The following table presents shares authorized, issued, and outstanding. | --- | --- | --- | --- | --- | --- | --- | |---------------------------------------------|----------------------|--------------------------|----------------------|--------------------------|----------------------|------------------------| | | December \nClass A | 31, 2022 \nClass B | December \nClass A | 31, 2021 \nClass B | December \nClass A | 31, 2020 \nClass B | | Common stock authorized | 500,000 | 10,000,000 | 500,000 | 10,000,0 ...

[Part I – Financial Information](index=4&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Biglari Holdings Inc.'s unaudited consolidated financial statements for Q3 and the first nine months of 2022, including balance sheets, earnings, cash flows, and notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $862.1 million from $894.8 million, mainly due to lower investment partnership values, while total shareholders' equity declined to $545.4 million Consolidated Balance Sheets (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$862,145** | **$894,807** | | Cash and cash equivalents | $64,842 | $42,349 | | Investment partnerships | $144,864 | $250,399 | | **Total Liabilities** | **$316,737** | **$307,111** | | Line of credit | $30,000 | $— | | **Total Shareholders' Equity** | **$545,408** | **$587,696** | [Consolidated Statements of Earnings](index=5&type=section&id=Consolidated%20Statements%20of%20Earnings) The company reported a Q3 2022 net income of $32.0 million, a turnaround from a $10.7 million loss, driven by investment partnership gains, but a nine-month net loss of $42.1 million Consolidated Statements of Earnings (in thousands) | Metric | Q3 2022 (Unaudited) | Q3 2021 (Unaudited) | First Nine Months 2022 (Unaudited) | First Nine Months 2021 (Unaudited) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$92,034** | **$82,083** | **$269,773** | **$267,158** | | Restaurant operations | $59,437 | $59,144 | $179,608 | $196,424 | | Investment partnership gains (losses) | $29,658 | $(20,231) | $(82,244) | $27,344 | | **Net Earnings (Loss) Attributable to BH** | **$32,005** | **$(10,669)** | **$(42,073)** | **$40,301** | | **Net Earnings (Loss) per Class A Share** | **$109.13** | **$(33.74)** | **$(140.30)** | **$125.79** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to $99.8 million, while investing activities used $102.5 million due to an acquisition, and financing provided $25.4 million from a new credit line Consolidated Statements of Cash Flows (in thousands) | Activity | First Nine Months 2022 (Unaudited) | First Nine Months 2021 (Unaudited) | | :--- | :--- | :--- | | 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 activities | $25,353 | $(154,586) | | **Increase in cash** | **$22,493** | **$792** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, business segments, the Abraxas Petroleum acquisition, and the significant impact of investment partnerships on earnings - On September 14, 2022, the company acquired Abraxas Petroleum Corporation for **$80 million**, funded by working capital and a line of credit, now a consolidated entity[26](index=26&type=chunk) - Investment partnerships generated a pre-tax gain of **$29.7 million** in Q3 2022 versus a loss of **$20.2 million** in Q3 2021, but recorded a pre-tax loss of **$82.2 million** for the first nine months of 2022 compared to a gain of **$27.3 million** in the prior year[43](index=43&type=chunk) Segment Revenue (in thousands) | Segment Revenue | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Restaurant Operations | $59,437 | $59,144 | | Insurance Operations | $16,312 | $14,723 | | Oil and Gas Operations | $14,380 | $7,353 | | Maxim (Licensing/Media) | $1,905 | $863 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management discusses performance by segment, financial condition, liquidity, and cash flow changes, including the Abraxas Petroleum acquisition and new line of credit - The company's net earnings are highly volatile due to the significant impact of investment partnership gains and losses, which are recorded in the income statement[107](index=107&type=chunk)[138](index=138&type=chunk) - On September 13, 2022, the company entered into a new **$30 million** revolving line of credit, fully drawn as of September 30, 2022, to help fund the Abraxas Petroleum acquisition[63](index=63&type=chunk)[152](index=152&type=chunk) [Results of Operations by Segment](index=27&type=section&id=Results%20of%20Operations%20by%20Segment) Segment performance review shows a shift in