BH 10-Q Quarterly Report Sept. 30, 2023 | Alphaminr
Biglari Holdings Inc.
ALPHAMINR

BH 10-Q Quarter ended Sept. 30, 2023

Balance Sheet
Cash Flow
Income Statement
Debt
BIGLARI HOLDINGS INC.
bh-20230930
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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 September 30, 2023
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.)

19100 Ridgewood Parkway,
Suite 1200
San Antonio, Texas 78259
(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 October 31, 2023:
Class A common stock – 206,864
Class B common stock – 2,068,640

BIGLARI HOLDINGS INC.
INDEX
Page No.


PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

BIGLARI HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30,
2023 		December 31,
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 33,993 $ 37,467
Investments 84,365 69,466
Receivables 25,783 29,375
Inventories 3,457 3,851
Other current assets 7,722 10,495
Total current assets 155,320 150,654
Property and equipment 383,766 400,725
Operating lease assets 33,547 34,739
Goodwill and other intangible assets 76,444 76,550
Investment partnerships 169,417 155,794
Other assets 8,678 10,012
Total assets $ 827,172 $ 828,474
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 78,997 $ 78,616
Loss and loss adjustment expenses 14,086 16,805
Unearned premiums 14,316 12,495
Current portion of lease obligations 15,206 16,981
Line of credit 19,000 10,000
Total current liabilities 141,605 134,897
Lease obligations 88,447 91,844
Deferred taxes 25,401 31,343
Asset retirement obligations 14,216 14,068
Other liabilities 99 754
Total liabilities 269,768 272,906
Shareholders’ equity
Common stock 1,138 1,138
Additional paid-in capital 385,594 381,788
Retained earnings 586,818 576,510
Accumulated other comprehensive income ( 3,066 ) ( 2,790 )
Treasury stock, at cost ( 413,080 ) ( 409,680 )
Biglari Holdings Inc. shareholders’ equity 557,404 546,966
Noncontrolling interests — 8,602
Total shareholders’ equity 557,404 555,568
Total liabilities and shareholders’ equity $ 827,172 $ 828,474
See accompanying Notes to Consolidated Financial Statements.

1
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
Third Quarter First Nine Months
2023 2022 2023 2022
(Unaudited) (Unaudited)
Revenues
Restaurant operations $ 61,886 $ 59,437 $ 187,506 $ 179,608
Insurance premiums and other 16,624 16,312 50,400 47,745
Oil and gas 12,159 14,380 35,123 38,632
Licensing and media 268 1,905 1,624 3,788
Total revenues 90,937 92,034 274,653 269,773
Costs and expenses
Restaurant cost of sales 36,789 36,162 104,455 107,469
Insurance losses and underwriting expenses 12,964 13,245 39,244 40,812
Oil and gas production costs 3,771 4,090 12,754 11,752
Licensing and media costs 476 345 1,427 1,975
Selling, general and administrative 18,315 15,469 54,587 48,275
Gain on sale — oil and gas properties ( 13,563 ) — ( 13,563 ) —
Impairments 752 — 2,381 20
Depreciation, depletion, and amortization 9,611 8,456 29,645 24,127
Interest expense on leases 1,262 1,372 3,870 4,169
Interest expense on borrowings 262 67 469 67
Total costs and expenses 70,639 79,206 235,269 238,666
Other income
Investment gains (losses) ( 4,715 ) ( 849 ) ( 724 ) ( 4,184 )
Investment partnership gains (losses) ( 89,599 ) 29,658 ( 24,507 ) ( 82,244 )
Total other income (expenses) ( 94,314 ) 28,809 ( 25,231 ) ( 86,428 )
Earnings (loss) before income taxes ( 74,016 ) 41,637 14,153 ( 55,321 )
Income tax expense (benefit) ( 17,502 ) 9,598 3,254 ( 13,282 )
Net earnings (loss) ( 56,514 ) 32,039 10,899 ( 42,039 )
Earnings attributable to noncontrolling interest — 34 591 34
Net earnings (loss) attributable to Biglari Holdings Inc. shareholders $ ( 56,514 ) $ 32,005 $ 10,308 $ ( 42,073 )
Net earnings (loss) per average equivalent Class A share * $ ( 195.55 ) $ 109.13 $ 35.44 $ ( 140.30 )
*Net earnings (loss) per average equivalent Class B share outstanding are one-fifth of the average equivalent Class A share or $( 39.11 ) and $ 7.09 for the third quarter and first nine months of 2023, respectively, and $ 21.83 and $( 28.06 ) for the third quarter and first nine months of 2022, respectively.
See accompanying Notes to Consolidated Financial Statements.
2
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Third Quarter First Nine Months
2023 2022 2023 2022
(Unaudited) (Unaudited)
Net earnings (loss) $ ( 56,514 ) $ 32,039 $ 10,899 $ ( 42,039 )
Foreign currency translation ( 286 ) ( 618 ) ( 276 ) ( 1,870 )
Comprehensive income ( 56,800 ) 31,421 10,623 ( 43,909 )
Comprehensive income attributable to noncontrolling interests — 34 591 34
Total comprehensive income attributable to Biglari Holdings Inc. shareholders $ ( 56,800 ) $ 31,387 $ 10,032 $ ( 43,943 )
See accompanying Notes to Consolidated Financial Statements.

3
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
First Nine Months
2023 2022
(Unaudited)
Operating activities
Net earnings (loss) $ 10,899 $ ( 42,039 )
Adjustments to reconcile net earnings (loss) to operating cash flows:
Depreciation, depletion, and amortization 29,645 24,127
Provision for deferred income taxes ( 5,931 ) ( 22,289 )
Asset impairments 2,381 20
Gains on sale of assets ( 18,391 ) ( 905 )
Investment and investment partnership (gains) losses 25,231 86,428
Distributions from investment partnerships — 51,200
Changes in receivables, inventories and other assets 5,441 7,240
Changes in accounts payable and accrued expenses ( 599 ) ( 4,028 )
Net cash provided by operating activities 48,676 99,754
Investing activities
Capital expenditures ( 16,910 ) ( 23,437 )
Proceeds from property and equipment sales 20,403 2,201
Acquisition of a business, net of cash acquired — ( 54,899 )
Purchases of noncontrolling interests ( 5,387 ) —
Purchases of interests in limited partnerships ( 41,530 ) ( 23,886 )
Purchases of investments ( 78,520 ) ( 110,837 )
Sales of investments and redemptions of fixed maturity securities 65,718 108,394
Net cash used in investing activities ( 56,226 ) ( 102,464 )
Financing activities
Proceeds from line of credit 31,600 30,000
Payments on line of credit ( 22,600 ) —
Principal payments on direct financing lease obligations ( 4,618 ) ( 4,647 )
Net cash provided by financing activities 4,382 25,353
Effect of exchange rate changes on cash ( 56 ) ( 150 )
Increase (decrease) in cash, cash equivalents and restricted cash ( 3,224 ) 22,493
Cash, cash equivalents and restricted cash at beginning of year 38,805 43,687
Cash, cash equivalents and restricted cash at end of third quarter $ 35,581 $ 66,180
September 30,
2023 2022
(Unaudited)
Cash and cash equivalents $ 33,993 $ 64,842
Restricted cash in other long-term assets 1,588 1,338
Cash, cash equivalents and restricted cash at end of third quarter $ 35,581 $ 66,180
See accompanying Notes to Consolidated Financial Statements.
4

