Financial Results Announcement - Biglari Holdings Inc. announced its financial results for Q1 2024, ending March 31, 2024[6]. - The company issued a press release detailing its operational results, which is attached as Exhibit 99.1[6]. - The financial results include key metrics that will be elaborated in the attached press release[6]. - The report does not include specific performance metrics or future guidance as the detailed financial results are in the press release[6]. Regulatory Compliance - The report is filed under the Securities Exchange Act of 1934, ensuring compliance with regulatory requirements[10]. - The filing does not incorporate any information as "filed" under the Securities Act of 1933[7]. - The company has not indicated any new or revised financial accounting standards compliance for emerging growth companies[3]. Company Information - The company is registered under the New York Stock Exchange with Class A and Class B common stock[12]. - The company’s principal executive offices are located in San Antonio, Texas[11]. - The report is signed by Bruce Lewis, the Controller of Biglari Holdings Inc.[9].

Revenue and Sales - Net sales and other revenue rose to $80,788 in Q1 2024 from $77,952 in Q1 2023[24]. - Franchise royalties and fees fell to $3,477 in Q1 2024 from $4,258 in Q1 2023, attributed to the closure of traditional franchise stores, reducing units from 143 to 125[22]. Expenses - General and administrative expenses increased to $11,730, or 18.9% of total revenue, in Q1 2024, compared to $10,463, or 17.1% in Q1 2023, primarily due to higher salaries and wages[23]. - Cost of food increased to $23,170, representing 28.7% of net sales in Q1 2024, up from $20,871, or 26.8%, in Q1 2023[24]. - Labor costs remained stable at $21,765, accounting for 26.9% of net sales in both Q1 2024 and Q1 2023[24]. Cash Flow and Investments - Cash increase in Q1 2024 was $6,470 compared to $2,146 in Q1 2023, mainly due to reduced cash used in investing and financing activities[37]. - Investment partnership pretax gains were $21,985 in Q1 2024, down from $72,588 in Q1 2023, leading to a decrease in income tax expense from $19,738 to $6,816[35]. - The available line of credit is $30,000, maturing on September 12, 2024, with no balance as of March 31, 2024[38]. Franchise Operations - Franchise partner fees decreased to $17,758 in Q1 2024 from $17,912 in Q1 2023, with food and labor expenses up by 1.8 percentage points[21]. - Estimated ultimate liabilities for prior accident years were reduced by $3,319 in Q1 2024, representing 21.9% of net liabilities, compared to $1,651 or 9.8% in Q1 2023[73].

Financial Results - Biglari Holdings Inc. announced its earnings for the fourth quarter and year ended December 31, 2023, on February 24, 2024[3] - The 2023 Annual Report to shareholders is available online, including Sardar Biglari's annual letter[12] Stock Information - The company is listed on the New York Stock Exchange under the trading symbols BH.A and BH[2]

Financial Performance - Total revenue for 2023 was $365.318 million, a slight decrease from $368.231 million in 2022 [263]. - Net earnings attributable to Biglari Holdings Inc. shareholders for 2023 were $54.948 million, compared to a loss of $32.018 million in 2022 [263]. - Restaurant operations generated revenue of $250.857 million in 2023, up from $241.568 million in 2022 [263]. - The consolidated income tax expense was $9,308 in 2023 compared to a benefit of $10,722 in 2022, with tax benefits of $5,660 associated with Abraxas Petroleum's oil and gas properties [232]. - Corporate and other net losses increased in 2023 compared to 2022, primarily due to an incentive fee of $7,271 [233]. - The company reported a gain on investment partnership of $19.440 million in 2023, recovering from a loss of $75.953 million in 2022 [263]. Cash Flow and Assets - Net cash provided by operating activities was $73,002 in 2023, down from $127,825 in 2022, while net cash used in investing activities decreased by $70,525 [237]. - The company had cash and cash equivalents of $28,066 and total cash and investments of $592,717 as of December 31, 2023 [235]. - Cash and cash equivalents decreased to $28.066 million in 2023 from $37.467 million in 2022 [262]. - Total current assets increased to $152.551 million in 2023 from $150.654 million in 2022 [262]. - Total assets rose to $849.422 million in 2023, compared to $828.474 million in 2022 [262]. - Total liabilities decreased to $250.092 million in 2023 from $272.906 million in 2022 [262]. Shareholder Information - Shareholders' equity increased to $599,330 as of December 31, 2023, an increase of $52,364 from the previous year, primarily due to net income of $54,948 [234]. - The company has never declared a dividend and had 1,551 beneficial shareholders of its Class A common stock as of February 1, 2024 [120]. Acquisitions - The company acquired the remaining 10% of Abraxas Petroleum for $5,387 in 2023, following the initial acquisition of 90% for $80,000 [102]. - The company’s financial results include the results of Abraxas Petroleum from the acquisition date to the end of the calendar year [102]. Lease Accounting - The company records right-of-use assets and corresponding lease liabilities on its consolidated balance sheets when a lease is determined to exist [267]. - Right-of-use assets are recognized at the commencement date at the value of the lease liability, adjusted for prepayments and initial direct costs [267]. - Lease liabilities are recognized based on the present value of remaining lease payments over the lease term [267]. - The company does not record lease contracts with a term of 12 months or less on its consolidated balance sheets [267]. - Fixed lease expense for operating leases is recognized on a straight-line basis over the lease term [267]. Operational Metrics - As of December 31, 2023, Biglari Holdings had 492 company-operated and franchise restaurant locations, with 17 of the 148 Steak n Shake company-operated stores closed [114]. - Goodwill remained relatively stable at $53.530 million in 2023, compared to $53.513 million in 2022 [262]. - The company maintained effective internal control over financial reporting as of December 31, 2023 [258].