restaurant revenue to franchise fees, lower insurance underwriting gains, significant growth in oil and gas, and increased licensing revenue - The restaurant segment is transitioning to a franchise partner model, increasing 'Franchise partner fees' while decreasing 'Net sales', with **171 franchise partner units** as of September 30, 2022, up from 140 a year prior[110](index=110&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) Segment Pre-Tax Earnings (Loss) (in thousands) | Segment Pre-Tax Earnings (Loss) | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Restaurant Operations | $4,333 | $(2,712) | | Insurance Operations | $3,092 | $3,842 | | Oil and Gas Operations | $7,241 | $2,982 | | Maxim (Licensing/Media) | $1,534 | $(56) | - First Guard's insurance underwriting gain decreased in Q3 and the first nine months of 2022 due to a higher loss ratio of **52.8%** in Q3 2022 versus 46.5% in Q3 2021, while Southern Pioneer swung to an underwriting loss[127](index=127&type=chunk)[128](index=128&type=chunk) - The Oil and Gas segment's earnings before tax increased to **$7.2 million** in Q3 2022 from **$3.0 million** in Q3 2021, driven by higher commodity prices and the contribution from the newly acquired Abraxas Petroleum[101](index=101&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) [Financial Condition and Liquidity](index=36&type=section&id=Financial%20Condition%20and%20Liquidity) The company maintains significant liquidity despite a decrease in cash and investments to $279.7 million due to investment partnership losses, and operating cash flow declined due to lower distributions Total Cash and Investments (Fair Value, in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $64,842 | $42,349 | | Investments | $70,032 | $83,061 | | Fair value of interest in investment partnerships | $338,314 | $474,201 | | **Total cash and investments** | **$473,188** | **$599,611** | - Net cash from operating activities decreased to **$99.7 million** in the first nine months of 2022 from **$211.2 million** in 2021, mainly because distributions from investment partnerships fell to **$51.2 million** from **$172.4 million**[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risk from concentrated equity investments, with a 10% price change impacting carrying value by $21.5 million, and commodity price risk in oil and gas operations - The company holds concentrated equity positions through its investment partnerships, where a significant decline in the stock market or these specific investments could lead to a large net loss[158](index=158&type=chunk) - A hypothetical **10%** change in the market price of the company's investments would result in a corresponding change in carrying value of **$21.5 million**[159](index=159&type=chunk) - The oil and natural gas business is exposed to commodity price fluctuations, where a material decline in crude oil or natural gas prices could have a material adverse effect on operations[161](index=161&type=chunk) [Controls and Procedures](index=38&type=section&id=Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[162](index=162&type=chunk) [Part II – Other Information](index=39&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Other Information](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section covers other required disclosures, including legal proceedings referenced in Note 13, and confirms no material changes to risk factors or unregistered equity sales - Information regarding legal proceedings is incorporated by reference from Note 13 to the Consolidated Financial Statements[165](index=165&type=chunk) - 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, 2021[166](index=166&type=chunk)

Financial Performance - Net sales for Q2 2022 were $37,681 million, a decrease of 23.7% compared to Q2 2021, and for the first six months of 2022, net sales were $75,897 million, down 27.3% from the same period in 2021[100]. - The net contribution to earnings for Q2 2022 was $3,006 million, compared to $2,543 million in Q2 2021[100]. - Franchise royalties and fees for Q2 2022 were $5,237 million, up from $4,594 million in Q2 2021, and for the first six months, they increased to $10,383 million from $9,729 million[102]. - Franchise partner fees increased to $16,425 million in Q2 2022 from $12,383 million in Q2 2021, and for the first six months, fees rose to $32,049 million from $20,236 million[101]. Costs and Expenses - Cost of food in Q2 2022 was $11,365 million, representing 30.2% of net sales, compared to $14,727 million or 29.8% in Q2 