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(dollars in thousands)
Biglari Holdings Inc. Shareholders’ Equity
Common
Stock 		Additional Paid-In
Capital 		Retained
Earnings 		Accumulated Other Comprehensive Income Treasury
Stock 		Non-controlling Interests Total
For the third quarter and first nine months of 2023
Balance at December 31, 2022 $ 1,138 $ 381,788 $ 576,510 $ ( 2,790 ) $ ( 409,680 ) $ 8,602 $ 555,568
Net earnings (loss) 64,886 651 65,537
Other comprehensive income 332 332
Adjustment for holdings in investment partnerships ( 239 ) ( 239 )
Balance at March 31, 2023 $ 1,138 $ 381,788 $ 641,396 $ ( 2,458 ) $ ( 409,919 ) $ 9,253 $ 621,198
Net earnings (loss) 1,936 ( 60 ) 1,876
Other comprehensive income ( 322 ) ( 322 )
Adjustment for holdings in investment partnerships ( 1,011 ) ( 1,011 )
Purchases of noncontrolling interests 3,806 ( 9,193 ) ( 5,387 )
Balance at June 30, 2023 $ 1,138 $ 385,594 $ 643,332 $ ( 2,780 ) $ ( 410,930 ) $ — $ 616,354
Net earnings (loss) ( 56,514 ) ( 56,514 )
Other comprehensive income ( 286 ) ( 286 )
Adjustment for holdings in investment partnerships ( 2,150 ) ( 2,150 )
Balance at September 30, 2023 $ 1,138 $ 385,594 $ 586,818 $ ( 3,066 ) $ ( 413,080 ) $ — $ 557,404
For the third quarter and first nine months of 2022
Balance at December 31, 2021 $ 1,138 $ 381,788 $ 608,528 $ ( 1,907 ) $ ( 401,851 ) $ — $ 587,696
Net earnings (loss) ( 298 ) ( 298 )
Other comprehensive income ( 231 ) ( 231 )
Adjustment for holdings in investment partnerships 130 130
Balance at March 31, 2022 $ 1,138 $ 381,788 $ 608,230 $ ( 2,138 ) $ ( 401,721 ) $ — $ 587,297
Net earnings (loss) ( 73,780 ) ( 73,780 )
Other comprehensive income ( 1,021 ) ( 1,021 )
Adjustment for holdings in investment partnerships ( 6,760 ) ( 6,760 )
Balance at June 30, 2022 $ 1,138 $ 381,788 $ 534,450 $ ( 3,159 ) $ ( 408,481 ) $ — $ 505,736
Net earnings (loss) 32,005 34 32,039
Other comprehensive income ( 618 ) ( 618 )
Adjustment for holdings in investment partnerships ( 638 ) ( 638 )
Purchases of noncontrolling interests 8,889 8,889
Balance at September 30, 2022 $ 1,138 $ 381,788 $ 566,455 $ ( 3,777 ) $ ( 409,119 ) $ 8,923 $ 545,408
See accompanying Notes to Consolidated Financial Statements.
5
BIGLARI HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(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 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, 2022.
Biglari Holdings Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, licensing and media, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized financial decision-making. Operating decisions for the various business units are made by their respective managers. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.
As of September 30, 2023, Mr. Biglari beneficially owns shares of the Company that represent approximately 66.3 % of the economic interest and approximately 70.4 % of the voting interest.

Business Acquisition
On September 14, 2022, the Company purchased Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum Corporation (“Abraxas Petroleum”) for a purchase price of $ 80,000 . On October 26, 2022, the Company converted the Preferred Shares to 90 % of the outstanding common stock of Abraxas Petroleum. On June 14, 2023, the remaining 10 % of the outstanding common stock of Abraxas Petroleum was acquired for $ 5,387 .

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 Property & Casualty Insurance Company, Southern Oil Company and Abraxas Petroleum. Intercompany accounts and transactions have been eliminated in consolidation.
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.

6
Note 2. Earnings Per Share (continued)
The following table presents shares authorized, issued and outstanding on September 30, 2023 and December 31, 2022.
September 30, 2023 December 31, 2022
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

The Company has applied the “two-class method” of computing earnings per share as prescribed in Accounting Standards Codification (“ASC”) 260, “ Earnings Per Share ”. (Class B shares are economically equivalent to one-fifth of a Class A 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. In the tabulation below is the weighted average equivalent Class A common stock for earnings per share.
Third Quarter First Nine Months
2023 2022 2023 2022
Equivalent Class A common stock outstanding 620,592 620,592 620,592 620,592
Proportional ownership of Company stock held by investment partnerships 331,585 327,317 329,732 320,711
Equivalent Class A common stock for earnings per share 289,007 293,275 290,860 299,881
Note 3. Investments
We classify investments in fixed maturity securities at the acquisition date as available-for-sale. Realized gains and losses on disposals of investments are determined on a specific identification basis. Dividends earned on investments held by our insurance companies are reported as investment income. We consider investment income as a component of our aggregate insurance operating result. However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

Investment losses for the third quarter and first nine months of 2023 were $ 4,715 and $ 724 , respectively. Investment losses in the third quarter and first nine months of 2022 were $ 849 and $ 4,184 , respectively.
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 these shares 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. is the general partner of the investment partnerships. Biglari Capital Corp. is solely owned by Mr. Biglari.


