BH 10-Q Quarterly Report March 31, 2021 | Alphaminr
Biglari Holdings Inc.
ALPHAMINR

BH 10-Q Quarter ended March 31, 2021

Balance Sheet
Cash Flow
Income Statement
Debt
BIGLARI HOLDINGS INC.
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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 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 incorporation) (I.R.S. Employer Identification No.)

17802 IH 10 West,
Suite 400
San Antonio, TX 78257
(Address of principal executive offices) (Zip Code)
( 210 ) 344-3400
Registrant’s telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each 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
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and an “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Number of shares of common stock outstanding as of May 4, 2021:
Class A common stock – 206,864
Class B common stock – 2,068,640

BIGLARI HOLDINGS INC.
INDEX
Page No.

1
2
2
3
4
5
17
25
25
26
26
26
26
26
26
27
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PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIGLARI HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31,
2021 		December 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 28,438 $ 24,503
Investments 99,427 94,861
Receivables 16,438 19,185
Inventories 2,590 2,737
Other current assets 6,763 6,492
Total current assets 153,656 147,778
Property and equipment 317,432 316,122
Operating lease assets 41,015 42,832
Goodwill and other intangible assets 77,273 77,661
Investment partnerships 356,795 419,550
Other assets 13,715 14,025
Total assets $ 959,886 $ 1,017,968
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 120,304 $ 118,821
Current portion of lease obligations 14,850 17,365
Current portion of notes payable — 152,261
Total current liabilities 135,154 288,447
Lease obligations 109,063 111,645
Deferred taxes 64,649 41,346
Asset retirement obligations 10,147 10,022
Other liabilities 1,733 1,680
Total liabilities 320,746 453,140
Shareholders’ equity
Common stock 1,138 1,138
Additional paid-in capital 381,788 381,788
Retained earnings 644,757 573,050
Accumulated other comprehensive loss ( 1,975 ) ( 1,531 )
Treasury stock, at cost ( 386,568 ) ( 389,617 )
Biglari Holdings Inc. shareholders’ equity 639,140 564,828
Total liabilities and shareholders’ equity $ 959,886 $ 1,017,968
See accompanying Notes to Consolidated Financial Statements.
1
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
First Quarter
2021 2020
(Unaudited)
Revenues
Restaurant operations $ 69,954 $ 114,144
Insurance premiums and other 14,619 9,674
Oil and gas 8,592 11,374
Media and licensing 1,123 508
94,288 135,700
Cost and expenses
Restaurant cost of sales 45,616 89,916
Insurance losses and underwriting expenses 11,146 6,312
Oil and gas production costs 2,413 3,076
Media and licensing costs 480 506
Selling, general and administrative 15,540 17,227
Impairments 298 10,300
Depreciation and amortization 7,178 10,062
Interest expense 2,741 4,274
85,412 141,673
Other income
Investment gains 3,081 —
Investment partnership gains (losses) 81,766 ( 175,742 )
84,847 ( 175,742 )
Earnings (loss) before income taxes 93,723 ( 181,715 )
Income tax expense (benefit) 22,016 ( 43,830 )
Net earnings (loss) $ 71,707 $ ( 137,885 )
Earnings per share
Net earnings (loss) per equivalent Class A share * $ 223.29 $ ( 400.37 )
*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $ 44.66 for the first quarter of 2021 and $( 80.07 ) for the first quarter of 2020.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
First Quarter
2021 2020
(Unaudited)
Net earnings (loss) $ 71,707 $ ( 137,885 )
Foreign currency translation ( 444 ) ( 312 )
Total comprehensive income (loss) $ 71,263 $ ( 138,197 )
See accompanying Notes to Consolidated Financial Statements.
2

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
First Quarter
2021 2020
(Unaudited)
Operating activities
Net earnings (loss) $ 71,707 $ ( 137,885 )
Adjustments to reconcile net earnings (loss) to operating cash flows:
Depreciation and amortization 7,178 10,062
Provision for deferred income taxes 23,350 ( 38,132 )
Asset impairments and other non-cash expenses 435 10,548
Gains on disposal of assets ( 958 ) ( 1,272 )
Investment gains ( 3,247 ) —
Investment partnership (gains) losses ( 81,766 ) 175,742
Distributions from investment partnerships 150,570 42,300
Changes in receivables and inventories 2,827 7,465
Changes in other assets ( 903 ) 1,891
Changes in accounts payable and accrued expenses ( 3,895 ) ( 20,242 )
Net cash provided by operating activities 165,298 50,477
Investing activities
Capital expenditures ( 7,447 ) ( 6,473 )
Proceeds from property and equipment disposals 2,749 1,824
Acquisition of business, net of cash acquired — ( 34,240 )
Purchases of limited partner interests ( 3,000 ) ( 30,100 )
Purchases of investments ( 16,724 ) ( 105,430 )
Redemptions of fixed maturity securities 15,642 108,845
Net cash used in investing activities ( 8,780 ) ( 65,574 )
Financing activities
Proceeds from revolving credit facility — 50
Principal payments on long-term debt ( 149,952 ) ( 17,933 )
Principal payments on direct financing lease obligations ( 2,609 ) ( 1,525 )
Net cash used in financing activities ( 152,561 ) ( 19,408 )
Effect of exchange rate changes on cash ( 22 ) 14
Increase (decrease) in cash, cash equivalents and restricted cash 3,935 ( 34,491 )
Cash, cash equivalents and restricted cash at beginning of year 29,666 70,696
Cash, cash equivalents and restricted cash at end of first quarter $ 33,601 $ 36,205