Financial Performance - Net sales for Q3 2023 were $39,195, representing a 4.7% increase from Q3 2022, while net sales for the first nine months of 2023 were $115,613, a 2.0% increase compared to the same period in 2022[160] - Total revenue for Q3 2023 was $61,886, an increase from $59,437 in Q3 2022[160] - Franchise partner fees for Q3 2023 were $17,622, up from $15,880 in Q3 2022, and totaled $54,604 for the first nine months of 2023 compared to $47,929 in 2022[161] - The company reported a third-quarter income tax benefit of $17,502 in 2023, compared to an expense of $9,598 in Q3 2022[143] - Investment partnership pre-tax losses were $89,599 in Q3 2023, compared to pre-tax gains of $29,658 in Q3 2022[143] Operational Metrics - As of September 30, 2023, the company operated 510 restaurants, including both company-operated and franchise locations[135] - The company reopened four Steak n Shake stores and sold six properties during the first nine months of 2023[159] Cost and Expenses - The cost of food for Q3 2023 was $11,888, representing 30.3% of net sales, consistent with the same percentage in Q3 2022[160] - The company incurred $12,524 in total selling, general, and administrative expenses in Q3 2023, which was 20.2% of total revenue[160] Assets - The company’s total assets at fair value as of September 30, 2023, were $92,356, compared to $88,267 at the same time in 2022[149]

Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Corporate and other net losses increased during the second quarter and first six months of 2023 compared to the same periods in 2022 primarily because of recording a non-cash write down of a receivable of $1,000 and accruing for incentive fees. Consolidated cash and investments are summarized below. Table of Contents In 2023, cash from operating activities decreased by $2,686 as compared to 2 ...

First Quarter | --- | --- | --- | --- | --- | --- | |------------------------------------------------------|-------|---------|----------|---------|----------| | | | 2023 | | 2022 | | | Revenue | | | | | | | Net sales | $ | 36,894 | $ | 38,216 | | | Franchise partner fees | | 17,912 | | 15,624 | | | Franchise royalties and fees | | 4,258 | | 5,146 | | | Other revenue | | 2,065 | | 861 | | | Total revenue | | 61,129 | | 59,847 | | | | | | | | | | Restaurant cost of sales | | | | | | | | | | | | | | Cost of fo ...

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, 2022 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 001-38477 BIGLARI HOLDINGS INC. (Exact name of registrant as specified in its charter) Indiana 82-3784946 (State or other jurisdiction of ...

[Part I – Financial Information](index=4&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's discussion and analysis for Biglari Holdings Inc., along with disclosures on market risk and internal controls [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Biglari Holdings Inc.'s unaudited consolidated financial statements, including balance sheets, earnings, comprehensive income, cash flows, and equity changes, with detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time **Consolidated Balance Sheet Highlights (in thousands):** | Metric | Sep 30, 2022 | Dec 31, 2021 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $862,145 | $894,807 | $(32,662) | -3.65% | | Total Liabilities | $316,737 | $307,111 | $9,626 | 3.13% | | Total Shareholders' Equity | $545,408 | $587,696 | $(42,288) | -7.20% | | Cash and cash equivalents | $64,842 | $42,349 | $22,493 | 53.11% | | Investments | $70,032 | $83,061 | $(13,029) | -15.69% | | Investment partnerships | $144,864 | $250,399 | $(105,535) | -42.15% | | Property and equipment | $414,497 | $349,351 | $65,146 | 18.65% | | Line of credit | $30,000 | — | $30,000 | N/A | | Deferred taxes | $28,515 | $46,533 | $(18,018) | -38.72% | - Total assets and shareholders' equity decreased, while total liabilities increased as of September 30, 2022, compared to December 31, 2021. This was driven by a significant decrease in **investment partnerships** and an increase in **property and equipment**, alongside the introduction of a **$30,000 thousand line of credit**[8](index=8&type=chunk) [Consolidated Statements of Earnings](index=5&type=section&id=Consolidated%20Statements%20of%20Earnings) This section details the company's revenues, expenses, and net earnings or losses over specific periods **Consolidated Statements of Earnings Highlights (in thousands, except per share data):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------------- | :------ | :------- | :------- | :------- | | Total Revenues | $92,034 | $82,083 | $269,773 | $267,158 | | Investment partnership gains (losses) | $29,658 | $(20,231) | $(82,244) | $27,344 | | Earnings (loss) before income taxes | $41,637 | $(14,943) | $(55,321) | $51,845 | | Net earnings (loss) attributable to Biglari Holdings Inc. shareholders | $32,005 | $(10,669) | $(42,073) | $40,301 | | Net earnings (loss) per equivalent Class A share | $109.13 | $(33.74) | $(140.30) | $125.79 | - The company reported a significant turnaround in net earnings for Q3 2022, moving from a loss to a gain, primarily driven by **investment partnership gains**. However, for the first nine months of 2022, the company recorded a **net loss**, largely due to substantial **investment partnership losses**, contrasting with a gain in the prior year period. Total revenues saw a modest increase year-over-year for both the quarter and nine-month periods[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net earnings alongside other comprehensive income items, such as foreign currency translation adjustments **Consolidated Statements of Comprehensive Income Highlights (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :----------------------------------------------------------------- | :------ | :------- | :------- | :------- | | Net earnings (loss) | $32,039 | $(10,669) | $(42,039) | $40,301 | | Foreign currency translation | $(618) | $(49) | $(1,870) | $(378) | | Total comprehensive income (loss) attributable to Biglari Holdings Inc. shareholders | $31,387 | $(10,718) | $(43,943) | $39,923 | - Total comprehensive income for Q3 2022 showed a **positive shift** compared to a loss in Q3 2021, mirroring the net earnings trend. However, for the first nine months of 2022, the company reported a **comprehensive loss**, primarily influenced by the net earnings loss and negative foreign currency translation adjustments[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities over specific periods **Consolidated Statements of Cash Flows Highlights (in thousands):** | Metric | 9M 2022 | 9M 2021 | Change ($) | Change (%) | | :------------------------------------------------- | :------ | :------- | :--------- | :--------- | | Net cash provided by operating activities | $99,754 | $211,245 | $(111,491) | -52.78% | | Net cash used in investing activities | $(102,464) | $(55,782) | $(46,682) | 83.69% | | Net cash provided by (used in) financing activities | $25,353 | $(154,586) | $179,939 | 116.40% | | Increase in cash, cash equivalents and restricted cash | $22,493 | $792 | $21,701 | 2739.90% | | Cash, cash equivalents and restricted cash at end of third quarter | $66,180 | $30,458 | $35,722 | 117.29% | - Operating cash flow significantly **decreased** in the first nine months of 2022 compared to 2021, largely due to lower distributions from investment partnerships[15](index=15&type=chunk)[149](index=149&type=chunk). Investing activities used more cash, partly due to a business acquisition[150](index=150&type=chunk). Financing activities, however, shifted from a substantial cash outflow in 2021 (due to debt repayment) to a **cash inflow** in 2022, resulting in a notable increase in overall cash and cash equivalents[15](index=15&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section details the changes in each component of shareholders' equity, including retained earnings and treasury stock **Consolidated Statements of Changes in Shareholders' Equity Highlights (in thousands):** | Metric | Dec 31, 2021 | Sep 30, 2022 | Change ($) | Change (%) | | :---------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Shareholders' Equity | $587,696 | $545,408 | $(42,288) | -7.20% | | Retained Earnings | $608,528 | $566,455 | $(42,073) | -6.91% | | Accumulated Other Comprehensive Loss | $(1,907) | $(3,777) | $(1,870) | 98.06% | | Treasury Stock, at cost | $(401,851) | $(409,119) | $(7,268) | 1.81% | | Noncontrolling Interests | — | $8,923 | $8,923 | N/A | - The company's total shareholders' equity **decreased significantly** from December 31, 2021, to September 30, 2022, primarily driven by a reduction in **retained earnings** and an increase in **accumulated other comprehensive loss** and **treasury stock**[17](index=17&type=chunk)[18](index=18&type=chunk). A new **noncontrolling interest** was recorded due to a business acquisition[21](index=21&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1. Summary of Significant Accounting Policies](index=11&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the fundamental accounting principles and methods used in preparing the financial statements - Biglari Holdings Inc. is a holding company with diverse business activities including property and casualty insurance, licensing and media, restaurants, and oil and gas, with **restaurants being the largest operating segment**[24](index=24&type=chunk). The company's management system combines decentralized operations with centralized finance decision-making by Sardar Biglari, who beneficially owns approximately **66.3% of the economic interest** and **70.4% of the voting interest**[25](index=25&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - On September 14, 2022, the Company completed the purchase of **90% of Abraxas Petroleum Corporation for $80,000 thousand**, funding it with working capital and a line of credit[26](index=26&type=chunk). Abraxas Petroleum operates oil and natural gas properties in the Permian Basin and is now a consolidated entity[105](index=105&type=chunk) - The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, such as Steak n Shake Inc., Western Sizzlin Corporation, First Guard Insurance Company, Maxim Inc., Southern Pioneer Property & Casualty Insurance Company, Southern Oil Company, and Abraxas Petroleum[27](index=27&type=chunk) [Note 2. Earnings Per Share](index=11&type=section&id=Note%202.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share, including the two-class method application - The Company applies the "two-class method" of computing earnings per share, which excludes the proportional shares of Biglari Holdings' stock held by investment partnerships from the weighted average common shares outstanding[32](index=32&type=chunk) **Common Stock Outstanding (as of Sep 30, 2022 and Dec 31, 2021):** | Class | Shares | | :---- | :------- | | Class A | 206,864 | | Class B | 2,068,640 | **Equivalent Class A Common Stock for Earnings Per Share (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :-------------------------------------------------------------------- | :------ | :------ | :------ | :------ | | Equivalent Class A common stock for earnings per share | 293,275 | 316,236 | 299,881 | 320,377 | | Proportional ownership of Company stock held by investment partnerships | 327,317 | 304,356 | 320,711 | 300,215 | [Note 3. Investments](index=13&type=section&id=Note%203.%20Investments) This note describes the company's investment classifications, valuation methods, and realized gains or losses - Investments in fixed maturity securities are classified as either available-for-sale or held-to-maturity, with held-to-maturity carried at amortized cost. Realized gains and losses are determined on a specific identification basis[34](index=34&type=chunk) **Investment Gains (Losses) (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :----- | | Third Quarter | $(849) | $4,534 | | First Nine Months | $(4,184) | $6,465 | - Investment gains and losses, whether realized or unrealized, are considered non-operating[34](index=34&type=chunk) [Note 4. Investment Partnerships](index=13&type=section&id=Note%204.%20Investment%20Partnerships) This note explains the accounting for limited partnership interests and the impact of investment partnership gains or losses - The Company reports on limited partnership interests in investment partnerships under the equity method of accounting, excluding Company common stock held by said partnerships, which is recorded as treasury stock[36](index=36&type=chunk) **Investment Partnership Gains (Losses) (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :------- | | Third Quarter | $29,658 | $(20,231) | | First Nine Months | $(82,244) | $27,344 | **Carrying Value of Investment Partnerships (net of deferred taxes, in thousands):** | Date | Carrying Value | | :-------------------- | :------------- | | September 30, 2022 | $122,688 | | December 31, 2021 | $205,867 | - Biglari Capital Corp., solely owned by Mr. Biglari, is the general partner of the investment partnerships. An incentive reallocation fee of **25% of net profits** above an annual hurdle rate of **6%** over the previous high-water mark is accrued, but no reallocations occurred in the first nine months of 2022 or 2021[37](index=37&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 5. Property and Equipment](index=15&type=section&id=Note%205.