7
Note 4. Investment Partnerships (continued)

The fair value and adjustment for Company common stock held by the investment partnerships to determine the carrying value of our partnership interest are presented below.
Fair Value Company
Common Stock 		Carrying Value
Partnership interest at December 31, 2022 $ 383,004 $ 227,210 $ 155,794
Investment partnership gains (losses) 21,141 45,648 ( 24,507 )
Contributions 41,530 41,530
Changes in proportionate share of Company stock held 3,400 ( 3,400 )
Partnership interest at September 30, 2023 $ 445,675 $ 276,258 $ 169,417
Fair Value Company
Common Stock 		Carrying Value
Partnership interest at December 31, 2021 $ 474,201 $ 223,802 $ 250,399
Investment partnership gains (losses) ( 119,864 ) ( 37,620 ) ( 82,244 )
Contributions (net of distributions) ( 16,023 ) ( 16,023 )
Changes in proportionate share of Company stock held 7,268 ( 7,268 )
Partnership interest at September 30, 2022 $ 338,314 $ 193,450 $ 144,864
The carrying value of the investment partnerships net of deferred taxes is presented below.
September 30,
2023 		December 31, 2022
Carrying value of investment partnerships $ 169,417 $ 155,794
Deferred tax liability related to investment partnerships ( 17,646 ) ( 23,643 )
Carrying value of investment partnerships net of deferred taxes $ 151,771 $ 132,151
Because of a transaction that occurred between The Lion Fund, L.P. and The Lion Fund II, L.P. in 2022, we expect that a majority of the $ 17,646 deferred tax liability enumerated above will not become due until the dissolution of the investment partnerships. In effect, the tax-basis cost increased for the common stock of certain unaffiliated securities held by the investment partnerships.
The Company’s proportionate share of Company stock held by investment partnerships at cost was $ 413,080 and $ 409,680 at September 30, 2023 and December 31, 2022, respectively.
The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock.  Fair value of our partnership interest is assessed according to our proportional ownership interest of the fair value of investments held by the investment partnerships. Unrealized gains and losses on marketable securities held by the investment partnerships affect our net earnings.
Gains/losses from investment partnerships recorded in the Company’s consolidated statements of earnings are presented below.
Third Quarter First Nine Months
2023 2022 2023 2022
Gains (losses) from investment partnerships $ ( 89,599 ) $ 29,658 $ ( 24,507 ) $ ( 82,244 )
Tax expense (benefit) ( 21,222 ) 6,601 ( 6,660 ) ( 20,153 )
Contribution to net earnings (loss) $ ( 68,377 ) $ 23,057 $ ( 17,847 ) $ ( 62,091 )
On December 31 of each year, the general partner of the investment partnerships, Biglari Capital Corp., 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 Corp. 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.
8
Note 4. Investment Partnerships (continued)

There were no incentive reallocations accrued during the first nine months of 2023 and 2022.
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 September 30, 2023 $ 366,038 $ 327,011
Total liabilities as of September 30, 2023 $ 26,330 $ 174,471
Revenue for the first nine months of 2023 $ 44,886 $ ( 12,172 )
Earnings for the first nine months of 2023 $ 44,208 $ ( 19,603 )
Biglari Holdings’ ownership interest as of September 30, 2023 89.4 % 87.8 %
Total assets as of December 31, 2022 $ 285,071 $ 330,832
Total liabilities as of December 31, 2022 $ 10,517 $ 167,847
Revenue for the first nine months of 2022 $ ( 46,341 ) $ ( 88,378 )
Earnings for the first nine months of 2022 $ ( 46,544 ) $ ( 89,771 )
Biglari Holdings’ ownership interest as of September 30, 2022 88.2 % 87.7 %
Revenue in the financial information of the investment partnerships, summarized above, includes investment income and unrealized gains and losses on investments.
Note 5. Property and Equipment
Property and equipment is composed of the following.
September 30,
2023 		December 31,
2022
Land $ 139,817 $ 143,313
Buildings 151,911 151,627
Land and leasehold improvements 151,371 151,496
Equipment 215,246 222,661
Oil and gas properties 144,844 144,888
Construction in progress 1,599 2,238
804,788 816,223
Less accumulated depreciation, depletion, and amortization ( 421,022 ) ( 415,498 )
Property and equipment, net $ 383,766 $ 400,725
Depletion expense related to oil and gas properties was $ 7,550 and $ 4,345 during the first nine months of 2023 and 2022, respectively.
The Company recorded an impairment of $ 752 in the third quarter of 2023 and $ 2,361 in the first nine months of 2023 related to underperforming stores. There were no impairments of property and equipment in the third quarter and first nine months of 2022.

Property and equipment held for sale of $ 1,410 and $ 4,700 are recorded in other assets as of September 30, 2023 and December 31, 2022, respectively. The assets classified as held for sale at September 30, 2023 include properties owned by Steak n Shake, which were previously company-operated restaurants. During the third quarter, Abraxas Petroleum entered into a royalty-based arrangement with an unaffiliated party to conduct development activities that will establish proved undeveloped reserves on its proportional share; however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties. As a result of the transaction, a gain of $ 13,563 was recorded for the upfront payment portion of the arrangement. During the first nine months of 2023, Steak n Shake sold properties for a gain of $ 5,253 . Abraxas Petroleum sold its office building for $ 4,719 with no gain or loss recorded.
9

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.
A reconciliation of the change in the carrying value of goodwill is as follows.
Goodwill
Goodwill at December 31, 2022
Goodwill $ 53,813
Accumulated impairment losses ( 300 )
$ 53,513
Change in foreign exchange rates during the first nine months of 2023 ( 7 )
Goodwill at September 30, 2023
$ 53,506

Goodwill and indefinite-lived intangible asset impairment reviews include determining the estimated fair values of our reporting units and indefinite-lived intangible assets. The key assumptions and inputs used in such determinations may include forecasting revenue and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. Significant judgment by management is required in estimating the fair value of a reporting unit and in performing impairment reviews. Due to the inherent subjectivity and uncertainty in forecasting future cash flows and earnings over long periods of time, actual results may differ materially for the forecasts. If the carrying value of the indefinite-lived intangible asset exceeds fair value, the excess is charged to earnings as an impairment loss. If the carrying value of a reporting unit exceeds the estimated fair value of the reporting unit, then the excess, limited to the carrying amount of goodwill, will be charged to earnings as an impairment loss. There was no impairment recorded for goodwill during the first nine months of 2023 or 2022. There was a $ 20 impairment recorded for intangible assets during the first nine months of 2023 and 2022.
Other Intangible Assets
Intangible assets with indefinite lives are composed of the following.
Trade Names Lease Rights Total
Balance at December 31, 2022
Intangible assets $ 15,876 $ 10,889 $ 26,765
Accumulated impairment losses — ( 3,728 ) ( 3,728 )
15,876 7,161 23,037
Impairment — ( 20 ) ( 20 )
Change in foreign exchange rates during the first nine months of 2023 — ( 79 ) ( 79 )
Balance at September 30, 2023
$ 15,876 $ 7,062 $ 22,938
Note 7. Restaurant Operations Revenues
Restaurant operations revenues were as follows.
Third Quarter First Nine Months
2023 2022 2023 2022
Net sales $ 39,195 $ 37,448 $ 115,613 $ 113,345
Franchise partner fees 17,622 15,880 54,604 47,929
Franchise royalties and fees 4,073 5,089 12,456 15,472
Other 996 1,020 4,833 2,862
$ 61,886 $ 59,437 $ 187,506 $ 179,608