First Quarter
2021 2020
(Unaudited)
Cash and cash equivalents $ 28,438 $ 33,281
Restricted cash in other long-term assets 5,163 2,924
Cash, cash equivalents and restricted cash at end of first quarter $ 33,601 $ 36,205
See accompanying Notes to Consolidated Financial Statements.
3
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(dollars in thousands)
Common
Stock 		Additional Paid-In
Capital 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Treasury
Stock 		Total
Balance at December 31, 2020 $ 1,138 $ 381,788 $ 573,050 $ ( 1,531 ) $ ( 389,617 ) $ 564,828
Net earnings 71,707 71,707
Other comprehensive loss ( 444 ) ( 444 )
Adjustment to treasury stock for holdings in investment partnerships 3,049 3,049
Balance at March 31, 2021 $ 1,138 $ 381,788 $ 644,757 $ ( 1,975 ) $ ( 386,568 ) $ 639,140
Common
Stock 		Additional
Paid-In
Capital 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Treasury
Stock 		Total
Balance at December 31, 2019 $ 1,138 $ 381,788 $ 611,039 $ ( 2,810 ) $ ( 374,857 ) $ 616,298
Net earnings (loss) ( 137,885 ) ( 137,885 )
Other comprehensive loss ( 312 ) ( 312 )
Adjustment to treasury stock for holdings in investment partnerships 1,089 1,089
Balance at March 31, 2020 $ 1,138 $ 381,788 $ 473,154 $ ( 3,122 ) $ ( 373,768 ) $ 479,190
See accompanying Notes to Consolidated Financial Statements.
4
BIGLARI HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(dollars in thousands, except share and per share data)
Note 1. Summary of Significant Accounting Policies
Description of Business
The accompanying unaudited consolidated financial statements of Biglari Holdings Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal recurring adjustments. The results for the interim periods shown are not necessarily indicative of results for the entire fiscal year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020.
Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of March 31, 2021, Mr. Biglari beneficially owns shares of the Company that represent approximately 63.0 % of the economic interest and 67.5 % of the voting interest.
Overview of the Impact of COVID-19
The novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization, which caused governments to contain its spread, thereby significantly affecting our operating businesses beginning in March of 2020 and adversely affecting nearly all of our operations during 2020. Our restaurants were required to close their dining rooms during the first quarter of 2020 and the majority of our dining rooms remain closed. During 2020, the pandemic also caused oil demand to decrease significantly, which created oversupplied markets and lowered commodity prices and margins. The risks and uncertainties resulting from the pandemic may continue to affect our future earnings, cash flows and financial condition.
Business Acquisition
On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company, and its agency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance. The financial results for Southern Pioneer are included from the date of acquisition. Pro-forma financial information of Southern Pioneer is not material.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including Steak n Shake Inc., Western Sizzlin Corporation, First Guard Insurance Company, Maxim Inc., Southern Pioneer, and Southern Oil.  Intercompany accounts and transactions have been eliminated in consolidation.
Change in Presentation
The first quarter of 2020 has been adjusted to conform to the following changes in presentation. Interest expense on finance leases was combined with interest expense and reclassified as a component of cost and expenses.  Gain on debt extinguishment of $ 4,346 has been reclassified from other income to selling, general and administrative expenses.

5

Note 2. Earnings Per Share
Earnings per share of common stock is based on the weighted average number of shares outstanding during the year. The shares of Company stock attributable to our limited partner interest in The Lion Fund, L.P. and The Lion Fund II, L.P. (collectively, the “investment partnerships”) — based on our proportional ownership during this period — are considered treasury stock on the consolidated balance sheet and thereby deemed not to be included in the calculation of weighted average common shares outstanding. However, these shares are legally outstanding.
The following table presents shares authorized, issued and outstanding on March 31, 2021 and December 31, 2020.
March 31, 2021 December 31, 2020
Class A Class B Class A Class B
Common stock authorized 500,000 10,000,000 500,000 10,000,000
Common stock issued and outstanding 206,864 2,068,640 206,864 2,068,640
On an equivalent Class A common stock basis, there were 620,592 shares outstanding as of March 31, 2021 and December 31, 2020.  There are no dilutive securities outstanding. The Company has applied the “two-class method” of computing earnings per share as prescribed in Accounting Standards Codification (“ASC”) 260, “Earnings Per Share.” The equivalent Class A common stock applied for computing earnings per share excludes the proportional shares of Biglari Holdings’ stock held by the investment partnerships. The equivalent Class A common stock for the earnings per share calculation during the first quarter of 2021 and 2020 was 321,139 and 344,391 , respectively.
Note 3. Investments
Investments were $ 99,427 and $ 94,861 as of March 31, 2021 and December 31, 2020, respectively.  All investments are classified as available-for-sale and recorded at fair value.
Note 4. Investment Partnerships
The Company reports on the limited partnership interests in investment partnerships under the equity method of accounting. We record our proportional share of equity in the investment partnerships but exclude Company common stock held by said partnerships. The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though they are legally outstanding.  The Company records gains/losses from investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses on their securities) in the consolidated statements of earnings based on our carrying value of these partnerships. The fair value is calculated net of the general partner’s accrued incentive fees. Gains and losses on Company common stock included in the earnings of these partnerships are eliminated because they are recorded as treasury stock.  Biglari Capital Corp. (“Biglari Capital”) is the general partner of the investment partnerships and is an entity solely owned by Mr. Biglari.
The fair value and adjustment for Company common stock held by the investment partnerships to determine the carrying value of our partnership interest is presented below.
Fair Value Company
Common Stock 		Carrying Value
Partnership interest at December 31, 2020 $ 590,926 $ 171,376 $ 419,550
Investment partnership gains (losses) 110,918 29,152 81,766
Distributions (net of contributions) ( 147,570 ) ( 147,570 )
Decrease in proportionate share of Company stock held ( 3,049 ) 3,049
Partnership interest at March 31, 2021 $ 554,274 $ 197,479 $ 356,795
6
Note 4. Investment Partnerships (continued)