%20Property%20and%20Equipment) This note provides details on the composition, changes, and impairment of property and equipment, including oil and gas properties **Property and Equipment, Net (in thousands):** | Date | Amount | | :-------------------- | :------- | | September 30, 2022 | $414,497 | | December 31, 2021 | $349,351 | **Key Components (Sep 30, 2022 vs Dec 31, 2021):** | Component | Sep 30, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Oil and gas properties | $140,916 | $74,147 | - Net property and equipment increased significantly, primarily driven by a substantial rise in **oil and gas properties**[48](index=48&type=chunk). No impairments were recorded in the first nine months of 2022, compared to **$559 thousand** in 2021 related to underperforming restaurant stores[49](index=49&type=chunk) - As of September 30, 2022, **$5,002 thousand** of property and equipment is recorded as held for sale within other current assets[49](index=49&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=16&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) This note outlines the carrying values and impairment assessments for goodwill and other intangible assets with indefinite lives **Goodwill (in thousands):** | Date | Amount | | :-------------------- | :------- | | September 30, 2022 | $53,464 | | December 31, 2021 | $53,547 | - No goodwill impairment was recorded in the first nine months of 2022 or 2021. Goodwill is evaluated annually or more frequently if circumstances indicate impairment[52](index=52&type=chunk) **Other Intangible Assets with Indefinite Lives (in thousands, as of Sep 30, 2022):** | Asset Type | Amount | | :-------------------- | :------- | | Trade Names | $15,876 | | Lease Rights | $6,593 | | Total | $22,469 | - An impairment of **$20 thousand** to lease rights was recorded in the first nine months of 2022[54](index=54&type=chunk) [Note 7. Restaurant Operations Revenues](index=16&type=section&id=Note%207.%20Restaurant%20Operations%20Revenues) This note disaggregates revenue streams from restaurant operations, including net sales and franchise fees **Restaurant Operations Revenues (in thousands):** | Revenue Type | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :-------------------------- | :------ | :------- | :------- | :------- | | Net sales | $37,448 | $41,916 | $113,345 | $146,269 | | Franchise partner fees | $15,880 | $11,508 | $47,929 | $31,744 | | Franchise royalties and fees | $5,089 | $4,865 | $15,472 | $14,594 | | Total Revenue | $59,437 | $59,144 | $179,608 | $196,424 | - The decrease in net sales from company-operated restaurants is primarily due to the strategic shift of company units to franchise partner units, where revenue is derived from a share of profits and fees rather than direct sales[115](index=115&type=chunk) - Franchise partner fees increased significantly by **38.0% in Q3 2022** and **51.0% in the first nine months of 2022**, reflecting the transition to more franchise partner units (**171 units** as of Sep 30, 2022, up from 140)[116](index=116&type=chunk) [Note 8. Accounts Payable and Accrued Expenses](index=18&type=section&id=Note%208.%20Accounts%20Payable%20and%20Accrued%20Expenses) This note provides a breakdown of the company's accounts payable and various accrued expenses **Accounts Payable and Accrued Expenses (in thousands):** | Account | Sep 30, 2022 | Dec 31, 2021 | | :---------------------------------- | :----------- | :----------- | | Total Accounts Payable and Accrued Expenses | $101,503 | $100,467 | | Taxes payable | $21,583 | $11,392 | | Oil and gas payable | $5,586 | $1,936 | | Professional fees | $1,998 | $11,731 | - Total accounts payable and accrued expenses remained relatively stable, with a slight increase. Notable shifts include a significant rise in **taxes payable** and **oil and gas payable**, offset by a substantial decrease in **professional fees**[62](index=62&type=chunk) [Note 9. Line of Credit and Note Payable](index=18&type=section&id=Note%209.%20Line%20of%20Credit%20and%20Note%20Payable) This note details the company's borrowing arrangements, including a new line of credit and repayment of prior debt - Biglari Holdings entered into a new revolving line of credit for up to **$30,000 thousand** on September 13, 2022, with a balance of **$30,000 thousand** as of September 30, 2022[63](index=63&type=chunk)[152](index=152&type=chunk) - Steak n Shake's **$220,000 thousand** senior secured term loan facility was fully repaid on February 19, 2021[64](index=64&type=chunk)[153](index=153&type=chunk) [Note 10. Lease Assets and Obligations](index=19&type=section&id=Note%2010.%20Lease%20Assets%20and%20Obligations) This note provides information on the company's lease assets, lease liabilities, and associated lease costs and income **Lease Obligations (in thousands):** | Metric | Sep 30, 2022 | Dec 31, 2021 | | :---------------------------------- | :----------- | :----------- | | Total Current Portion of Lease Obligations | $17,093 | $16,898 | | Total Long-term Lease Obligations | $95,980 | $104,479 | **Total Lease Costs (in thousands):** | Period | 9M 2022 | 9M 2021 | | :-------------------- | :------ | :------ | | Total Lease Costs | $3,643 | $3,007 | | Total Lease Income | $16,049 | $11,846 | **Weighted-Average Lease Terms and Discount Rates (as of Sep 30, 2022):** | Metric | Finance Leases | Operating Leases | | :---------------------------------- | :------------- | :--------------- | | Weighted-average remaining lease terms | 4.56 years | 4.90 years | | Weighted-average discount rates | 7.0% | 7.0% | [Note 11. Accumulated Other Comprehensive Income](index=21&type=section&id=Note%2011.%20Accumulated%20Other%20Comprehensive%20Income) This note details changes in accumulated other comprehensive income, primarily due to foreign currency translation adjustments **Decrease in Accumulated Other Comprehensive Income (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :----- | | Third Quarter | $(618) | $(49) | | First Nine Months | $(1,870) | $(378) | - All changes in accumulated other comprehensive loss were due to foreign currency translation adjustments; no reclassifications from accumulated other comprehensive loss to earnings occurred during the first nine months of 2022 and 2021[79](index=79&type=chunk) [Note 12. Income Taxes](index=21&type=section&id=Note%2012.