10
Note 7. Restaurant Operations Revenues (continued)
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.
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. We generate most of our revenue from our share of the franchise partners’ profits. An initial franchise fee of ten thousand dollars is recognized when the operator becomes a franchise partner. The Company recognizes franchise partner fees monthly as underlying restaurant sales occur.
The Company leases or subleases property and equipment to franchise partners under lease arrangements. Both real estate and equipment rental payments are charged to franchise partners and are recognized in accordance with ASC 842, “ Leases ”. During the third quarter of 2023 and 2022, restaurant operations recognized $ 5,692 and $ 5,362 , respectively, in franchise partner fees related to rental income. During the first nine months ended September 30, 2023 and September 30, 2022, restaurant operations recognized $ 17,030 and $ 15,193 , respectively, in franchise partner fees related to rental income.
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.
Other Revenue
Restaurant operations sells gift cards to customers that 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.
September 30,
2023 		December 31,
2022
Accounts payable $ 22,238 $ 28,431
Gift card and other marketing 8,564 12,028
Insurance accruals 5,284 6,012
Salaries, wages and vacation 11,937 4,400
Deferred revenue 3,137 4,445
Taxes payable 20,179 14,896
Oil and gas payable 3,418 3,877
Other 4,240 4,527
Accounts payable and accrued expenses $ 78,997 $ 78,616

Note 9. Lines of Credit
Biglari Holdings Line of Credit
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $ 30,000 . The line of credit will be available on a revolving basis until September 12, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants. The balance of the line of credit was $ 19,000 and $ 10,000 on September 30, 2023 and December 31, 2022, respectively. On September 30, 2023, the interest rate was 8.0 %.

11
Note 9. Lines of Credit (continued)
Western Sizzlin Revolver
Western Sizzlin’s available line of credit is $ 500 . As of September 30, 2023 and December 31, 2022, Western Sizzlin had no debt outstanding under its revolver.

Note 10. Unpaid Losses and Loss Adjustment Expenses
Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under insurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities, net of reinsurance, for each of the nine month periods ended September 30, 2023 and 2022 follows.
2023 2022
Balances at beginning of year:
Gross liabilities $ 17,520 $ 14,993
Reinsurance recoverable on unpaid losses ( 715 ) ( 1,892 )
Net liabilities 16,805 13,101
Incurred losses and loss adjustment expenses:
Current accident year 29,171 26,888
Prior accident years ( 3,421 ) 757
Total 25,750 27,645
Paid losses and loss adjustment expenses:
Current accident year 22,443 20,961
Prior accident years 6,026 5,172
Total 28,469 26,133
Balances at September 30:
Net liabilities 14,086 14,613
Reinsurance recoverable on unpaid losses 1,047 649
Gross liabilities $ 15,133 $ 15,262
In the first nine months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $ 3,421 in 2023 and net increases of $ 757 in 2022, which resulted in corresponding changes in incurred losses and loss adjustment expenses. These changes as a percentage of the net liabilities at the beginning of each year were reductions of 20.4 % in 2023 and increases of 5.8 % in 2022.

Note 11. Lease Assets and Obligations
Lease obligations include the following.
Current portion of lease obligations September 30,
2023 		December 31,
2022
Finance lease liabilities $ 1,287 $ 1,237
Finance obligations 5,027 5,161
Operating lease liabilities 8,892 10,583
Total current portion of lease obligations $ 15,206 $ 16,981
Long-term lease obligations
Finance lease liabilities $ 3,144 $ 4,129
Finance obligations 57,538 58,868
Operating lease liabilities 27,765 28,847
Total long-term lease obligations $ 88,447 $ 91,844
12
Note 11. Lease Assets and Obligations (continued)
Nature of Leases
Steak n Shake and Western Sizzlin operate restaurants that are located on sites owned by us or leased from third parties. In addition, they own sites and lease sites from third parties that are leased and/or subleased to franchisees.
Lease Costs
A significant portion of our operating and finance lease portfolio includes restaurant locations. We recognize fixed lease expense for operating leases on a straight-line basis over the lease term. For finance leases, we recognize amortization expense on the right-of-use asset and interest expense on the lease liability over the lease term.
Total lease cost consists of the following.
Third Quarter First Nine Months
2023 2022 2023 2022
Finance lease costs:
Amortization of right-of-use assets $ 239 $ 309 $ 723 $ 1,023
Interest on lease liabilities 80 102 257 325
Operating and variable lease costs 3,012 3,577 9,260 10,782
Sublease income ( 2,988 ) ( 2,895 ) ( 9,133 ) ( 8,487 )
Total lease costs $ 343 $ 1,093 $ 1,107 $ 3,643
Supplemental cash flow information related to leases is as follows.
First Nine Months
2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases $ 934 $ 1,116
Operating cash flows from finance leases $ 257 $ 324
Operating cash flows from operating leases $ 9,670 $ 9,347



13
Note 11. Lease Assets and Obligations (continued)
Supplemental balance sheet information related to leases is as follows.
September 30,
2023 		December 31,
2022
Finance leases:
Property and equipment, net $ 3,098 $ 4,352
Weighted-average lease terms and discount rates are as follows.
September 30,
2023
Weighted-average remaining lease terms:
Finance leases 3.68 years
Operating leases 5.42 years
Weighted-average discount rates:
Finance leases 7.0 %
Operating leases 7.0 %
Maturities of lease liabilities as of September 30, 2023 are as follows.
Year Operating
Leases 		Finance
Leases
2023 $ 3,040 $ 378
2024 10,495 1,534
2025 8,989 1,298
2026 6,468 959
2027 4,182 623
After 2027 10,715 232
Total lease payments 43,889 5,024
Less interest 7,232 593
Total lease liabilities $ 36,657 $ 4,431
Lease Income
The components of lease income recorded in operations are as follows.
Third Quarter First Nine Months
2023 2022 2023 2022
Operating lease income $ 4,085 $ 4,085 $ 12,214 $ 11,737
Variable lease income 1,840 1,556 5,545 4,312
Total lease income $ 5,925 $ 5,641 $ 17,759 $ 16,049


14
Note 11. Lease Assets and Obligations (continued)
The following table displays the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2023. Franchise partner leases and subleases are short-term leases and have been excluded from the table.