Fair Value Company
Common Stock 		Carrying Value
Partnership interest at December 31, 2019 $ 666,123 $ 160,581 $ 505,542
Investment partnership gains (losses) ( 261,708 ) ( 85,966 ) ( 175,742 )
Distributions (net of contributions) ( 12,200 ) ( 12,200 )
Decrease in proportionate share of Company stock held ( 1,089 ) 1,089
Partnership interest at March 31, 2020 $ 392,215 $ 73,526 $ 318,689
The carrying value of the investment partnerships net of deferred taxes is presented below.
March 31, 2021 December 31, 2020
Carrying value of investment partnerships $ 356,795 $ 419,550
Deferred tax liability related to investment partnerships ( 68,060 ) ( 44,805 )
Carrying value of investment partnerships net of deferred taxes $ 288,735 $ 374,745
The Company’s proportionate share of Company stock held by investment partnerships at cost is $ 386,568 and $ 389,617 at March 31, 2021 and December 31, 2020, respectively, and is recorded as treasury stock.
The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock.  Fair value is according to our proportional ownership interest of the fair value of investments held by the investment partnerships. The fair value measurement is classified as level 3 within the fair value hierarchy.
Gains/losses from investment partnerships recorded in the Company’s consolidated statements of earnings are presented below.
First Quarter
2021 2019
Gains (losses) on investment partnership $ 81,766 $ ( 175,742 )
Tax expense (benefit) 19,117 ( 41,383 )
Net earnings (loss) $ 62,649 $ ( 134,359 )
On December 31 of each year, the general partner of the investment partnerships, Biglari Capital, will earn an incentive reallocation fee for the Company’s investments equal to 25 % of the net profits above an annual hurdle rate of 6 % over the previous high-water mark. Our policy is to accrue an estimated incentive fee throughout the year. The total incentive reallocation from Biglari Holdings to Biglari Capital includes gains on the Company’s common stock. Gains and losses on the Company’s common stock and the related incentive reallocations are eliminated in our financial statements. Our investments in these partnerships are committed on a rolling 5 -year basis.
There were no incentive reallocations from Biglari Holdings to Biglari Capital during the first quarters of 2021 and 2020.

7
Note 4. Investment Partnerships (continued)

Summarized financial information for The Lion Fund, L.P. and The Lion Fund II, L.P. is presented below.
Equity in Investment Partnerships
Lion Fund Lion Fund II
Total assets as of March 31, 2021 $ 115,563 $ 577,151
Total liabilities as of March 31, 2021 $ 113 $ 65,943
Revenue for the first quarter of 2021 $ 18,016 $ 105,347
Earnings for the first quarter of 2021 $ 17,998 $ 105,274
Biglari Holdings' ownership interest as of March 31, 2021 61.3 % 94.0 %
Total assets as of December 31, 2020 $ 112,970 $ 566,663
Total liabilities as of December 31, 2020 $ 189 $ 25,453
Revenue for the first quarter of 2020 $ ( 45,894 ) $ ( 248,460 )
Earnings for the first quarter of 2020 $ ( 45,910 ) $ ( 249,573 )
Biglari Holdings' ownership interest as of March 31, 2020 66.1 % 93.1 %
Revenue in the above summarized financial information of the investment partnerships includes investment income and unrealized gains and losses on investments.
Note 5. Property and Equipment
Property and equipment is composed of the following.
March 31,
2021 		December 31,
2020
Land $ 143,382 $ 142,601
Buildings 140,992 138,734
Land and leasehold improvements 142,003 141,351
Equipment 195,090 192,735
Oil and gas properties 73,268 75,900
Construction in progress 1,242 1,032
695,977 692,353
Less accumulated depreciation and amortization ( 378,545 ) ( 376,231 )
Property and equipment, net $ 317,432 $ 316,122
Depletion expense related to oil and gas properties was $ 2,244 and $ 4,737 during the first quarter of 2021 and 2020, respectively, and is included in depreciation and amortization within the consolidated statement of earnings.
During the first quarter of 2021, the Company recorded impairment charges of $ 298 related to closed stores. The Company recorded impairment charges of $ 10,300 in the first quarter of 2020 mainly because of the adverse effect the COVID-19 pandemic had on our restaurant operations. The fair value of the long-lived assets was determined based on Level 3 inputs using a discounted cash flow model and quoted prices for the properties.
Note 6. Goodwill and Other Intangible Assets
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of the net assets acquired in connection with business acquisitions.
8
Note 6. Goodwill and Other Intangible Assets (continued)
A reconciliation of the change in the carrying value of goodwill is as follows.
Goodwill
Goodwill at December 31, 2020 $ 53,596
Change in foreign exchange rates during the first quarter of 2021 ( 29 )
Goodwill at March 31, 2021 $ 53,567
We evaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value. The valuation methodology and underlying financial information included in our determination of fair value require significant management judgments. We use both market and income approaches to derive fair value. The judgments in these two approaches include, but are not limited to, comparable market multiples, long-term projections of future financial performance, and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results. No impairment charges for goodwill were recorded in the first quarters of 2021 or 2020.
In response to the adverse effects of the COVID-19 pandemic, during 2020 we considered whether goodwill needed to be evaluated for impairment for certain restaurant reporting units.  We considered the available facts and made qualitative assessments and judgments for what we believed represented reasonably possible outcomes. Another pandemic event could have a negative impact on restaurant operations, which may require the Company to record goodwill impairment charges in future periods.
Other Intangible Assets
Intangible assets with indefinite lives are composed of the following.
Trade Names Lease Rights Total
Balance at December 31, 2020 $ 15,876 $ 8,189 $ 24,065
Change in foreign exchange rates during the first quarter of 2021 — ( 359 ) ( 359 )
Balance at March 31, 2021 $ 15,876 $ 7,830 $ 23,706
Fair values were determined using Level 3 inputs and available market data.
Note 7. Restaurant Operations Revenues
Restaurant operations revenues were as follows.
First Quarter
2021 2020
Net sales $ 54,950 $ 104,728
Franchise partner fees 7,853 3,344
Franchise royalties and fees 5,135 5,211
Other 2,016 861
$ 69,954 $ 114,144
Net sales
Net sales are composed of retail sales of food through company-operated stores. Company-operated store revenues are recognized, net of discounts and sales taxes, when our obligation to perform is satisfied at the point of sale. Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.

