Biglari (US:BH)2020-11-09 13:40Financial 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]