Operating Leases
Year Subleases Owned Properties
2023 $ 143 $ 99
2024 465 396
2025 338 404
2026 19 407
2027 — 415
After 2027 — 2,858
Total future minimum receipts $ 965 $ 4,579
Note 12. Income Taxes
In determining the quarterly provision for income taxes, the Company used an estimated annual effective tax rate for the first nine months of 2023 and 2022. 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 benefit for the third quarter of 2023 was $ 17,502 compared to an income tax expense of $ 9,598 for the third quarter of 2022.  Income tax expense for the first nine months of 2023 was $ 3,254 compared to an income tax benefit of $ 13,282 for the first nine months of 2022. The variance in income taxes between 2023 and 2022 is attributable to income and losses generated by the investment partnerships.  Investment partnership pre-tax losses were $ 89,599 during the third quarter of 2023 compared to pre-tax gains of $ 29,658 during the third quarter of 2022. Investment partnership pre-tax losses were $ 24,507 during the first nine months of 2023 compared to pre-tax losses of $ 82,244 during the first nine months of 2022.
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.
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.

15
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 as Level 1 of the fair value hierarchy.
Equity securities: The Company’s investments in equity securities are classified as Level 1 of the fair value hierarchy.
Bonds: The Company’s investments in bonds consist of both corporate and government debt. Bonds are classified as Level l 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 as Level 1 of the fair value hierarchy.

As of September 30, 2023 and December 31, 2022, the fair values of financial assets were as follows.
September 30, 2023 December 31, 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 7,591 $ — $ — $ 7,591 $ 17,608 $ — $ — $ 17,608
Equity securities
Consumer goods 22,475 — — 22,475 17,274 — — 17,274
Other 2,631 — — 2,631 2,031 — — 2,031
Bonds
Government 58,471 — — 58,471 48,456 — — 48,456
Corporate 1,188 — — 1,188 2,199 — — 2,199
Non-qualified deferred compensation plan investments — — — — 699 — — 699
Total assets at fair value $ 92,356 $ — $ — $ 92,356 $ 88,267 $ — $ — $ 88,267
There were no changes in our valuation techniques used to measure fair values on a recurring basis.
16
Note 15. Related Party Transactions
Service Agreement
The Company is party to a service agreement with Biglari Enterprises LLC (“Biglari Enterprises”) under which Biglari Enterprises provides business and administrative related services to the Company. Biglari Enterprises is owned by Mr. Biglari.

The Company paid Biglari Enterprises $ 6,300 in service fees during the first nine months of 2023 and 2022. The service agreement does not alter the hurdle rate connected with the incentive reallocation paid to Biglari Capital Corp.
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.
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.  Our oil and gas operations include Southern Oil and Abraxas Petroleum. The Company also reports segment information for Maxim. Other business activities not specifically identified with reportable business segments are presented under corporate and other. 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.
17
Note 16. Business Segment Reporting (continued)
A disaggregation of our consolidated data for the third quarters and first nine months of 2023 and 2022 is presented in the tables which follow.
Revenues
Third Quarter First Nine Months
2023 2022 2023 2022
Operating Businesses:
Restaurant Operations:
Steak n Shake $ 59,180 $ 56,949 $ 179,244 $ 172,444
Western Sizzlin 2,706 2,488 8,262 7,164
Total Restaurant Operations 61,886 59,437 187,506 179,608
Insurance Operations:
Underwriting
First Guard 9,351 9,112 27,465 26,858
Southern Pioneer 5,809 6,004 18,430 17,653
Investment income and other 1,464 1,196 4,505 3,234
Total Insurance Operations 16,624 16,312 50,400 47,745
Oil and Gas Operations:
Abraxas Petroleum 8,310 1,692 21,493 1,692
Southern Oil 3,849 12,688 13,630 36,940
Total Oil and Gas Operations 12,159 14,380 35,123 38,632
Maxim 268 1,905 1,624 3,788
$ 90,937 $ 92,034 $ 274,653 $ 269,773


18
Note 16. Business Segment Reporting (continued)
Earnings (Losses) Before Income Taxes
Third Quarter First Nine Months
2023 2022 2023 2022
Operating Businesses:
Restaurant Operations:
Steak n Shake $ 3,358 $ 3,964 $ 19,317 $ 11,777
Western Sizzlin 397 369 1,462 997
Total Restaurant Operations 3,755 4,333 20,779 12,774
Insurance Operations:
Underwriting:
First Guard 2,362 2,354 7,378 4,800
Southern Pioneer ( 166 ) ( 483 ) ( 728 ) ( 1,101 )
Investment income and other 1,155 1,221 3,456 3,188
Total Insurance Operations 3,351 3,092 10,106 6,887
Oil and Gas Operations:
Abraxas Petroleum 17,990 446 21,044 446
Southern Oil 963 6,795 2,902 19,137
Total Oil and Gas Operations 18,953 7,241 23,946 19,583
Maxim ( 239 ) 1,534 91 1,699
Interest expense not allocated to segments ( 262 ) ( 67 ) ( 469 ) ( 67 )
Total Operating Businesses 25,558 16,133 54,453 40,876
Corporate and other ( 5,260 ) ( 3,305 ) ( 15,069 ) ( 9,769 )
Investment gains (losses) ( 4,715 ) ( 849 ) ( 724 ) ( 4,184 )
Investment partnership gains (losses) ( 89,599 ) 29,658 ( 24,507 ) ( 82,244 )
$ ( 74,016 ) $ 41,637 $ 14,153 $ ( 55,321 )
19

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands except per share data)
Overview
Biglari Holdings Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, licensing and media, restaurants, and oil and gas. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized financial decision-making. Operating decisions for the various business units are made by their respective managers. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.
As of September 30, 2023, Mr. Biglari beneficially owns shares of the Company that represent approximately 66.3% of the economic interest and 70.4% of the voting interest.
On September 14, 2022, the Company purchased Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum Corporation for a purchase price of $80,000. On October 26, 2022, the Company converted the Preferred Shares to 90% of the outstanding common stock of Abraxas Petroleum. On June 14, 2023, the remaining 10% of the outstanding common stock of Abraxas Petroleum was acquired for $5,387.
Net earnings (loss) attributable to Biglari Holdings Inc. shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.
Third Quarter First Nine Months
2023 2022 2023 2022
Operating businesses:
Restaurant $ 3,395 $ 3,320 $ 16,170 $ 9,588
Insurance 2,674 2,389 7,975 5,292
Oil and gas 14,631 5,574 18,451 14,867
Brand licensing (179) 1,150 68 1,274
Interest expense (202) (52) (362) (52)
Corporate and other (4,746) (2,742) (12,987) (7,630)
Total operating businesses 15,573 9,639 29,315 23,339
Investment gains (losses) (3,710) (657) (569) (3,287)
Investment partnership gains (losses) (68,377) 23,057 (17,847) (62,091)
Net earnings (loss) (56,514) 32,039 10,899 (42,039)
Earnings (loss) attributable to noncontrolling interest — 34 591 34
Net earnings (loss) attributable to Biglari Holdings Inc. shareholders $ (56,514) $ 32,005 $ 10,308 $ (42,073)