9
Note 7. Restaurant Operations Revenues (continued)
Franchise partner fees
Franchise partner fees are composed of up to 15 % of sales as well as 50 % of profits. We are therefore fully affected by the operating results of the business, unlike in a traditional franchising arrangement, where the franchisor obtains a royalty fee based on sales only. Therefore, we generate most of our revenue from our share of the franchise partners’ profits. The initial franchise fee of ten thousand dollars is recognized when the operator becomes a franchise partner.
Franchise royalties and fees
Franchise royalties and fees from Steak n Shake and Western Sizzlin franchisees are based upon a percentage of sales of the franchise restaurant and are recognized as earned. Franchise royalties are billed on a monthly basis. Initial franchise fees when a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over the term of the franchise agreement.
Gift card revenue
Restaurant operations sells gift cards to customers which can be redeemed for retail food sales within our stores. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as net sales upon redemption. Restaurant operations estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as other revenue in proportion to the rate of gift card redemptions by vintage.
Note 8. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include the following.
March 31,
2021 		December 31,
2020
Accounts payable $ 31,347 $ 26,537
Gift card liability 20,122 21,822
Loss reserves 13,487 14,652
Unearned premiums 13,222 13,277
Other insurance accruals 5,012 6,559
Salaries, wages and vacation 8,407 8,285
Deferred revenue 10,259 9,324
Taxes payable 10,288 10,922
Other 8,160 7,443
Accounts payable and accrued expenses $ 120,304 $ 118,821

Note 9. Notes Payable and Lease Obligations
Steak n Shake Credit Facility
On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $ 200,000 . The term loan was scheduled to mature on March 19, 2021. As of December 31, 2020, $ 152,506 was outstanding ($ 152,261 net of deferred financing costs). The Company repaid Steak n Shake's outstanding balance in full on February 19, 2021.
10

Lease obligations include the following.
Current portion of lease obligations March 31,
2021 		December 31,
2020
Finance lease liabilities $ 1,582 $ 1,897
Finance obligations 4,050 4,854
Operating lease liabilities 9,218 10,614
Total current portion of lease obligations $ 14,850 $ 17,365
Long-term lease obligations
Finance lease liabilities $ 5,700 $ 7,034
Finance obligations 68,543 68,148
Operating lease liabilities 34,820 36,463
Total long-term lease obligations $ 109,063 $ 111,645
Note 10. Leased Assets and Lease Commitments
A significant portion of our operating and finance lease portfolio includes restaurant locations. Operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.
Total lease cost consists of the following.
First Quarter
2021 2020
Finance lease costs:
Amortization of right-of-use assets $ 419 $ 479
Interest on lease liabilities 147 178
Operating lease costs * 1,110 3,736
Total lease costs $ 1,676 $ 4,393
*Includes short-term leases, variable lease costs and sublease income, which are immaterial.

11
Note 10. Leased Assets and Lease Commitments (continued)
Supplemental cash flow information related to leases is as follows.
First Quarter
2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases $ 529 $ 413
Operating cash flows from finance leases $ 132 $ 171
Operating cash flows from operating leases $ 4,186 $ 3,993
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities $ — $ 73
Supplemental balance sheet information related to leases is as follows.
March 31,
2021 		December 31,
2020
Finance leases:
Property and equipment, net $ 6,175 $ 6,501
Weighted-average lease terms and discount rates are as follows.
March 31,
2021
Weighted-average remaining lease terms:
Finance leases 5.4 years
Operating leases 5.4 years
Weighted-average discount rates:
Finance leases 7.1 %
Operating leases 6.9 %
Maturities of lease liabilities as of March 31, 2021 are as follows.
Year Operating
Leases 		Finance
Leases
2021 $ 9,162 $ 1,533
2022 11,092 1,706
2023 9,817 1,401
2024 7,844 1,384
2025 6,087 1,148
After 2025 9,279 1,605
Total lease payments 53,281 8,777
Less interest 9,243 1,495
Total lease liabilities $ 44,038 $ 7,282


12
Note 11. Accumulated Other Comprehensive Income
During the first quarters of 2021 and 2020, accumulated other comprehensive losses increased by $ 444 and $ 312 , respectively. As of March 31, 2021 and 2020, the balances in accumulated other comprehensive loss were $ 1,975 and $ 3,122 , respectively.  There were no reclassifications from accumulated other comprehensive income to earnings during the first quarters of 2021 and 2020.  All changes in accumulated other comprehensive income were due to foreign currency translation adjustments.
Note 12. Income Taxes
In determining the quarterly provision for income taxes, the Company used a discrete effective tax rate method based on statutory tax rates for the first quarters of 2021 and 2020. Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and underlying income tax rates applicable to the various taxing jurisdictions.
Income tax expense for the first quarter of 2021 was $ 22,016 compared to a tax benefit of $ 43,830 for the first quarter of 2020.  The variance in income taxes between 2021 and 2020 is attributable to taxes on income generated by the investment partnerships.  Investment partnership pretax earnings were $ 81,766 during the first quarter of 2021 compared to pretax losses of $ 175,742 during the first quarter of 2020.
Note 13. Commitments and Contingencies
We are involved in various legal proceedings and have certain unresolved claims pending. We believe, based on examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided in our consolidated financial statements is not likely to have a material effect on our results of operations, financial position or cash flow.
On January 29, 2018, a shareholder of the Company filed a purported class action complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholder generally alleged claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari as a result of the dual class structure. On March 26, 2018, a shareholder of the Company filed a purported class action complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. This shareholder generally alleged claims of breach of fiduciary duty by the members of our Board of Directors. On May 17, 2018, the shareholders who filed the January 29, 2018 complaint and the March 26, 2018 complaint filed a new, consolidated complaint against the Company and the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholders generally alleged claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglari arising out of the dual class structure, including the ability to vote the Company’s shares that are eliminated for financial reporting purposes.
On December 14, 2018, the judge of the Superior Court of Hamilton County, Indiana issued an order granting the Company’s motion to dismiss the shareholders’ lawsuits. On January 11, 2019, the shareholders filed an appeal of the judge’s order dismissing the lawsuits. On December 4, 2019, the Indiana Court of Appeals issued a unanimous decision affirming the trial court’s decision to dismiss the shareholder litigation. On January 20, 2020, the shareholders filed a petition to transfer with the Indiana Supreme Court seeking review of the decision of the Court of Appeals.  The Company opposed the petition.  On April 7, 2020, the Indiana Supreme Court denied the petition to transfer.
All of the cases referenced above are completed and each case was concluded in the Company’s favor.