2021[103]. - Restaurant operating costs in Q2 2022 were $20,350 million, accounting for 54.0% of net sales, compared to $22,058 million or 44.6% in Q2 2021[104]. - General and administrative costs for Q2 2022 were $10,121 million, a slight decrease from $10,481 million in Q2 2021[105]. - Marketing expenses in Q2 2022 were $3,087 million, down from $3,287 million in Q2 2021[106]. - The company recorded impairment charges of $20 million in Q2 2022, significantly lower than $261 million in Q2 2021[106]. Insurance and Underwriting - Premiums earned for the second quarter of 2022 were $9,015 million, up from $8,225 million in 2021, representing an increase of 9.6%[112]. - Insurance losses for the second quarter of 2022 were $5,465 million, which is 60.6% of premiums earned, compared to $3,809 million (46.3%) in 2021[112]. - Total losses and expenses for the second quarter of 2022 amounted to $7,301 million, which is 81.0% of premiums earned, compared to $5,266 million (64.0%) in 2021[112]. - Pre-tax underwriting gain for the second quarter of 2022 was $1,714 million, down from $2,959 million in 2021[112]. Oil and Gas Operations - Oil and gas revenue for the second quarter of 2022 was $14,440 million, significantly higher than $8,365 million in 2021, marking a 72.5% increase[115]. - Contribution to net earnings from oil and gas operations for the second quarter of 2022 was $6,369 million, compared to $2,336 million in 2021, reflecting a substantial increase[115]. Investments and Cash Flow - Consolidated cash and investments as of June 30, 2022, totaled $461,622 million, down from $599,611 million at the end of 2021[126]. - Cash provided by operating activities was $34,204 in the first six months of 2022, a decrease of 81.7% compared to $187,208 in 2021[128]. - Cash used in investing activities was $32,819 in 2022, slightly lower than $32,839 in 2021, with capital expenditures decreasing by $10,425 due to a transition to a self-service model[129]. - Cash used in financing activities was $3,134 in 2022, significantly lower than $153,136 in 2021, as the company repaid Steak n Shake's debt in 2021[130]. Market and Risk Factors - A hypothetical 10% increase or decrease in the market price of investments would result in a respective change in carrying value of $22,352, affecting shareholders' equity by approximately 3%[136]. - The company has had minimal exposure to foreign currency exchange rate fluctuations in the first six months of 2022 and 2021[137]. - Southern Oil's operations may be significantly affected by changes in oil and gas prices, which depend on various local, regional, and global events[138]. Internal Controls and Accounting Policies - There have been no material changes to critical accounting policies as disclosed in the annual report for the year ended December 31, 2021[132]. - The company has effective disclosure controls and procedures as of June 30, 2022[139]. - There have been no changes in internal control over financial reporting that materially affected the company during the quarter ended June 30, 2022[140].

Financial Performance - Net sales for 2022 were $38,216 million, a decrease of $16,734 million or 30.5% compared to 2021[105] - Total revenue for 2022 was $59,847 million, down from $69,954 million in 2021[105] - Contribution to net earnings for 2022 was $3,262 million, down from $4,118 million in 2021[105] Costs and Expenses - Cost of food was $10,960 million or 28.7% of net sales in 2022, compared to $15,554 million or 28.3% in 2021[107] - Restaurant operating costs were $20,032 million or 52.4% of net sales in 2022, up from $25,197 million or 45.9% in 2021[107] - General and administrative costs rose to $8,650 million in 2022, representing 14.5% of total revenue, compared to $7,680 million or 11.0% in 2021[108] Franchise Operations - Franchise partner fees increased to $15,624 million in 2022 from $7,853 million in 2021, with 171 franchise partner units as of March 31, 2022[106] Investment Performance - Oil and gas revenue for the first quarter of 2022 was $9,812 million, an increase from $8,592 million in 2021[117] - Investment gains net of tax for the first quarter of 2022 were $175 million, compared to $2,414 million in 2021[120] - Investment partnership pretax losses were $6,661 in Q1 2022 compared to pretax gains of $81,766 in Q1 2021[125] Cash Flow and Liquidity - Net cash provided by operating activities was $21,092 in Q1 2022, a significant decrease from $165,298 in Q1 2021, primarily due to lower distributions from investment