%20Income%20Taxes) This note explains the components of income tax expense or benefit and the factors influencing tax variances **Income Tax Expense (Benefit) (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :------- | | Third Quarter | $9,598 | $(4,274) | | First Nine Months | $(13,282) | $11,544 | - The variance in income taxes between 2022 and 2021 is primarily attributable to taxes on income generated by the investment partnerships, which experienced pre-tax gains in Q3 2022 (**$29,658 thousand**) versus losses in Q3 2021 (**$(20,231) thousand**), and pre-tax losses in 9M 2022 (**$(82,244) thousand**) versus gains in 9M 2021 (**$27,344 thousand**)[81](index=81&type=chunk)[144](index=144&type=chunk) [Note 13. Commitments and Contingencies](index=21&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) This note discloses the company's involvement in legal proceedings and other claims, assessing their potential financial impact - The company is involved in various legal proceedings and unresolved claims, but management believes that the ultimate liability, if any, in excess of amounts already provided, is not likely to have a material effect on its results of operations, financial position, or cash flow[82](index=82&type=chunk) [Note 14. Fair Value of Financial Assets](index=21&type=section&id=Note%2014.%20Fair%20Value%20of%20Financial%20Assets) This note describes the fair value measurement of financial instruments using a three-level hierarchy based on input observability - The company measures the fair value of its financial instruments using a **three-level hierarchy** (Levels 1, 2, and 3) based on the observability of inputs[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) **Total Assets at Fair Value (in thousands):** | Date | Amount | | :-------------------- | :------- | | September 30, 2022 | $88,215 | | December 31, 2021 | $103,788 | - Cash equivalents, some equity securities, government bonds, and non-qualified deferred compensation plan investments are classified as **Level 1**[88](index=88&type=chunk). Corporate bonds, other equity securities, and derivative instruments are classified as **Level 2**[89](index=89&type=chunk)[90](index=90&type=chunk) [Note 15. Related Party Transactions](index=23&type=section&id=Note%2015.%20Related%20Party%20Transactions) This note details transactions and agreements with related parties, including service fees and incentive arrangements - The Company has a service agreement with Biglari Enterprises LLC and Biglari Capital Corp. (Biglari Entities), both owned by Mr. Biglari, for business and administrative services. Service fees of **$6,300 thousand** were paid during the first nine months of both 2022 and 2021[94](index=94&type=chunk)[95](index=95&type=chunk) - An Incentive Agreement provides Mr. Biglari with a performance-based annual incentive payment, contingent on operating businesses achieving an annual increase in shareholders' equity exceeding a **6% hurdle rate** above the previous high-water mark. Mr. Biglari receives **25% of any incremental book value** created above this threshold[96](index=96&type=chunk) [Note 16. Business Segment Reporting](index=24&type=section&id=Note%2016.%20Business%20Segment%20Reporting) This note provides financial information for the company's reportable business segments, including revenues and earnings - The company's reportable business segments include Restaurant Operations (Steak n Shake, Western Sizzlin), Insurance Operations (First Guard, Southern Pioneer), Oil and Gas Operations (Southern Oil, Abraxas Petroleum), and Maxim (Licensing and Media)[98](index=98&type=chunk) **Total Revenue by Operating Business (in thousands):** | Segment | 9M 2022 | 9M 2021 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Restaurant Operations | $179,608 | $196,424 | $(16,816) | -8.56% | | Insurance Operations | $47,745 | $43,729 | $4,016 | 9.18% | | Oil and Gas Operations | $38,632 | $24,310 | $14,322 | 58.91% | | Maxim | $3,788 | $2,695 | $1,093 | 40.56% | **Total Earnings (Losses) Before Income Taxes by Operating Business (in thousands):** | Segment | 9M 2022 | 9M 2021 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Restaurant Operations | $12,774 | $6,440 | $6,334 | 98.35% | | Insurance Operations | $6,887 | $11,398 | $(4,511) | -39.58% | | Oil and Gas Operations | $19,583 | $9,047 | $10,536 | 116.46% | | Maxim | $1,699 | $867 | $832 | 95.96% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook [Overview](index=26&type=section&id=Overview) This section provides a general introduction to the company's business model, subsidiaries, and recent significant events - Biglari Holdings Inc. is a holding company with diverse subsidiaries in property and casualty insurance, licensing and media, restaurants, and oil and gas, with **restaurants being the largest operating segment**[103](index=103&type=chunk). Sardar Biglari, Chairman and CEO, leads the company and beneficially owns approximately **66.3% economic interest** and **70.4% voting interest**[104](index=104&type=chunk) - The company completed the acquisition of **90% of Abraxas Petroleum Corporation on September 14, 2022, for $80,000 thousand**, which operates oil and natural gas properties in the Permian Basin[105](index=105&type=chunk) **Net Earnings (Loss) Attributable to Biglari Holdings Shareholders (after tax, in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :------- | | Third Quarter | $32,005 | $(10,669) | | First Nine Months | $(42,073) | $40,301 | [Restaurants](index=27&type=section&id=Restaurants) This section analyzes the financial performance and strategic shifts within the company's restaurant operations - The restaurant segment, including Steak n Shake and Western Sizzlin, comprised **552 company-operated and franchise restaurants** as of September 30, 2022, a decrease from **577** at December 31, 2021[109](index=109&type=chunk)[110](index=110&type=chunk) - The decrease in company-owned restaurant revenue is primarily due to the strategic shift of company units to franchise partner units, where revenue is recognized as a share of profits and fees rather than direct sales[115](index=115&type=chunk) **Restaurant Financial Highlights (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Net sales | $37,448 | $41,916 | $113,345 | $146,269 | | Franchise partner fees | $15,880 | $11,508 | $47,929 | $31,744 | | Cost of food as % of net sales | 30.3% | 31.3% | 29.7% | 29.7% | | Restaurant operating costs as % of net sales | 55.4% | 58.4% | 53.9% | 49.1% | | Contribution to net earnings (loss) (after tax) | $3,320 | $(1,515) | $9,588 | $5,146 | - Cost of food as a percentage of net sales decreased in Q3 2022 due to higher menu prices, while restaurant operating costs as a percentage of net sales increased in the first nine months of 2022 due to higher wages[118](index=118&type=chunk)[119](index=119&type=chunk) [Insurance](index=30&type=section&id=Insurance) This section reviews the financial results of the company's insurance businesses, including