equity** | | | | Accounts payable and accrued expenses | $138,822 | $117,265 | | Long-term notes payable and other borrowings | $264,857 | $240,001 | | Operating lease liabilities | $59,668 | $— | | **Total Liabilities** | **$552,430** | **$459,038** | | **Total Shareholders' Equity** | **$601,520** | **$570,455** | [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) Net earnings reached $31.8 million for the first nine months of 2019, driven by investment gains despite lower revenue Statement of Earnings Summary (in thousands) | Metric | Q3 2019 | Q3 2018 | First Nine Months 2019 | First Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $160,216 | $203,582 | $510,418 | $614,546 | | Restaurant Operations Revenue | $145,111 | $195,041 | $478,947 | $589,569 | | Investment partnership gains (losses) | $1,449 | $(19,008) | $69,801 | $(23,854) | | Earnings (loss) before income taxes | $(631) | $(24,902) | $38,801 | $(35,942) | | **Net Earnings (Loss)** | **$(17)** | **$(13,703)** | **$31,775** | **$(23,056)** | | Net earnings (loss) per equivalent Class A share | $(0.05) | $(39.50) | $92.04 | $(66.12) | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow was $39.9 million, while investing activities used $63.3 million for the Southern Oil acquisition Cash Flow Summary - First Nine Months (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $39,859 | $(5,584) | | Net cash provided by (used in) investing activities | $(63,276) | $2,221 | | Net cash used in financing activities | $(6,003) | $(5,797) | | **Decrease in cash, cash equivalents and restricted cash** | **$(29,449)** | **$(9,223)** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the Southern Oil acquisition, adoption of ASC 842, investment concentrations, and impairment charges - On September 9, 2019, the company acquired Southern Oil Company for **$51.5 million** in cash, marking its entry into the oil and gas exploration and production business[15](index=15&type=chunk) - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of operating lease assets of **$63.3 million** and operating lease liabilities of **$69.7 million**[26](index=26&type=chunk) - The company's investments in The Lion Fund partnerships are **highly concentrated** in the common stock of Cracker Barrel Old Country Store, Inc[42](index=42&type=chunk)[127](index=127&type=chunk) - Impairment charges of **$7.4 million** were recorded in the first nine months of 2019, primarily due to the temporary closure of 106 Steak n Shake restaurants[44](index=44&type=chunk) - The company settled the Drake v. Steak n Shake and Clendenen v. Steak n Shake class action lawsuits for **$8.35 million** regarding the classification of managerial employees[81](index=81&type=chunk) [Management's Discussion and Analysis (MD&A)](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Southern Oil acquisition, challenges at Steak n Shake, and the impact of investment gains - Steak n Shake's sales have declined since 2017, leading to lower profitability and the **temporary closure of 106 company-operated restaurants** as of September 30, 2019[101](index=101&type=chunk) - The significant swing to net earnings in 2019 is primarily due to gains from investment partnerships, which contributed **$53.9 million to net earnings** compared to a loss of $15.7 million in the prior year[103](index=103&type=chunk)[126](index=126&type=chunk) [Results of Operations: Restaurants](index=22&type=section&id=MD%26A%20-%20Restaurants) The restaurant segment saw a significant sales decline and operating loss due to store closures and reduced traffic Restaurant Segment Earnings (in thousands) | Metric | First Nine Months 2019 | First Nine Months 2018 | | :--- | :--- | :--- | | Total Revenue | $478,947 | $589,569 | | Earnings (loss) before income taxes | $(21,343) | $59 | | Contribution to net earnings (loss) | $(14,888) | $1,914 | - Steak n Shake's same-store sales **decreased 6.4%** and customer traffic **decreased 9.7%** during the first nine months of 2019[111](index=111&type=chunk) - As of September 30, 2019, **106 Steak n Shake restaurants were temporarily closed** pending identification of a franchise partner[106](index=106&type=chunk) [Results of Operations: Insurance](index=26&type=section&id=MD%26A%20-%20Insurance) The insurance segment delivered solid growth in premiums earned and underwriting gains, increasing its net earnings Insurance Segment Earnings (in thousands) | Metric | First Nine Months 2019 | First Nine Months 2018 | | :--- | :--- | :--- | | Premiums written | $21,302 | $19,576 | | Pre-tax underwriting gain | $4,902 | $4,029 | | Contribution to net earnings | $4,465 | $3,629 | [Results of Operations: Oil and Gas](index=27&type=section&id=MD%26A%20-%20Oil%20and%20Gas) The newly acquired Oil and Gas segment contributed $6.5 million in revenue and $1.1 million in net earnings Oil and Gas Segment Earnings - Q3 2019 (in thousands) | Metric | Amount | | :--- | :--- | | Oil and gas revenue | $6,500 | | Earnings before income taxes | $1,448 | | Contribution to net earnings | $1,060 | [Results of Operations: Investment Partnership Gains (Losses)](index=28&type=section&id=MD%26A%20-%20Investment%20Partnership%20Gains%20(Losses)) Investment partnership gains of $69.8 million drove overall profitability, reversing prior year losses Investment Partnership Contribution (in