partnerships[129] - Cash used in investing activities increased to $16,077 in Q1 2022 from $8,780 in Q1 2021, with capital expenditures rising by $1,846[130] - Total cash and investments as of March 31, 2022, were $604,719, up from $599,611 on December 31, 2021[127] - The carrying value of cash and investments on the balance sheet was $375,295 as of March 31, 2022, slightly down from $375,809 at the end of 2021[127] Tax and Interest - Income tax benefit for Q1 2022 was $171, compared to an income tax expense of $22,016 in Q1 2021[125] - Interest expense net of tax was $841 in Q1 2021, with no interest expense reported for Q1 2022[123] Operational Strategy - The company intends to meet working capital needs primarily through anticipated cash flows generated from operations and cash on hand[131] - Unrealized gains/losses from investments held by partnerships are eliminated in the company's consolidated financial results[127] - The company has minimal exposure to foreign currency exchange rate fluctuations in Q1 2022 and Q1 2021[139] Impairment Charges - The company recorded no impairment charges in 2022, while there were $298 million in impairments in the first quarter of 2021[108]

Part I – Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended June 30, 2021, show total assets decreased to **$933.9 million**, net earnings for the first six months turned around to **$51.0 million**, and **$187.2 million** in operating cash flow was generated for debt repayment [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2021, total assets decreased to **$933.9 million** due to lower investment partnership values, while total liabilities significantly decreased to **$320.4 million** due to debt repayment, leading to an increase in shareholders' equity to **$613.5 million** Consolidated Balance Sheets (in thousands) | | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$933,895** | **$1,017,968** | | Total Current Assets | $152,279 | $147,778 | | Investment Partnerships | $311,878 | $419,550 | | **Total Liabilities** | **$320,403** | **$453,140** | | Total Current Liabilities | $141,926 | $288,447 | | **Total Shareholders' Equity** | **$613,492** | **$564,828** | [Consolidated Statements of Earnings](index=5&type=section&id=Consolidated%20Statements%20of%20Earnings) For Q2 2021, the company reported a net loss of **$20.7 million** due to investment partnership losses, while the first six months saw net earnings of **$51.0 million**, a significant improvement from the prior year, despite a decrease in total revenues to **$185.1 million** Consolidated Statements of Earnings (in thousands) | (in thousands) | Q2 2021 (Unaudited) | Q2 2020 | First Six Months 2021 (Unaudited) | First Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$90,787** | **$96,502** | **$185,075** | **$232,202** | | Restaurant operations | $67,326 | $78,764 | $137,280 | $192,908 | | Investment partnership gains (losses) | ($34,191) | $59,248 | $47,575 | ($116,494) | | **Net Earnings (Loss)** | **($20,737)** | **$42,466** | **$50,970** | **($95,419)** | | **Net Earnings (Loss) per equivalent Class A share** | **($64.04)** | **$121.51** | **$158.06** | **($275.04)** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to **$187.2 million** for the first six months of 2021, primarily from investment partnership distributions, while net cash used in financing activities rose to **$153.1 million** due to substantial debt repayment Consolidated Statements of Cash Flows (in thousands) | (in thousands) | First Six Months 2021 (Unaudited) | First Six Months 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $187,208 | $98,685 | | Net cash used in investing activities | ($32,839) | ($103,360) | | Net cash used in financing activities | ($153,136) | ($24,156) | | **Increase (decrease) in cash** | **$1,209** | **($28,834)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's diversified holding structure, the significant impact of investment partnerships, the acquisition of Southern Pioneer Insurance, segment revenue and earnings, and the full repayment of the Steak n Shake credit facility - Biglari Holdings operates as a diversified holding company across insurance, media, restaurants, and oil and gas, with all major investment decisions made by **Chairman and CEO Sardar Biglari**[15](index=15&type=chunk) - The company fully repaid Steak n Shake's **$152.5 million** term loan on February 19, 2021[51](index=51&type=chunk) Revenue by Segment (in thousands) | (in thousands) | Q2 2021 | Q2 2020 | First Six Months 2021 | First Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenue by Segment** | | | | | | Restaurant Operations | $67,326 | $78,764 | $137,280 | $192,908 | | Insurance Operations | $14,387 | $14,605 | $29,006 | $24,279 | | Southern Oil | $8,365 | $2,151 | $16,957 | $13,525 | | Maxim | $709 | $982 | $1,832 | $1,490 | | **Total Revenue** | **$90,787** | **$96,502** | **$185,075** | **$232,202** | Earnings (Loss) Before Income Taxes (in thousands) | (in thousands) | Q2 2021 | Q2 2020 | First Six Months 2021 | First Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Earnings (Loss) Before Income Taxes** | | | | | | Total Operating Businesses | $11,249 | ($787) | $22,575 | ($4,464) | | Investment partnership gains (losses) | ($34,191) | $59,248 | $47,575 | ($116,494) | | **Total Earnings (Loss) Before Income Taxes** | **($26,935)** | **$57,230** | **$66,788** | **($124,485)** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial performance for the first six months of 2021 shows improved operating business contributions of **$17.1 million** to net earnings, though overall results remain significantly influenced by volatile investment partnership gains of **$36.5 million**, alongside the strategic repayment of the **$152.5 million** Steak n Shake term loan [Restaurants](index=24&type=section&id=Restaurants) The restaurant segment's strategic shift to a franchise partner model led to a **40.1%** decrease in net sales but a significant increase in franchise fees, resulting in a turnaround to **$9.2 million** in pre-tax earnings for the first six months of 2021 Store Type (Number of Stores) | Store Type | Dec 31, 2020 (Number of Stores) | June 30, 2021 (Number of Stores) | Change (Number of Stores) | | :--- | :--- | :--- | :--- | | **Steak n Shake** | | | | | Company-operated | 276 | 230 | (46) | | Franchise Partner | 86 | 131 | +45 | | Traditional Franchise | 194 | 186 | (8) | | **Western Sizzlin** | | | | | Company-operated | 3 | 3 | 0 | | Franchise | 39 | 38 | (1) | | **Total Stores** | **598** | **588** | **(10)** | - Revenue decrease from company-operated restaurants is primarily due to the strategic shift to franchise partner units, altering revenue recognition[98](index=98&type=chunk) - As of June 30, 2021, **49** of the **230** company-operated Steak n Shake stores were temporarily closed[92](index=92&type=chunk) [Insurance](index=27&type=section&id=Insurance) Insurance operations, including First Guard and Southern Pioneer, showed improved results for the first six months of 2021, with pre-tax underwriting gain increasing to **$6.2 million** and total premiums written growing **23%** to **$27.3 million** Insurance Performance (in thousands) | (in thousands) | First Six Months 2021 | First Six Months 2020 | | :--- | :--- | :--- | | Premiums written | $27,265 | $22,163 | | Pre-tax underwriting gain | $6,204 | $4,587 | | Contribution to net earnings | $5,917 | $4,615 | - First Guard's pre-tax underwriting gain for the first six months of 2021 was **$5.1 million**, an increase from **$4.9 million** in 2020[110](index=110&type=chunk) - Southern Pioneer, acquired in March 2020, achieved a pre-tax underwriting gain of **$1.1 million** for the first six months of 2021, reversing a prior-year loss[113](index=113&type=chunk) [Oil and Gas](index=29&type=section&id=Oil%20and%20Gas) The Southern Oil segment experienced a strong recovery in the first six months of 2021, with revenue increasing to **$17.0 million** and earnings before income taxes turning around significantly to **$6.1 million** due to higher commodity prices Oil and Gas Performance (in thousands) | (in thousands) | First Six Months 2021 | First Six Months 2020 | | :--- | :--- | :--- | | Oil and gas revenue | $16,957 | $13,525 | | Earnings before income taxes | $6,065 | $763 | | Contribution to net earnings | $4,691 | $889 | - Performance improvement is linked to the recovery in crude oil prices that began in mid-2020 following the COVID-19 pandemic's initial impact[118](index=118&type=chunk) [Investment Gains and Investment Partnership Gains](index=30&type=section&id=Investment%20Gains%20and%20Investment%20Partnership%20Gains) Investment partnership results are a highly volatile and significant component of overall earnings, contributing a **$36.5 million** gain in the first six months of 2021, reversing a prior-year loss, despite a **$26.2 million** loss in Q2 2021 Investment Partnership Gains (Losses) (in thousands) | Contribution to Net Earnings (in thousands) | Q2 2021 | Q2 2020 | First Six Months 2021 | First Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Investment partnership gains (losses) | ($26,195) | $45,365 | $36,454 | ($88,994) | - The company does not consider quarterly or annual investment fluctuations meaningful for understanding its core operating business results[125](index=125&type=chunk) [Financial Condition and Liquidity](index=31&type=section&id=Financial%20Condition%20and%20Liquidity) The company maintains strong liquidity with **$436.2 million** in cash and investments, generating **$187.2 million** in operating cash flow primarily from investment partnership distributions, which facilitated the full repayment of Steak n Shake's **$152.5 million** term loan - The company fully repaid Steak n Shake's outstanding term loan balance of **$152.5 million** on February 19, 2021[136](index=136&type=chunk)[127](index=127&type=chunk) - Increased cash from operating activities was mainly due to **$158.1 million** in investment partnership distributions in H1 2021, primarily utilized for debt repayment[134](index=134&type=chunk) Cash and Investments (Fair Value, in thousands) | (in thousands) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $28,212 | $24,503 | | Investments | $96,094 | $94,861 | | Fair value of interest in investment partnerships | $551,942 | $590,926 | | **Total cash and investments (Fair Value)** | **$676,248** | **$710,290** | [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk stems from equity investments, where a **10%** price change would alter carrying value by **$40.8 million**, alongside commodity price risk in Southern Oil operations, while foreign currency risk remains minimal - The company's main market risk is from equity investments, where a hypothetical **10%** price change would alter carrying value by **$40.8 million**[142](index=142&type=chunk) - Southern Oil's earnings are significantly impacted by fluctuations in oil and gas commodity prices[143](index=143&type=chunk) [Controls and Procedures](index=34&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 June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Controller affirmed the effectiveness of the company's disclosure controls and procedures as of June 30, 2021[144](index=144&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2021[145](index=145&type=chunk) Part II – Other Information [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Shareholder class action lawsuits filed in 2018 against the company and its Board of Directors were dismissed, with the dismissal affirmed on appeal and further review denied by the Indiana Supreme Court, concluding all cases in the company's favor - Shareholder class action lawsuits filed in 2018 alleging breach of fiduciary duty were dismissed, with the dismissal affirmed on appeal and further review denied by the Indiana Supreme Court, concluding all cases in the company's favor[69](index=69&type=chunk)[70](index=70&type=chunk) [Risk Factors](index=34&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, 2020 - No material changes have occurred from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020[147](index=147&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2021, The Lion Fund II, L.P., an affiliated purchaser, acquired shares of the company's common stock through open market transactions without a publicly announced repurchase plan Common Stock Purchases by Affiliated Purchaser | Period | Total Class A Shares Purchased (Number of Shares) | Avg. Price Paid per Share (Class A) (USD) | Total Class B Shares Purchased (Number of Shares) | Avg. Price Paid per Share (Class B) (USD) | | :--- | :--- | :--- | :--- | :--- | | May 1 - May 31, 2021 | 895 | $778.74 | 19,311 | $149.07 | | June 1 - June 30, 2021 | 3,391 | $871.76 | — | — | | **Total** | **4,286** | | **19,311** | | - The Lion Fund II, L.P., an affiliated purchaser, acquired Class A and Class B common stock through open market transactions between May 11, 2021, and June 16, 2021[148](index=148&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[151](index=151&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[151](index=151&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[151](index=151&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certifications by principal executive and financial officers and Interactive Data Files (XBRL) - Filed exhibits include CEO and Controller certifications under Sarbanes-Oxley Act Sections 302 and 906, along with Interactive Data Files[152](index=152&type=chunk)

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 ...