premiums and underwriting gains - The insurance businesses (First Guard and Southern Pioneer) operate with decentralized underwriting decisions and centralized investment decisions by Sardar Biglari[122](index=122&type=chunk) **Insurance Financial Highlights (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Premiums earned | $15,116 | $13,901 | $44,511 | $41,166 | | Pre-tax underwriting gain | $1,871 | $3,229 | $3,699 | $9,433 | | Net underwriting gain (after tax) | $1,479 | $2,548 | $2,923 | $7,449 | | Net investment income (after tax) | $286 | $154 | $657 | $515 | | Contribution to net earnings (loss) (after tax) | $2,389 | $2,985 | $5,292 | $8,902 | - Premiums earned increased, but pre-tax underwriting gain and net underwriting gain decreased for both the quarter and nine-month periods, primarily due to higher insurance losses as a percentage of premiums earned for both First Guard and Southern Pioneer[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Oil and Gas](index=33&type=section&id=Oil%20and%20Gas) This section discusses the performance of the oil and gas operations, including revenue and earnings contributions **Southern Oil Financial Highlights (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Oil and gas revenue | $12,688 | $7,353 | $36,940 | $24,310 | | Earnings before income taxes | $6,795 | $2,982 | $19,137 | $9,047 | | Contribution to net earnings (after tax) | $5,231 | $2,325 | $14,524 | $7,016 | - Southern Oil demonstrated strong growth in revenue and earnings before income taxes for both the third quarter and first nine months of 2022[131](index=131&type=chunk) **Abraxas Petroleum Contribution (Q3 2022, from acquisition date, in thousands):** | Metric | Amount | | :------------------------------------------ | :------- | | Oil and gas revenue | $1,692 | | Earnings before income taxes | $446 | | Net earnings attributable to Biglari Holdings Inc. shareholders | $309 | - Abraxas Petroleum, acquired on September 14, 2022, contributed **$1,692 thousand** in revenue and **$309 thousand** in net earnings attributable to Biglari Holdings Inc. shareholders for the partial quarter[132](index=132&type=chunk)[133](index=133&type=chunk) [Brand Licensing](index=35&type=section&id=Brand%20Licensing) This section examines the financial performance of the brand licensing segment, highlighting revenue and earnings trends **Maxim Financial Highlights (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Licensing and media revenue | $1,905 | $863 | $3,788 | $2,695 | | Earnings (loss) before income taxes | $1,534 | $(56) | $1,699 | $867 | | Contribution to net earnings (loss) (after tax) | $1,150 | $(43) | $1,274 | $662 | - The Brand Licensing segment (Maxim) showed significant growth in revenue and a strong turnaround in earnings for both the third quarter and first nine months of 2022, driven by the transformation of its business model to focus on licensing activities[135](index=135&type=chunk) [Investment Gains](index=35&type=section&id=Investment%20Gains) This section analyzes the company's investment gains and losses, noting their non-operating nature and impact on earnings **Investment Gains (Losses) Net of Tax (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :----- | | Third Quarter | $(657) | $3,390 | | First Nine Months | $(3,287) | $4,896 | - The company reported investment losses (net of tax) for both the third quarter and first nine months of 2022, a reversal from gains in the corresponding periods of 2021. These investment gains and losses are considered non-operating[136](index=136&type=chunk) [Investment Partnership Gains](index=35&type=section&id=Investment%20Partnership%20Gains) This section discusses the volatile impact of investment partnership gains and losses on the company's periodic earnings **Investment Partnership Gains (Losses) (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Pre-tax gains (losses) | $29,658 | $(20,231) | $(82,244) | $27,344 | | Contribution to net earnings (loss) (after tax) | $23,057 | $(15,285) | $(62,091) | $21,169 | - Investment partnership results showed a significant pre-tax gain in Q3 2022, reversing a loss from Q3 2021, but a substantial pre-tax loss for the first nine months of 2022. These gains and losses, including changes in market values of underlying investments, contribute significant volatility to the company's periodic earnings[138](index=138&type=chunk) - The investment partnerships hold the Company's common stock, which is recorded as treasury stock, and related gains and losses are eliminated in the Company's consolidated financial results[139](index=139&type=chunk) [Interest Expense](index=36&type=section&id=Interest%20Expense) This section details the company's interest expense, explaining changes due to new credit lines and debt repayments **Interest Expense on Notes Payable (in thousands):** | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :------------------------------------------ | :------ | :------- | :------- | :------- | | Pre-tax interest expense | $67 | — | $67 | $1,121 | | Interest expense net of tax | $52 | — | $52 | $841 | - The increase in Q3 2022 interest expense is due to the new line of credit, while the significant decrease for the first nine months of 2022 compared to 2021 is due to the repayment of Steak n Shake's term facility in 2021[63](index=63&type=chunk)[64](index=64&type=chunk)[142](index=142&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Corporate and Other](index=36&type=section&id=Corporate%20and%20Other) This section covers the financial results of corporate activities and other non-segment specific operations - Corporate and other net losses during the third quarter and first nine months of 2022 were relatively flat compared to the same periods in 2021, excluding the activities of the operating businesses[143](index=143&type=chunk) [Income Taxes](index=36&type=section&id=Income%20Taxes) This section analyzes the company's income tax expense or benefit, attributing variances to investment partnership performance **Income Tax Expense (Benefit) (in thousands):** | Period | 2022 | 2021 | | :-------------------- | :----- | :------- | | Third Quarter | $9,598 | $(4,274) | | First Nine Months | $(13,282) | $11,544 | - The variance in income taxes between 2022 and 2021 is primarily attributable to taxes on income generated by the investment partnerships, which experienced pre-tax gains in Q3 2022 (**$29,658 thousand**) versus losses in Q3 2021 (**$(20,231) thousand**), and pre-tax losses in 9M 2022 (**$(82,244) thousand**) versus gains in 9M 2021 (**$27,344 thousand**)[144](index=144&type=chunk) [Financial Condition](index=36&type=section&id=Financial%20Condition) This