thousands) | Metric | Q3 2019 | Q3 2018 | First Nine Months 2019 | First Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Investment partnership gains (losses) | $1,449 | $(19,008) | $69,801 | $(23,854) | | Contribution to net earnings (loss) | $1,400 | $(12,889) | $53,891 | $(15,691) | - The investments held by the partnerships are **largely concentrated** in the common stock of Cracker Barrel Old Country Store, Inc[127](index=127&type=chunk) [Financial Condition and Liquidity](index=28&type=section&id=MD%26A%20-%20Financial%20Condition%20and%20Liquidity) Shareholders' equity grew to $601.5 million, supported by strong operating cash flow despite acquisition spending - Consolidated shareholders' equity increased to **$601.5 million** at September 30, 2019, up from $570.5 million at year-end 2018, primarily due to net income of $31.8 million[131](index=131&type=chunk)[6](index=6&type=chunk) - Cash used in investing activities was **$63.3 million**, which included **$51.1 million** for the acquisition of Southern Oil[134](index=134&type=chunk)[135](index=135&type=chunk) - The outstanding balance on Steak n Shake's credit facility was **$182.0 million** as of September 30, 2019, with the loan maturing in March 2021[129](index=129&type=chunk)[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces significant market risk from its concentrated equity investments and interest rate risk from its debt - The company's primary market risk is from its **concentrated equity position** in Cracker Barrel Old Country Store, Inc, held through its investment partnerships[145](index=145&type=chunk) - A hypothetical **10% change** in investment market prices would result in a corresponding change to carrying value of **$60.5 million** and an approximate **8% change** in shareholders' equity[146](index=146&type=chunk) - A hypothetical **100 basis point increase** in short-term interest rates would reduce annual net earnings by approximately **$1.4 million** due to the variable-rate term loan[147](index=147&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[148](index=148&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended September 30, 2019[149](index=149&type=chunk) Part II – Other Information [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company discloses ongoing litigation, including an appealed shareholder lawsuit and settled employee class actions - A shareholder class action lawsuit alleging breach of fiduciary duty related to the company's dual-class stock structure was dismissed by the Superior Court but is **currently under appeal**[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - The company settled two purported class action lawsuits (Drake v. Steak n Shake and Clendenen v. Steak n Shake) for **$8.35 million**[81](index=81&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported during the quarter - **No material changes** to risk factors were reported for the quarter[150](index=150&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[150](index=150&type=chunk)

[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company achieved **$31.8 million** net earnings in H1 2019, reversing a **$9.4 million** loss in H1 2018, driven by investment gains and an increase in total assets to **$1.15 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,154,669** | **$1,029,493** | | Cash and cash equivalents | $27,662 | $48,557 | | Investment partnerships | $622,066 | $557,480 | | **Total Liabilities** | **$552,307** | **$459,038** | | **Total Shareholders' Equity** | **$602,362** | **$570,455** | Consolidated Earnings Summary (in thousands) | Period | Revenues ($ thousands) | Investment Partnership Gains (Losses) ($ thousands) | Net Earnings (Loss) ($ thousands) | | :--- | :--- | :--- | :--- | | **Q2 2019** | $168,343 | $34,198 | $21,974 | | **Q2 2018** | $208,739 | $(8,341) | $(7,539) | | **First Six Months 2019** | $350,202 | $68,352 | $31,792 | | **First Six Months 2018** | $410,964 | $(4,846) | $(9,353) | Consolidated Cash Flow Summary - First Six Months (in thousands) | Activity | 2019 ($ thousands) | 2018 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,295) | $(465) | | Net cash used in investing activities | $(8,619) | $(5,714) | | Net cash used in financing activities | $(3,984) | $(3,932) | | **Decrease in cash** | **$(20,895)** | **$(10,166)** | - The company adopted ASC 842 on January 1, 2019, recognizing **$63.3 million** in operating lease assets and **$69.7 million** in operating lease liabilities[18](index=18&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes H1 2019 profitability to strong investment partnerships, despite significant restaurant segment operational challenges and a strategic shift to a franchise partnership model - Steak n Shake's sales have declined since 2017, leading to **103** temporary restaurant closures as of June 30, 2019, as the company emphasizes its franchise partnership program for profitability improvement[101](index=101&type=chunk) Net Earnings (Loss) Contribution by Segment - First Six Months (in thousands) | Segment | 2019 ($ thousands) | 2018 ($ thousands) | | :--- | :--- | :--- | | Restaurant | $(14,767) | $1,184 | | Insurance | $2,675 | $2,204 | | Media | $48 | $(155) | | Investment partnership gains (losses) | $52,491 | $(2,802) | | **Total Net Earnings (Loss)** | **$31,792** | **$(9,353)** | [Restaurants](index=20&type=section&id=Restaurants) - The restaurant segment reported a pre-tax loss of **$21.0 million** in H1 2019, reversing a **$2.7 million** profit in H1 2018, primarily due to declining Steak n Shake sales[106](index=106&type=chunk) - Steak n Shake's same-store sales decreased by **6.5%** and customer traffic fell by **8.1%** in H1 2019, largely due to temporary store closures[108](index=108&type=chunk) - Cost of food as a percentage of net sales increased to **32.2%** in H1 2019 from **30.0%** in 2018 due to a promotion, while operating costs also rose due to higher wages[110](index=110&type=chunk)[111](index=111&type=chunk) [Insurance](index=23&type=section&id=Insurance) Insurance Segment Performance - First Six Months (in thousands) | Metric | 2019 ($ thousands) | 2018 ($ thousands) | | :--- | :--- | :--- | | Premiums written | $13,926 | $12,833 | | Pre-tax underwriting gain | $2,768 | $2,432 | | **Contribution to net earnings** | **$2,675** | **$2,204** | - Premiums earned in H1 2019 increased by **8.5%** year-over-year, indicating steady growth in the insurance business[115](index=115&type=chunk) [Investment Partnership Gains (Losses)](index=24&type=section&id=Investment%20Partnership%20Gains%20%28Losses%29) - The company recorded pre-tax investment partnership gains of **$68.4 million** in H1 2019, a significant turnaround from a **$4.8 million** loss in H1 2018, driving overall net earnings[120](index=120&type=chunk) - Investment partnerships hold a highly concentrated position in the common stock of Cracker Barrel Old Country Store, Inc[121](index=121&type=chunk) [Financial Condition and Liquidity](index=24&type=section&id=Financial%20Condition%20and%20Liquidity) - Consolidated shareholders' equity increased by **$31.9 million** to **$602.4 million** in H1 2019, primarily driven by **$31.8 million** in net income[126](index=126&type=chunk) - Cash used in operating activities increased significantly to **$8.3 million** in H1 2019 from **$0.5 million** in the prior year, mainly due to decreased restaurant revenues[129](index=129&type=chunk) - Steak n Shake had **$182.6 million** outstanding on its term loan facility as of June 30, 2019, maturing in March 2021 with an interest rate of **6.19%**[124](index=124&type=chunk)[135](index=135&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk stems from its concentrated equity investment in Cracker Barrel Old Country Store, Inc., and interest rate risk on its variable-rate term loan - The company's investment partnerships hold a concentrated position in Cracker Barrel Old Country Store, Inc. common stock, exposing it to price fluctuations[140](index=140&type=chunk) - A hypothetical **10%** change in investment market prices would alter the carrying value by approximately **$66.4 million**[141](index=141&type=chunk) - The company faces interest rate risk on its term loan, where a hypothetical **100 basis point** increase in short-term rates would impact net earnings by approximately **$1.4 million**[142](index=142&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - The CEO and Controller concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[143](index=143&type=chunk) [Part II – Other Information](index=27&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company settled two class action lawsuits against Steak n Shake for **$8.35 million** and is appealing the dismissal of a shareholder lawsuit regarding its dual-class stock structure - The company settled two class action lawsuits (Drake v. Steak n Shake and Clendenen v. Steak n Shake) for **$8.35 million**, related to managerial employee classification[82](index=82&type=chunk) - A shareholder lawsuit alleging breach of fiduciary duty regarding the dual-class stock structure was dismissed, but an appeal was filed on January 11, 2019, which the company is defending[80](index=80&type=chunk)[81](index=81&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) A material change to risk factors highlights the significant risk that Steak n Shake's franchise conversion strategy may not succeed in reversing declining sales and profitability - A key risk is that Steak n Shake's franchise partnership conversion strategy may fail to reverse declining sales and profitability[146](index=146&type=chunk) - There is no assurance Steak n Shake will find suitable franchise partners for its **103** temporarily closed stores or that the new model will succeed, potentially requiring additional financing[147](index=147&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Between May and June 2019, Chairman and CEO Sardar Biglari purchased **7,702** Class A and **23,646** Class B common shares through open market transactions - From May to June 2019, CEO Sardar Biglari purchased **7,702** shares of Class A and **23,646** shares of Class B common stock in open market transactions[154](index=154&type=chunk)[155](index=155&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbols Name of each exchange on which registered Class A Common Stock, no par value Class B Common Stock, no par value BH.A BH New York Stock Exchange New York Stock Exchange 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, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 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) INDIANA 82-3784946 (State or other jurisdiction of ...