Note 14. Fair Value of Financial Assets
The fair values of substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

13
Note 14. Fair Value of Financial Assets (continued)
The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.
• Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.
• Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

• Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and we may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.
The following methods and assumptions were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:
Cash equivalents: Cash equivalents primarily consist of money market funds which are classified within Level 1 of the fair value hierarchy.
Equity securities: The Company’s investments in equity securities are classified within Levels 1 and 2 of the fair value hierarchy.
Bonds: The Company’s investments in bonds consist of both corporate and government debt. Bonds are classified within Level l or Level 2 of the fair value hierarchy.
Non-qualified deferred compensation plan investments: The assets of the non-qualified plan are set up in a rabbi trust. They represent mutual funds and publicly traded securities, each of which are classified within Level 1 of the fair value hierarchy.
Derivative instruments: Options related to equity securities are marked to market each reporting period and are classified within Level 2 of the fair value hierarchy depending on the instrument.
14
Note 14. Fair Value of Financial Assets (continued)
As of March 31, 2021 and December 31, 2020, the fair values of financial assets were as follows.
March 31, 2021 December 31, 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 24,322 $ — $ — $ 24,322 $ 23,885 $ — $ — $ 23,885
Equity securities
Consumer goods 9,533 5,983 — 15,516 7,274 5,652 — 12,926
Insurance 116 — — 116 261 — — 261
Bonds
Government 54,350 — — 54,350 39,472 14,043 — 53,515
Corporate 5,977 — — 5,977 — 5,406 — 5,406
Options on equity securities — 2,580 — 2,580 — 2,911 — 2,911
Non-qualified deferred compensation plan investments 1,504 — — 1,504 1,368 — — 1,368
Total assets at fair value $ 95,802 $ 8,563 $ — $ 104,365 $ 72,260 $ 28,012 $ — $ 100,272
There were no changes in our valuation techniques used to measure fair values on a recurring basis.
Note 15. Related Party Transactions
Service Agreement
The Company is party to a service agreement with Biglari Enterprises LLC and Biglari Capital Corp. (collectively, the “Biglari Entities”) under which the Biglari Entities provide services to the Company. The service agreement has a five -year term, effective on October 1, 2017.  The Company paid Biglari Enterprises $ 2,100 in service fees during the first quarters of 2021 and 2020. The service agreement does not alter the hurdle rate connected with the incentive reallocation paid to Biglari Capital Corp.  The Biglari Entities are owned by Mr. Biglari.

Incentive Agreement
The Incentive Agreement establishes a performance-based annual incentive payment for Mr. Biglari contingent upon the growth in adjusted equity in each year attributable to our operating businesses. In order for Mr. Biglari to receive any incentive, our operating businesses must achieve an annual increase in shareholders’ equity in excess of 6 % (the “Hurdle Rate”) above the previous highest level (the “High Water Mark”). Mr. Biglari will receive 25 % of any incremental book value created above the High Water Mark plus the Hurdle Rate. In any year in which book value declines, our operating businesses must completely recover their deficit from the previous High Water Mark, along with attaining the Hurdle Rate, before Mr. Biglari becomes eligible to receive any further incentive payment.
Note 16. Business Segment Reporting
Our reportable business segments are organized in a manner that reflects how management views those business activities. Our restaurant operations include Steak n Shake and Western Sizzlin. Our insurance operations include First Guard and Southern Pioneer.  The Company also reports segment information for Maxim and Southern Oil. Other business activities not specifically identified with reportable business segments are presented in corporate. We report our earnings from investment partnerships separate from our corporate expenses. We assess and measure segment operating results based on segment earnings as disclosed below. Segment earnings from operations are neither necessarily indicative of cash available to fund cash requirements, nor synonymous with cash flow from operations. The tabular information that follows shows data of our reportable segments reconciled to amounts reflected in the consolidated financial statements.
15
Note 16. Business Segment Reporting (continued)
A disaggregation of our consolidated data for the first quarters of 2021 and 2020 is presented in the tables which follow.
Revenue
First Quarter
2021 2020
Operating Businesses:
Restaurant Operations:
Steak n Shake $ 68,301 $ 111,113
Western Sizzlin 1,653 3,031
Total Restaurant Operations 69,954 114,144
Insurance Operations:
First Guard 8,219 7,884
Southern Pioneer 6,400 1,790
Total Insurance Operations 14,619 9,674
Southern Oil 8,592 11,374
Maxim 1,123 508
$ 94,288 $ 135,700

Earnings (Losses) Before Income Taxes
First Quarter
2021 2020
Operating Businesses:
Restaurant Operations:
Steak n Shake $ 5,456 $ ( 6,591 )
Western Sizzlin 92 37
Total Restaurant Operations 5,548 ( 6,554 )
Insurance Operations:
First Guard 2,193 2,441
Southern Pioneer 1,044 472
Total Insurance Operations 3,237 2,913
Southern Oil 3,039 2,470
Maxim 623 ( 32 )
Interest expense not allocated to segments ( 1,121 ) ( 2,474 )
Total Operating Businesses 11,326 ( 3,677 )
Corporate and Investments:
Corporate and other ( 2,450 ) ( 2,296 )
Investment gains 3,081 —
Investment partnership gains (losses) 81,766 ( 175,742 )
Total Corporate and Investments 82,397 ( 178,038 )
$ 93,723 $ ( 181,715 )