Financial Performance - Total revenue for the third quarter of 2020 was $79.674 million, a decrease from $145.111 million in the same quarter of 2019, representing a decline of approximately 45.0%[106] - Net sales for the first nine months of 2020 were $241.832 million, down from $454.344 million in the first nine months of 2019, reflecting a decrease of about 46.8%[106] - Net sales for Q3 2020 were $67,617, a decrease of $69,034 or 50.5% compared to Q3 2019, and for the first nine months, net sales were $241,832, down $212,512 or 46.8% year-over-year[109] - Contribution to net earnings for Q3 2020 was $389 million, significantly lower than $1,060 million in Q3 2019, with a total of $1,278 million for the first nine months of 2020 compared to $1,060 million in the same period of 2019[126] Operational Changes - The total number of company-operated and franchise restaurants decreased from 662 as of December 31, 2019, to 570 as of September 30, 2020, a reduction of 13.9%[104] - As of September 30, 2020, 37 of the 260 company-operated Steak n Shake stores were temporarily closed due to the COVID-19 pandemic[104] - The COVID-19 pandemic has significantly impacted restaurant operations and financial results, necessitating strategic adjustments[108] - The company plans to reopen dining rooms with a self-service model, requiring significant investments in equipment, although funds are limited under the current debt agreement[108] Cost Management - Cost of food for Q3 2020 was $19,508, representing 28.9% of net sales, compared to $40,464 or 29.6% in Q3 2019; for the first nine months, it was $70,880 or 29.3% of net sales, down from $142,757 or 31.4%[112] - Restaurant operating costs in Q3 2020 were $30,451, down from $67,435 in Q3 2019; for the first nine months, costs were $110,903 compared to $236,825 in the same period last year[113] - General and administrative costs for Q3 2020 were $12,059, or 15.1% of total revenues, up from $10,907 or 7.5% in Q3 2019; for the first nine months, costs were $30,146 or 11.1% of total revenues, compared to $40,029 or 8.4%[115] - Franchise royalties and fees decreased by $2,217 or 33.4% in Q3 2020 compared to 2019, and by $6,313 or 31.5% for the first nine months[110] Investment and Financing - Investment partnership gains for the third quarter of 2020 were $21.055 million, significantly higher than $1.400 million in the same quarter of 2019[100] - Cash provided by operating activities was $106,367 million during the first nine months of 2020, compared to $39,859 million in the same period of 2019[140] - Cash used in investing activities was $112,081 million in the first nine months of 2020, compared to $63,276 million in the same period of 2019, including capital expenditures of $13,297 million[141] - The outstanding balance on Steak n Shake's credit facility was $153,056 million as of September 30, 2020, down from $182,048 million on September 30, 2019[136] Risk Management - A significant decline in the general stock market or major investments could lead to large net losses and decrease in consolidated shareholders' equity[151] - Decreases in values of equity investments can materially adversely affect earnings and consolidated shareholders' equity[151] - Market prices for equity securities are subject to fluctuation, potentially leading to significant differences between realized amounts and reported market values[152] - The company has a strategy to manage risks associated with market volatility and investment performance[152] Insurance Operations - The insurance operations reported earnings of $2.204 million in the third quarter of 2020, compared to $1.790 million in the same quarter of 2019, marking an increase of approximately 23.1%[100] - Biglari Holdings acquired Southern Pioneer Property & Casualty Insurance Company on March 9, 2020, with its financial results included in the consolidated statements from the acquisition date[98] Other Financial Metrics - Impairments recorded were $3,698 in Q3 2020 and $5,079 in Q3 2019; for the first nine months, impairments were $21,817 compared to $7,417 in the same period last year[117] - Same store traffic decreased by 54.2% in Q3 2020 and 44.6% for the first nine months compared to 2019, primarily due to the COVID-19 pandemic[109] - Media and licensing revenue for Q3 2020 was $1,719 million, up from $924 million in Q3 2019, with a total of $3,209 million for the first nine months of 2020 compared to $2,666 million in the same period of 2019[128] - Investment gains net of tax were $276 million for Q3 2020 and $1,468 million for the first nine months of 2020, compared to no investment gains/losses in the same period of 2019[130]

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)