20

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurants
Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 510 company-operated and franchise restaurants as of September 30, 2023.
Steak n Shake Western Sizzlin
Company-
operated 		Franchise
Partner 		Traditional
Franchise 		Company-
operated 		Franchise Total
Total stores as of December 31, 2022
177 175 154 3 36 545
Corporate stores transitioned (6) 7 (1) — — —
Net restaurants opened (closed) (12) (1) (19) — (3) (35)
Total stores as of September 30, 2023
159 181 134 3 33 510
Total stores as of December 31, 2021
199 159 178 3 38 577
Corporate stores transitioned (12) 12 — — — —
Net restaurants opened (closed) (6) — (19) — — (25)
Total stores as of September 30, 2022
181 171 159 3 38 552
As of September 30, 2023, 27 of the 159 company-operated Steak n Shake stores were closed. As of September 30, 2023, Steak n Shake has contracted to sell three of the 27 closed stores. An additional 16 closed stores are listed with brokers for lease or sale as of September 30, 2023. Steak n Shake plans to reopen or refranchise the remaining closed company-operated restaurants.
During the first nine months of 2023, Steak n Shake reopened four stores and sold six properties; all were closed as of December 31, 2022.

21

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurant operations are summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Revenue
Net sales $ 39,195 $ 37,448 $ 115,613 $ 113,345
Franchise partner fees 17,622 15,880 54,604 47,929
Franchise royalties and fees 4,073 5,089 12,456 15,472
Other revenue 996 1,020 4,833 2,862
Total revenue 61,886 59,437 187,506 179,608
Restaurant cost of sales
Cost of food 11,888 30.3 % 11,359 30.3 % 34,038 29.4 % 33,684 29.7 %
Restaurant operating costs 20,955 53.5 % 20,745 55.4 % 58,707 50.8 % 61,127 53.9 %
Occupancy costs 3,946 10.1 % 4,058 10.8 % 11,710 10.1 % 12,658 11.2 %
Total cost of sales 36,789 36,162 104,455 107,469
Selling, general and administrative
General and administrative 10,720 17.3 % 9,556 16.1 % 31,973 17.1 % 28,327 15.8 %
Marketing 2,629 4.2 % 2,758 4.6 % 8,876 4.7 % 9,589 5.3 %
Other expenses (825) (1.3) % (825) (1.4) % (5,126) (2.7) % (1,141) (0.6) %
Total selling, general and administrative 12,524 20.2 % 11,489 19.3 % 35,723 19.1 % 36,775 20.5 %
Impairments (752) — (2,381) (20)
Depreciation and amortization (6,804) (6,081) (20,298) (18,401)
Interest on finance leases and obligations (1,262) (1,372) (3,870) (4,169)
Earnings before income taxes 3,755 4,333 20,779 12,774
Income tax expense 360 1,013 4,609 3,186
Contribution to net earnings $ 3,395 $ 3,320 $ 16,170 $ 9,588
Cost of food, restaurant operating costs, and occupancy costs are expressed as a percentage of net sales.
General and administrative, marketing and other expenses are expressed as a percentage of total revenue.

Net sales for the third quarter and first nine months of 2023 were $39,195 and $115,613, respectively, representing an increase of $1,747 or 4.7% and $2,268 or 2.0%, compared to the third quarter and first nine months of 2022, respectively. The increase in revenue of company-owned restaurants is primarily due to higher same-store sales.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue. Because we derive most of our revenue from our share of the profits, revenue will continue to decline as we transition from company-operated units to franchise partner units.

Our franchise partner fees were $17,622 during the third quarter of 2023, as compared to $15,880 during the third quarter of 2022. Franchise partner fees were $54,604 and $47,929 during the first nine months of 2023 and 2022, respectively. As of September 30, 2023 there were 181 franchise partner units compared to 171 franchise partner units as of September 30, 2022. Included in franchise partner fees were $5,692 and $5,362 of rental income during the third quarter of 2023 and 2022, respectively, and $17,030 and $15,193 during the first nine months of 2023 and 2022, respectively. Franchise partners rent buildings and equipment from Steak n Shake.
22

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The franchise royalties and fees generated by the traditional franchising business were $4,073 during the third quarter of 2023, as compared to $5,089 during the third quarter of 2022. Franchise royalties and fees during the first nine months of 2023 were $12,456 compared to $15,472 during the first nine months of 2022. There were 134 Steak n Shake traditional units open on September 30, 2023, as compared to 159 units open on September 30, 2022. The decrease in franchise royalties and fees was primarily due to fewer traditional units open during 2023.

The cost of food at company-operated units during the third quarter of 2023 was $11,888 or 30.3% of net sales, as compared to $11,359 or 30.3% of net sales during the third quarter of 2022. The cost of food at company-operated units during the first nine months of 2023 was $34,038 or 29.4% of net sales, as compared to $33,684 or 29.7% of net sales during the first nine months of 2022. Cost of food expressed as a percentage of net sales remained relatively consistent.

The operating costs at company-operated restaurants during the third quarter of 2023 were $20,955 or 53.5% of net sales, as compared to $20,745 or 55.4% of net sales in the third quarter of 2022. The operating costs at company-operated restaurants during the first nine months of 2023 were $58,707 or 50.8% of net sales, as compared to $61,127 or 53.9% of net sales in 2022. The decrease in operating costs as a percentage of net sales was mainly attributable to higher net sales.

General and administrative expenses during the third quarter of 2023 were $10,720 or 17.3% of total revenue, as compared to $9,556 or 16.1% of total revenue in the third quarter of 2022. General and administrative expenses during the first nine months of 2023 were $31,973 or 17.1% of total revenue, as compared to $28,327 or 15.8% of total revenue in the first nine months of 2022. The change in general and administrative expenses is mainly attributable to an increase in support staff during 2023.

Marketing expense decreased by $713 during the first nine months of 2023 compared to the first nine months of 2022. The decrease was primarily attributable to reduced marketing by traditional franchisees.