16
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands except per share data)
Overview
Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of March 31, 2021, Mr. Biglari beneficially owns shares of the Company that represent approximately 63.0% of the economic interest and 67.5% of the voting interest.
On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company and its agency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). The Company's financial results include the results of Southern Pioneer from the date of acquisition.
Net earnings (loss) attributable to Biglari Holdings shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.
First Quarter
2021 2020
Operating businesses:
Restaurant $ 4,118 $ (4,682)
Insurance 2,531 2,316
Oil and gas 2,355 2,201
Media and licensing 480 (25)
Interest expense (841) (1,846)
Total operating businesses 8,643 (2,036)
Corporate and other (1,999) (1,490)
Investment gains 2,414 —
Investment partnership gains (losses) 62,649 (134,359)
$ 71,707 $ (137,885)
Restaurant businesses include Steak n Shake Inc. and Western Sizzlin Corporation.  Steak n Shake and Western Sizzlin are engaged in the ownership, operation, and franchising of restaurants.
Insurance businesses are composed of First Guard Insurance Company (“First Guard”) and Southern Pioneer. First Guard is a direct underwriter of commercial trucking insurance, selling physical damage and nontrucking liability insurance to truckers.  Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance.
Oil and gas business is composed of Southern Oil.
Media and licensing business is composed of Maxim Inc.
17

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurants
Steak n Shake and Western Sizzlin comprise 591 company-operated and franchise restaurants as of March 31, 2021.
Steak n Shake Western Sizzlin
Company-
operated 		Franchise
Partner 		Traditional
Franchise 		Company-
operated 		Franchise Total
Total stores as of December 31, 2020 276 86 194 3 39 598
Corporate stores transitioned (22) 22 — — — —
Net restaurants opened (closed) (1) — (5) — (1) (7)
Total stores as of March 31, 2021 253 108 189 3 38 591
Total stores as of December 31, 2019 368 29 213 4 48 662
Corporate stores transitioned (11) 10 1 — — —
Net restaurants opened (closed) (51) — (6) — — (57)
Total stores as of March 31, 2020 306 39 208 4 48 605
As of March 31, 2021, 50 of the 253 company-operated Steak n Shake stores were temporarily closed.

18

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Earnings of our restaurant operations are summarized below.
First Quarter
2021 2020
Revenue
Net sales $ 54,950 $ 104,728
Franchise partner fees 7,853 3,344
Franchise royalties and fees 5,135 5,211
Other revenue 2,016 861
Total revenue 69,954 114,144
Restaurant cost of sales
Cost of food 15,554 28.3% 31,443 30.0%
Restaurant operating costs 25,197 45.9% 53,497 51.1%
Occupancy costs 4,865 8.9% 4,976 4.8%
Total cost of sales 45,616 89,916
Selling, general and administrative
General and administrative 7,680 11.0% 8,898 7.8%
Marketing 4,623 6.6% 8,820 7.7%
Other expenses (141) (0.2)% 284 0.2%
Total selling, general and administrative 12,162 17.4% 18,002 15.8%
Impairments (298) (10,300)
Depreciation and amortization (4,710) (5,026)
Gain on debt extinguishment — 4,346
Interest on finance leases and obligations (1,620) (1,800)
Earnings (loss) before income taxes 5,548 (6,554)
Income tax expense (benefit) 1,430 (1,872)
Contribution to net earnings $ 4,118 $ (4,682)
Cost of food, restaurant operating costs and rent expense are expressed as a percentage of net sales.
General and administrative, marketing and other expenses are expressed as a percentage of total revenue.
The COVID-19 pandemic adversely affected our restaurant operations and financial results.  Our restaurants were required to close their dining rooms during the first quarter of 2020, and the majority of our dining rooms remain closed. Steak n Shake is reopening its dining rooms but with a self-service model.
Net sales for the first quarter of 2021 were $54,950, representing a decrease of $49,778 or 47.5% compared to the first quarter of 2020.  The decreased performance of our restaurant operations in 2021 was primarily due to the closing of dining rooms.
Franchise partner fees were $7,853 during the first quarter of 2021 compared to $3,344 during 2020.  As of March 31, 2021, there were 108 franchise partner units compared to 39 franchise partner units as of March 31, 2020. We continue to transition from company-operated units to franchise-operated. For a franchise partner to be awarded a restaurant, he or she must demonstrate the gold standard in service.
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cost of food during the first quarter of 2021 was $15,554 or 28.3% of net sales compared to the first quarter in 2020 of $31,443 or 30.0% of net sales.  The decrease as a percentage of net sales is primarily attributable to changes in menu offerings implemented in the third and fourth quarters of 2020.
Restaurant operating costs during the first quarter of 2021 were $25,197 or 45.9% of net sales compared to $53,497 or 51.1% of net sales in 2020. The decrease is mainly attributable to transitioning to an off-premises business - drive-through, delivery and takeout.
General and administrative costs during the first quarter of 2021 were $7,680 compared to $8,898 during 2020. The decrease is primarily attributable to lower personnel costs.
Marketing expense during the first quarter of 2021 was $4,623 or 6.6% of total revenues compared to expenses during the first quarter of 2020 of $8,820 or 7.7% of total revenues.
Our restaurants recorded an impairment to long-lived assets of $298 and $10,300 in the first quarters of 2021 and 2020, respectively.  The impairments are primarily attributable to the closure of Steak n Shake stores.
Insurance
We view our insurance businesses as possessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Business units are operated under separate local management. Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer.
Underwriting results of our insurance operations are summarized below.
First Quarter
2021 2020
Underwriting gain attributable to:
First Guard $ 2,131 $ 2,323
Southern Pioneer 413 207
Pre-tax underwriting gain 2,544 2,530
Income tax expense 534 531
Net underwriting gain $ 2,010 $ 1,999
Earnings of our insurance operations are summarized below.
First Quarter
2021 2020
Premiums written $ 13,690 $ 8,842
Insurance losses 7,021 4,174
Underwriting expenses 4,125 2,138
Pre-tax underwriting gain 2,544 2,530
Other income and expenses
Investment income and commissions 745 832
Other income (expenses) (52) (449)
Total other income 693 383
Earnings before income taxes 3,237 2,913
Income tax expense 706 597
Contribution to net earnings $ 2,531 $ 2,316
Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income and commissions.
20