section assesses the company's overall financial health, including changes in cash, investments, and equity **Consolidated Cash and Investments (in thousands):** | Metric | Sep 30, 2022 | Dec 31, 2021 | Change ($) | Change (%) | | :------------------------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total cash and investments | $473,188 | $599,611 | $(126,423) | -21.08% | | Carrying value of cash and investments on balance sheet | $279,738 | $375,809 | $(96,071) | -25.57% | | Fair value of interest in investment partnerships | $338,314 | $474,201 | $(135,887) | -28.66% | - The company's total cash and investments, as well as the carrying value on the balance sheet, decreased significantly from December 31, 2021, to September 30, 2022. This decline was largely driven by a substantial decrease in the fair value of interest in investment partnerships[146](index=146&type=chunk) [Liquidity](index=37&type=section&id=Liquidity) This section discusses the company's ability to meet short-term obligations, focusing on cash flow from various activities **Consolidated Cash Flow Activities (in thousands):** | Metric | 9M 2022 | 9M 2021 | Change ($) | Change (%) | | :------------------------------------------------- | :------ | :------- | :--------- | :--------- | | Net cash provided by operating activities | $99,754 | $211,245 | $(111,491) | -52.78% | | Net cash used in investing activities | $(102,464) | $(55,782) | $(46,682) | 83.69% | | Net cash provided by (used in) financing activities | $25,353 | $(154,586) | $179,939 | 116.40% | - The decrease in operating cash flow is mainly attributable to lower distributions from investment partnerships (**$51,200 thousand** for 2022 vs **$172,420 thousand** for 2021)[149](index=149&type=chunk) - Financing activities shifted from a substantial cash outflow in 2021 (due to Steak n Shake's debt repayment) to a cash inflow in 2022, partly due to a new **$30,000 thousand line of credit**[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) This section highlights key accounting policies requiring significant management estimates and judgments - The consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and judgments. There have been no material changes to critical accounting policies previously disclosed in the annual report on Form 10-K for the year ended December 31, 2021[155](index=155&type=chunk) [Recently Issued Accounting Pronouncements](index=38&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section addresses the impact of new accounting standards on the company's financial reporting - No recently issued accounting pronouncements were applicable for this Quarterly Report on Form 10-Q[156](index=156&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=38&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers on the inherent uncertainties and risks associated with forward-looking information in the report - This report includes forward-looking statements, which are estimates of future financial items and are subject to various risks and uncertainties beyond the company's control, as described in Item 1A of the annual report and this report[157](index=157&type=chunk) - Forward-looking statements are neither predictions nor guarantees of future events, and the company undertakes no obligation to publicly update or revise them, except as may be required by law[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily related to equity investments and commodity prices for its oil and gas business - The majority of the company's investments are conducted through investment partnerships, which generally hold concentrated positions in common stocks, exposing the company to significant market risk[158](index=158&type=chunk) - A hypothetical **10% increase or decrease** in the market price of investments would result in a respective change of **$21,490 thousand** in carrying value and approximately **3%** in shareholders' equity[159](index=159&type=chunk) - The oil and natural gas business is fundamentally a commodity business, meaning operations and earnings may be significantly affected by changes in oil and gas prices[161](index=161&type=chunk) - The company had minimal exposure to foreign currency exchange rate fluctuations in the first nine months of 2022 and 2021[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports on internal control changes - The Chief Executive Officer and Controller concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[162](index=162&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended September 30, 2022[163](index=163&type=chunk) [Part II – Other Information](index=39&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) This section provides additional information not covered in Part I, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This item refers to Note 13 for details on legal proceedings, indicating no new material disclosures - Information in response to this Item is included in Note 13 to the Consolidated Financial Statements and is incorporated herein by reference[165](index=165&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This item states no material changes to previously disclosed risk factors from the annual report - There have been no material changes from the risk factors as previously disclosed in Item 1A to the Company's Annual Report on Form 10-K for the year ended December 31, 2021[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports no unregistered sales of equity securities or use of proceeds during the period - None[166](index=166&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item reports no defaults upon senior securities during the period - None[166](index=166&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[166](index=166&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This item reports no other material information for the period - None[166](index=166&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This item lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - Exhibits include certifications pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (31.01, 31.02), Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (32.01*), and Interactive Data Files (101, 104)[166](index=166&type=chunk) [Signatures](index=40&type=section&id=Signatures) This section contains the authorized signatures confirming the due filing of the report - The report was signed by Bruce Lewis, Controller, on behalf of Biglari Holdings Inc. on November 4, 2022[167](index=167&type=chunk)[168](index=168&type=chunk)