During the first nine months of 2023, Steak n Shake sold properties for a gain of $5,253.

The Company recorded $752 in impairment charges in the third quarter and $2,381 in the first nine months of 2023 related to underperforming stores. The Company recorded no impairment charges in the third quarter and $20 in the first nine months of 2022.

Depreciation and amortization expense was $20,298 during 2023 versus $18,401 during 2022. The year-over-year increase was primarily attributable to higher capital expenditures incurred in 2022 and 2021.

Interest on obligations under leases was $3,870 during 2023 versus $4,169 during 2022. The year-over-year decrease in interest expense is primarily attributable to the maturity and retirement of lease obligations.
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. Our business units are operated under separate local management. Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer.

23

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Underwriting results of our insurance operations are summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Underwriting gain attributable to:
First Guard $ 2,362 $ 2,354 $ 7,379 $ 4,800
Southern Pioneer (166) (483) (728) (1,101)
Pre-tax underwriting gain 2,196 1,871 6,651 3,699
Income tax expense 461 392 1,397 776
Net underwriting gain $ 1,735 $ 1,479 $ 5,254 $ 2,923

Earnings of our insurance operations are summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Premiums earned $ 15,160 $ 15,116 $ 45,895 $ 44,511
Insurance losses 8,783 8,814 25,751 27,646
Underwriting expenses 4,181 4,431 13,493 13,166
Pre-tax underwriting gain 2,196 1,871 6,651 3,699
Other income and expenses
Investment income 832 362 2,169 832
Other income (expenses) 323 859 1,286 2,356
Total other income 1,155 1,221 3,455 3,188
Earnings before income taxes 3,351 3,092 10,106 6,887
Income tax expense 677 703 2,131 1,595
Contribution to net earnings $ 2,674 $ 2,389 $ 7,975 $ 5,292

Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.

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.
Third Quarter First Nine Months
2023 2022 2023 2022
Amount % Amount % Amount % Amount %
Premiums earned $ 9,351 100.0 % $ 9,112 100.0 % $ 27,465 100.0 % $ 26,858 100.0 %
Insurance losses 5,268 56.3 % 4,815 52.8 % 14,766 53.8 % 16,468 61.3 %
Underwriting expenses 1,721 18.4 % 1,943 21.3 % 5,320 19.4 % 5,590 20.8 %
Total losses and expenses 6,989 74.7 % 6,758 74.1 % 20,086 73.2 % 22,058 82.1 %
Pre-tax underwriting gain $ 2,362 $ 2,354 $ 7,379 $ 4,800

First Guard’s ratio of losses and loss adjustment expenses to premiums earned was 56.3% during the third quarter of 2023 as compared to 52.8% during the third quarter of 2022 and 53.8% during the first nine months of 2023 as compared to 61.3%
24

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
during the first nine months of 2022. First Guard’s underwriting results in 2023 were in line with its historical performance despite cost inflation in property and physical damage claims, which began to accelerate in 2022.
Southern Pioneer

Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance. A summary of Southern Pioneer’s underwriting results follows.
Third Quarter First Nine Months
2023 2022 2023 2022
Amount % Amount % Amount % Amount %
Premiums earned $ 5,809 100.0 % $ 6,004 100.0 % $ 18,430 100.0 % $ 17,653 100.0 %
Insurance losses 3,515 60.5 % 3,999 66.6 % 10,985 59.6 % 11,178 63.3 %
Underwriting expenses 2,460 42.3 % 2,488 41.4 % 8,173 44.3 % 7,576 42.9 %
Total losses and expenses 5,975 102.8 % 6,487 108.0 % 19,158 103.9 % 18,754 106.2 %
Pre-tax underwriting loss $ (166) $ (483) $ (728) $ (1,101)
Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 60.5% during the third quarter of 2023 as compared to 66.6% during the third quarter of 2022 and 59.6% during the first nine months of 2023 and 63.3% during the first nine months of 2022. Southern Pioneer’s underwriting losses were primarily attributable to weather-related losses in its personal lines as well as a higher expense ratio, an increase caused by information technology projects related to the implementation of a new policy administration system.
A summary of net investment income attributable to our insurance operations follows.
Third Quarter First Nine Months
2023 2022 2023 2022
Interest, dividends and other investment income:
First Guard $ 475 $ 202 $ 1,293 $ 398
Southern Pioneer 357 160 876 434
Pre-tax investment income 832 362 2,169 832
Income tax expense 174 76 455 175
Net investment income $ 658 $ 286 $ 1,714 $ 657
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.
25

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Oil and Gas
A summary of revenues and earnings of our oil and gas operations follows.
Third Quarter First Nine Months
2023 2022 2023 2022
Oil and gas revenues $ 12,159 $ 14,380 $ 35,123 $ 38,632
Oil and gas production costs 3,771 4,090 12,754 11,752
Depreciation, depletion and accretion 2,404 2,233 8,155 5,286
Gain on sale of properties (13,563) — (13,563) —
General and administrative expenses 594 816 3,831 2,011
Earnings before income taxes 18,953 7,241 23,946 19,583
Income tax expense 4,322 1,667 5,495 4,716
Contribution to net earnings $ 14,631 $ 5,574 $ 18,451 $ 14,867
Our oil and gas business is highly dependent on oil and natural gas prices. The average West Texas Intermediate price per barrel for the first nine months of 2023 was approximately $77.30 as compared to approximately $98.27 in the first nine months of 2022. It is expected that the prices of oil and gas commodities will remain volatile, which will be reflected in our financial results.
Southern Oil

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.
Third Quarter First Nine Months
2023 2022 2023 2022
Oil and gas revenues $ 3,849 $ 12,688 $ 13,630 $ 36,940
Oil and gas production costs 1,710 3,484 5,918 11,146
Depreciation, depletion and accretion 754 1,873 3,106 4,926
General and administrative expenses 422 536 1,704 1,731
Earnings before income taxes 963 6,795 2,902 19,137
Income tax expense 185 1,564 656 4,613
Contribution to net earnings $ 778 $ 5,231 $ 2,246 $ 14,524


26

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Abraxas Petroleum

Abraxas Petroleum operates oil and gas properties in the Permian Basin of West Texas. Earnings for Abraxas Petroleum are summarized below.