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
First Guard
First Guard is a direct underwriter of commercial truck insurance, selling physical damage and nontrucking liability insurance to truckers. First Guard’s insurance products are marketed primarily through direct response methods via the internet or by telephone. First Guard’s cost-efficient direct response marketing methods enable it to be a low-cost insurer. A summary of First Guard’s underwriting results follows.
First Quarter
2021 2020
Amount % Amount %
Premiums written $ 8,077 100.0% $ 7,415 100.0%
Insurance losses 4,002 49.5% 3,558 48.0%
Underwriting expenses 1,944 24.1% 1,534 20.7%
Total losses and expenses 5,946 73.6% 5,092 68.7%
Pre-tax underwriting gain $ 2,131 $ 2,323
Southern Pioneer
Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance. The financial results for Southern Pioneer are from the date of acquisition March 9, 2020. A summary of Southern Pioneer’s underwriting results follows.
First Quarter
2021 2020
Amount % Amount %
Premiums written $ 5,613 100.0% $ 1,427 100.0%
Insurance losses 3,019 53.8% 616 43.2%
Underwriting expenses 2,181 38.9% 604 42.3%
Total losses and expenses 5,200 92.7% 1,220 85.5%
Pre-tax underwriting gain $ 413 $ 207
Insurance – Investment Income

A summary of net investment income attributable to our insurance operations follows.

First Quarter
2021 2020
Interest, dividends and other investment income:
First Guard $ 17 $ 149
Southern Pioneer 149 285
Pre-tax investment income 166 434
Income tax expense 35 91
Net investment income $ 131 $ 343

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


21

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Oil and Gas
Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico. Earnings for Southern Oil are summarized below.
First Quarter
2021 2020
Oil and gas revenue $ 8,592 $ 11,374
Oil and gas production costs 2,413 3,076
Depreciation, depletion and accretion 2,378 4,868
General and administrative expenses 762 960
Earnings before income taxes 3,039 2,470
Income tax expense 684 269
Contribution to net earnings $ 2,355 $ 2,201
The COVID-19 pandemic caused oil demand to significantly decrease, creating oversupplied markets that resulted in lower commodity prices and margins. However, crude oil prices improved in mid-2020 in response to the lifting of COVID-19 restrictions, resulting in the increase of oil demand.
Media and Licensing
Maxim's business lies principally in media and licensing. Earnings of our media and licensing operations are summarized below.
First Quarter
2021 2020
Media and licensing revenue $ 1,123 $ 508
Media and licensing costs 480 506
General and administrative expenses 20 34
Earnings before income taxes 623 (32)
Income tax expense 143 (7)
Contribution to net earnings $ 480 $ (25)
We acquired Maxim with the idea of transforming its business model.  The magazine developed the Maxim brand, a franchise we are utilizing to generate nonmagazine revenue, notably through licensing, a cash-generating business related to consumer products, services, and events.
Investment Gains
Investment gains net of tax were $2,414 during the first quarter of 2021. Dividends earned on investments are reported as other income by our insurance companies. We consider investment income as a component of our aggregate insurance operating results.  However, we consider investment gains and losses, whether realized or unrealized as non-operating.
22

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Investment Partnership Gains
Earnings from our investments in partnerships are summarized below.
First Quarter
2021 2020
Investment partnership gains (losses) $ 81,766 $ (175,742)
Tax expense (benefit) 19,117 (41,383)
Contribution to net earnings $ 62,649 $ (134,359)
Investment partnership gains include gains/losses from changes in market values of underlying investments and dividends earned by the partnerships.  Dividend income has a lower effective tax rate than income from capital gains.  Changes in the market values of investments can be highly volatile.
The investment partnerships hold the Company’s common stock as investments. The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding. Gains and losses on Company common stock included in the earnings of the partnerships are eliminated.
Interest Expense
The Company’s interest expense is summarized below.
First Quarter
2021 2020
Interest expense on notes payable $ 1,121 $ 2,474
Tax benefit 280 628
Interest expense net of tax $ 841 $ 1,846
Steak n Shake’s term loan was scheduled to mature on March 19, 2021. As of December 31, 2020, $152,506 was outstanding. The Company repaid Steak n Shake’s outstanding balance in full on February 19, 2021.

Corporate and Other
Corporate expenses exclude the activities in the restaurant, media and licensing, insurance, and oil and gas businesses. Corporate net losses during the first quarter of 2021 were relatively flat compared to the same period during 2020.
Income Taxes
Income tax expense for the first quarter of 2021 was $22,016 compared to a tax benefit of $43,830 for the first quarter of 2020.  The variance in income taxes between 2021 and 2020 is attributable to taxes on income generated by the investment partnerships.  Investment partnership pretax earnings were $81,766 during the first quarter of 2021 compared to pretax losses of $175,742 during the first quarter of 2020.
23