[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) The company reported a $74.1 million net loss for the first six months of 2022, primarily due to investment partnership losses, reversing prior year's earnings [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $773.4 million as of June 30, 2022, primarily due to a decline in investment partnerships, with corresponding decreases in liabilities and equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$773,352** | **$894,807** | | Cash and cash equivalents | $40,512 | $42,349 | | Investment partnerships | $151,753 | $250,399 | | **Total Liabilities** | **$267,616** | **$307,111** | | **Total Shareholders' Equity** | **$505,736** | **$587,696** | [Consolidated Statements of Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Earnings) The company reported a net loss of $73.8 million in Q2 2022 and $74.1 million for the first six months, primarily due to significant investment partnership losses Key Earnings Data (in thousands, except per share) | Metric | Q2 2022 | Q2 2021 | First Six Months 2022 | First Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $92,367 | $90,787 | $177,739 | $185,075 | | Investment partnership gains (losses) | $(105,241) | $(34,191) | $(111,902) | $47,575 | | **Net Earnings (Loss)** | **$(73,780)** | **$(20,737)** | **$(74,078)** | **$50,970** | | Net earnings (loss) per Class A share | $(244.37) | $(64.04) | $(244.29) | $158.06 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly decreased to $34.2 million for the first six months of 2022, primarily due to lower investment partnership distributions Cash Flow Summary - First Six Months (in thousands) | Activity | 2022 (Unaudited) | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,204 | $187,208 | | Net cash used in investing activities | $(32,819) | $(32,839) | | Net cash used in financing activities | $(3,134) | $(153,136) | | **Increase (decrease) in cash** | **$(1,837)** | **$1,209** | - The significant drop in operating cash flow was primarily attributed to lower distributions from investment partnerships, which were **$4,500 thousand** in the first six months of 2022 compared to **$158,100 thousand** in the same period of 2021[12](index=12&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail diverse business activities, highlighting a $111.9 million pre-tax loss from investment partnerships that overshadowed profitable operating segments - Biglari Holdings is a holding company with diverse businesses including insurance, media, restaurants, and oil & gas. Operations are decentralized, but major investment and capital allocation decisions are centralized under Chairman and CEO Sardar Biglari, who holds a controlling economic (**66.3%**) and voting (**70.4%**) interest[16](index=16&type=chunk)[17](index=17&type=chunk) Investment Partnership Carrying Value (in thousands) | Description | Fair Value | Company Stock Adjustment | Carrying Value | | :--- | :--- | :--- | :--- | | **Balance at Dec 31, 2021** | **$474,201** | **$223,802** | **$250,399** | | Investment partnership losses | $(144,748) | $(32,846) | $(111,902) | | **Balance at June 30, 2022** | **$349,339** | **$197,586** | **$151,753** | Segment Earnings Before Income Taxes - First Six Months (in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Restaurant Operations | $8,441 | $9,152 | | Insurance Operations | $3,795 | $7,556 | | Southern Oil | $12,342 | $6,065 | | Maxim | $165 | $923 | | **Total Operating Businesses** | **$24,743** | **$22,575** | | Investment partnership gains (losses) | $(111,902) | $47,575 | | **Total Earnings (Loss) Before Taxes** | **$(96,958)** | **$66,788** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the $74.1 million net loss for the first six months of 2022 to investment partnership losses, while core operating businesses showed increased earnings Disaggregated Net Earnings (Loss) - First Six Months (in thousands) | Component | 2022 | 2021 | | :--- | :--- | :--- | | **Total operating businesses** | **$13,700** | **$13,010** | | Investment gains | $(2,630) | $1,506 | | Investment partnership gains (losses) | $(85,148) | $36,454 | | **Total Net Earnings (Loss)** | **$(74,078)** | **$50,970** | - The decrease in restaurant net sales is primarily due to the strategic shift from company-operated units to franchise partner units. While this reduces top-line 'net sales', it increases 'franchise partner fees'. As of June 30, 2022, there were **177 franchise partner units**, up from **131** a year prior[100](index=100&type=chunk)[101](index=101&type=chunk) - The insurance segment's pre-tax underwriting gain decreased to **$1,800 thousand** in the first six months of 2022 from **$6,200 thousand** in 2021, primarily due to higher loss ratios at both First Guard and Southern Pioneer[108](index=108&type=chunk)[110](index=110&type=chunk) - The Oil and Gas segment's contribution to net earnings nearly doubled to **$9,300 thousand** in the first half of 2022 from **$4,700 thousand** in 2021, driven by higher commodity prices[115](index=115&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces significant market risk from concentrated equity investments, where a 10% market change could impact carrying value by **$22,352 thousand**, and commodity price risk in its oil and gas segment - The company holds concentrated positions in common stocks, making it vulnerable to market volatility. A hypothetical **10%** change in the market price of its investments would result in a corresponding change in carrying value of **$22,352 thousand**[135](index=135&type=chunk)[136](index=136&type=chunk) - The Southern Oil subsidiary's operations and earnings are significantly affected by changes in oil and gas commodity prices[138](index=138&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 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 June 30, 2022[139](index=139&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2022[140](index=140&type=chunk) [Part II – Other Information](index=37&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management believes the ultimate liability will not materially affect financial results - Information regarding legal proceedings is incorporated by reference from Note 13 of the financial statements, which states that ultimate liability is not expected to have a **material effect** on the company[72](index=72&type=chunk)[142](index=142&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have occurred from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[143](index=143&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&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 [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files - Exhibits filed include certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Interactive Data Files[143](index=143&type=chunk)