Third Quarter First Nine Months
2023 2022 2023 2022
Oil and gas revenues $ 8,310 $ 1,692 $ 21,493 $ 1,692
Oil and gas production costs 2,061 606 6,836 606
Depreciation, depletion and accretion 1,650 360 5,049 360
Gain on sale of properties (13,563) — (13,563) —
General and administrative expenses 172 280 2,127 280
Earnings before income taxes 17,990 446 21,044 446
Income tax expense 4,137 103 4,839 103
Contribution to net earnings $ 13,853 $ 343 $ 16,205 $ 343
At year-end 2022, none of Abraxas Petroleum’s proved reserves were classified as proved undeveloped. During the third quarter, Abraxas Petroleum entered into a royalty-based arrangement with an unaffiliated party to conduct development activities that will establish proved undeveloped reserves on its proportional share; however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties. As a result of the transaction, a gain of $13,563 was recorded for the upfront payment portion of the arrangement.
Brand Licensing
Maxim’s business lies principally in licensing and media. Earnings of operations are summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Licensing and media revenue $ 268 $ 1,905 $ 1,624 $ 3,788
Licensing and media costs 476 345 1,427 1,975
General and administrative expenses 31 26 106 114
Earnings before income taxes (239) 1,534 91 1,699
Income tax expense (60) 384 23 425
Contribution to net earnings $ (179) $ 1,150 $ 68 $ 1,274
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 and Investment Partnership Gains
Investment losses net of tax for the third quarter of 2023 were $3,710 compared to investment losses net of tax for the third quarter of 2022 of $657. Investment losses net of tax for the first nine months of 2023 were $569 compared to investment losses net of tax for the first nine months of 2022 of $3,287. Dividends earned on investments are reported as investment income by
27

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
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.
Earnings (loss) from our investments in partnerships are summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Investment partnership gains (losses) $ (89,599) $ 29,658 $ (24,507) $ (82,244)
Tax expense (benefit) (21,222) 6,601 (6,660) (20,153)
Contribution to net earnings (loss) $ (68,377) $ 23,057 $ (17,847) $ (62,091)
Investment partnership gains (losses) 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. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.
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 in the Company’s consolidated financial results.
Investment gains and losses in 2023 and 2022 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment and derivative gains/losses are generally meaningless for analytical purposes in understanding our quarterly and annual results.
Interest Expense
The Company’s interest expense is summarized below.
Third Quarter First Nine Months
2023 2022 2023 2022
Interest expense on notes payable $ 262 $ 67 $ 469 $ 67
Tax benefit 60 15 107 15
Interest expense net of tax $ 202 $ 52 $ 362 $ 52

On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The balance of the line of credit was $19,000 as of September 30, 2023 and $10,000 as of December 31, 2022. On September 30, 2023, the interest rate was 8.0%.
Corporate and Other
Income and expense items in corporate and other exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Corporate and other net losses increased during the third quarter and first nine months of 2023 compared to the same periods in 2022 primarily because of accruing for higher incentive fees.
Income Taxes
Income tax benefit for the third quarter of 2023 was $17,502 compared to an income tax expense of $9,598 for the third quarter of 2022. Income tax expense for the first nine months of 2023 was $3,254 compared to an income tax benefit of $13,282 for the first nine months of 2022. The variance in income taxes between 2023 and 2022 is attributable to taxes on income generated by the investment partnerships.  Investment partnership pre-tax losses were $89,599 during the third quarter of 2023 compared to pre-tax gains of $29,658 during the third quarter of 2022. Investment partnership pre-tax losses were $24,507 during the first nine months of 2023 compared to pre-tax losses of $82,244 during the first nine months of 2022.
28

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Financial Condition
Consolidated cash and investments are summarized below.
September 30,
2023 		December 31,
2022
Cash and cash equivalents $ 33,993 $ 37,467
Investments 84,365 69,466
Fair value of interest in investment partnerships 445,675 383,004
Total cash and investments 564,033 489,937
Less: portion of Company stock held by investment partnerships (276,258) (227,210)
Carrying value of cash and investments on balance sheet $ 287,775 $ 262,727
Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results.
Liquidity
Our balance sheet continues to maintain significant liquidity.  Consolidated cash flow activities are summarized below.
First Nine Months
2023 2022
Net cash provided by operating activities $ 48,676 $ 99,754
Net cash used in investing activities (56,226) (102,464)
Net cash provided by financing activities 4,382 25,353
Effect of exchange rate changes on cash (56) (150)
Increase (decrease) in cash, cash equivalents and restricted cash $ (3,224) $ 22,493
In 2023, cash from operating activities decreased by $51,078 as compared to 2022. The change was primarily attributable to distributions from investment partnerships of $51,200 that occurred in 2022.
Net cash used in investing activities was $46,238 lower during 2023 as compared to 2022. Capital expenditures were $6,527 higher in 2022 primarily due to Steak n Shake’s implementation of a self-service model. Proceeds from sales of property and equipment were $18,202 higher in 2023 primarily due to the sale of oil & gas properties for $13,563. During 2022, the Company acquired 90% of Abraxas Petroleum for $80,000 but also assumed $25,101 of cash in the transaction. In 2023 the Company acquired the remaining 10% of Abraxas Petroleum for $5,387.
Cash provided by financing activities decreased $20,971 during 2023 as compared to 2022. The decrease was primarily due to net borrowings on the Company’s line of credit. In 2022 the Company borrowed $30,000 and in 2023 the Company borrowed $9,000.
Biglari Holdings Line of Credit
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The line of credit will be available on a revolving basis until September 12, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants. As of September 30, 2023, we were in compliance with all covenants. The balance of the line of credit was $19,000 and $10,000 on September 30, 2023 and December 31, 2022, respectively. On September 30, 2023, the interest rate was 8.0%.
Western Sizzlin Revolver
Western Sizzlin’s available line of credit is $500. As of September 30, 2023 and December 31, 2022, Western Sizzlin had no debt outstanding on its revolver.

29

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, 2022.
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
Not applicable.
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 September 30, 2023.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023 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, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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.

31

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: November 3, 2023 By:
/s/ B RUCE L EWIS
Bruce Lewis
Controller

32
TABLE OF CONTENTS
Part 1 Financial InformationItem 1. Financial StatementsNote 1. Summary Of Significant Accounting PoliciesNote 2. Earnings Per ShareNote 2. Earnings Per Share (continued)Note 3. InvestmentsNote 4. Investment PartnershipsNote 4. Investment Partnerships (continued)Note 5. Property and EquipmentNote 6. Goodwill and Other Intangible AssetsNote 7. Restaurant Operations RevenuesNote 7. Restaurant Operations Revenues (continued)Note 8. Accounts Payable and Accrued ExpensesNote 9. Lines Of CreditNote 9. Lines Of Credit (continued)Note 10. Unpaid Losses and Loss Adjustment ExpensesNote 11. Lease Assets and ObligationsNote 11. Lease Assets and Obligations (continued)Note 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.