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Financial Condition
Consolidated cash and investments are summarized below.
March 31,
2021 		December 31,
2020
Cash and cash equivalents $ 28,438 $ 24,503
Investments 99,427 94,861
Fair value of interest in investment partnerships 554,274 590,926
Total cash and investments 682,139 710,290
Less: portion of Company stock held by investment partnerships (197,479) (171,376)
Carrying value of cash and investments on balance sheet $ 484,660 $ 538,914
Liquidity
Our balance sheet continues to maintain significant liquidity.  Consolidated cash flow activities are summarized below.
First Quarter
2021 2020
Net cash provided by operating activities $ 165,298 $ 50,477
Net cash used in investing activities (8,780) (65,574)
Net cash used in financing activities (152,561) (19,408)
Effect of exchange rate changes on cash (22) 14
Decrease in cash, cash equivalents and restricted cash $ 3,935 $ (34,491)
Cash provided by operating activities was $165,298 during the first quarter of 2021 compared to cash provided by operating activities of $50,477 during the first quarter of 2020.  The cash provided by operating activities is mainly attributable to distributions from investment partnerships of $150,570 for 2021 and $42,300 for 2020. The distributions during 2021 were primarily used to retire Steak n Shake’s debt.
Cash used in investing activities during the first quarter of 2021 was $8,780 compared to $65,574 during the first quarter of 2020.  Use of cash in investing activities was higher during 2020 primarily due to the acquisition of Southern Pioneer and purchases of limited partner interests.
During the first quarter of 2021, the Company retired the balance of the term loan under Steak n Shake’s credit facility.
We intend to meet the working capital needs of our operating subsidiaries principally through anticipated cash flows generated from operations and cash on hand. We continually review available financing alternatives.
Steak n Shake Credit Facility
On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000. The term loan was scheduled to mature on March 19, 2021. As of December 31, 2020, $152,506 was outstanding. The Company repaid Steak n Shake's outstanding balance in full on February 19, 2021.
Critical Accounting Policies
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain accounting policies require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized in our consolidated financial statements from such estimates are necessarily based on numerous assumptions involving varying and potentially significant degrees of judgment and uncertainty. Accordingly, the amounts currently reflected in our consolidated financial statements will likely increase or decrease in the future as additional information becomes available.  There have been no material changes to critical accounting policies previously disclosed in our annual report on Form 10-K for the year ended December 31, 2020.
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Recently Issued Accounting Pronouncements
No recently issued accounting pronouncements were applicable for this Quarterly Report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In general, forward-looking statements include estimates of future revenues, cash flows, capital expenditures, or other financial items, and assumptions underlying any of the foregoing. Forward-looking statements reflect management’s current expectations regarding future events and use words such as “anticipate,” “believe,” “expect,” “may,” and other similar terminology. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Investors should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, many beyond our control, including, but not limited to, the risks and uncertainties described in Item 1A, Risk Factors of our annual report on Form 10-K and Item 1A of this report. We undertake no obligation to publicly update or revise them, except as may be required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The majority of our investments are conducted through investment partnerships which generally hold common stocks. We also hold marketable securities directly. A significant decline in the general stock market or in the prices of major investments may produce a large net loss and decrease in our consolidated shareholders’ equity. Decreases in values of equity investments can have a materially adverse effect on our earnings and on consolidated shareholders’ equity.
We prefer to hold equity investments for very long periods of time so we are not troubled by short-term price volatility with respect to our investments. Our interests in the investment partnerships are committed on a rolling 5-year basis, and any distributions upon our withdrawal of funds will be paid out over two years (and may be paid in kind rather than in cash). Market prices for equity securities are subject to fluctuation. Consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. A hypothetical 10% increase or decrease in the market price of our investments would result in a respective increase or decrease in the carrying value of our investments of $45,622 along with a corresponding change in shareholders’ equity of approximately 5%.
We have had minimal exposure to foreign currency exchange rate fluctuations in the first quarters of 2021 and 2020.
Southern Oil’s business is fundamentally a commodity business. This means Southern Oil’s operations and earnings may be significantly affected by changes in oil and gas prices. Such commodity prices depend on local, regional and global events or conditions that affect supply and demand for oil and gas. Any material decline in crude oil or natural gas prices could have a material adverse effect on Southern Oil’s operations.


Item 4. Controls and Procedures
Based on an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), our Chief Executive Officer and Controller have concluded that our disclosure controls and procedures were effective as of March 31, 2021.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information in response to this Item is included in Note 13 to the Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q and is incorporated herein by reference.
ITEM 1A. RISK FACTORS
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, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
From March 4, 2021 through March 11, 2021, The Lion Fund II, L.P. purchased 656 shares of Class A common stock and 1,888 shares of Class B common stock. The Lion Fund II, L.P. may be deemed to be an “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended. The purchases were made through open market transactions.
Total Number of
Class A Shares
Purchased 		Average Price Paid
per Class A Share 		Total Number of
Class B Shares
Purchased 		Average Price Paid
per Class B Share 		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs 		Maximum Number
of Shares That May
Yet Be Purchased
Under Plans or
Programs
January 1, 2021 – January 31, 2021 — $ — — $ — — —
February 1, 2021 – February 28, 2021 — $ — — $ — — —
March 1, 2021 – March 31, 2021 656 $ 743.65 1,888 $ 140.03 — —
Total 656 1,888 —

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit Number Description
101 Interactive Data Files.
104 Cover page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)
_________________
* Furnished herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Biglari Holdings inc.
Date: May 7, 2021 By:
/s/ B RUCE L EWIS
Bruce Lewis
Controller

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TABLE OF CONTENTS
Part 1 Financial InformationItem 1. Financial StatementsNote 1. Summary Of Significant Accounting PoliciesNote 2. Earnings Per ShareNote 3. InvestmentsNote 4. Investment PartnershipsNote 4. Investment Partnerships (continued)Note 5. Property and EquipmentNote 6. Goodwill and Other Intangible AssetsNote 6. Goodwill and Other Intangible Assets (continued)Note 7. Restaurant Operations RevenuesNote 7. Restaurant Operations Revenues (continued)Note 8. Accounts Payable and Accrued ExpensesNote 9. Notes Payable and Lease ObligationsNote 10. Leased Assets and Lease CommitmentsNote 10. Leased Assets and Lease Commitments (continued)Note 11. Accumulated Other Comprehensive IncomeNote 12. Income TaxesNote 13. Commitments and ContingenciesNote 14. Fair Value Of Financial AssetsNote 14. Fair Value Of Financial Assets (continued)Note 15. Related Party TransactionsNote 16. Business Segment ReportingNote 16. Business Segment Reporting (continued)Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations (continued)Item 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

31.01 Certification 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. 31.02 Certification 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. 32.01* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.