* Net earnings per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $26.33 for 2019, $11.14 for 2018 and $27.20 for 2017.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Years Ended December 31, 2019, 2018
and 2017)
(dollars in thousands, except share and
per-share data)
|
Note 1.
|
Summary of Significant Accounting Policies
|
Description of Business
Biglari Holdings Inc. 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 is founded and 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 December 31, 2019, Mr. Biglari’s
beneficial ownership was approximately 64.4% of the Company’s outstanding Class A common stock and 55.4% of the Company’s
outstanding Class B common stock.
Business Acquisition
On September 9, 2019, a wholly-owned subsidiary
of the Company, Southern Oil Company, acquired the stock of Southern Oil of Louisiana Inc. (collectively “Southern Oil”)
for $51,505 in cash. Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf
of Mexico. The Company’s financial results include the results of Southern Oil from the acquisition date to the end of the
year.
Acquired assets included oil and gas properties
of $69,881 and accounts receivable of $6,735. Acquired liabilities included asset retirement obligations of $10,542, income taxes
payable of $4,302, deferred tax liabilities of $5,671 and accounts payable of $3,949. Acquisition related expenses were recorded
as general and administrative expenses.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries including Steak n Shake Inc. (“Steak n Shake”), Western
Sizzlin Corporation (“Western Sizzlin”), Maxim Inc. (“Maxim”), First Guard Insurance Company and its agency,
1st Guard Corporation (collectively “First Guard”), and Southern Oil. Intercompany accounts and transactions have
been eliminated in consolidation.
Cash, Cash Equivalents and Restricted
Cash
Cash equivalents primarily consist of U.S.
Government securities and money market accounts, all of which have original maturities of three months or less. Cash equivalents
are carried at fair value. The statement of cash flows includes restricted cash with cash and cash equivalents.
Cash as reported on the statements of cash
flows consists of the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Cash and cash equivalents
|
|
$
|
67,772
|
|
|
$
|
48,557
|
|
|
$
|
58,577
|
|
Restricted cash included in other long-term assets
|
|
|
2,924
|
|
|
|
6,453
|
|
|
|
8,653
|
|
Cash, cash equivalents and restricted cash
|
|
$
|
70,696
|
|
|
$
|
55,010
|
|
|
$
|
67,230
|
|
Investments
Our investments are carried at fair value
with net unrealized gains or losses reported in the statements of earnings. Realized gains and losses on disposals of investments
are determined by the specific identification of cost of investments sold.
|
Note 1.
|
Summary of Significant
Accounting Policies (continued)
|
Investment Partnerships
The Company holds a limited interest in
The Lion Fund, L.P. and The Lion Fund II, L.P. (collectively the “investment partnerships”). Biglari Capital Corp.
(“Biglari Capital”), an entity solely owned by Mr. Biglari, is the general partner of the investment partnerships.
Our interests in the investment partnerships are accounted as equity method investments because of our retained limited partner
interests. The Company records investment partnership gains (inclusive of the investment partnerships’ unrealized gains and
losses on their securities) as a component of other income based on our proportional ownership interest in the partnerships. The
investment partnerships are, for purposes of generally accepted accounting principles (“GAAP”), investment companies
under the AICPA Audit and Accounting Guide Investment Companies.
Concentration of Equity Price Risk
The majority of our investments are conducted
through investment partnerships which generally hold common stocks. We also hold marketable securities directly. Through the investment
partnerships we hold a concentrated position in the common stock of Cracker Barrel Old Country Store, Inc. A significant decline
in the general stock market or in the prices of major investments may have a materially adverse effect on our earnings and on consolidated
shareholders’ equity.
Receivables
Our accounts receivable balance consists
primarily of franchisee, customer, and other receivables. We carry our accounts receivable at cost less an allowance for doubtful
accounts, which is based on a history of past write-offs and collections and current credit conditions. Allowance for doubtful
accounts was $4,857 and $3,901 at December 31, 2019 and 2018, respectively.
Inventories
Inventories are valued at the lower of
cost (first-in, first-out method) or market, and consist primarily of restaurant food items and supply inventory.
Property and Equipment
Restaurants
Property and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are recognized on the straight-line method over the estimated useful lives of the assets (10 to 30
years for buildings and land improvements, and 3 to 10 years for equipment). Leasehold improvements are amortized on the straight-line
method over the shorter of the estimated useful lives of the improvements or the term of the related leases. Interest costs associated
with the construction of new restaurants are capitalized. Major improvements are also capitalized while repairs and maintenance
are expensed as incurred. We review our long-lived restaurant assets whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable. For purposes of this assessment, assets are evaluated at the lowest level for which
there are identifiable cash flows which is generally at the individual restaurant level. Assets included in the impairment assessment
generally consist of property, equipment and leasehold improvements directly associated with an individual restaurant as well as
any related finance or operating lease assets. If the future undiscounted cash flows of an asset are less than the recorded
value, an impairment is recorded for the difference between the carrying value and the estimated fair value of the asset.
Oil and Gas Properties
The successful efforts method is used for crude oil and natural gas exploration and
production activities. All costs for development wells, related plant and equipment, proved mineral interests in crude oil and
natural gas properties, and related asset retirement obligation assets are capitalized. Costs of exploratory wells are capitalized
pending determination of whether the wells found proved reserves. Costs of wells that are assigned proved reserves remain capitalized.
Costs also are capitalized for exploratory wells that have found crude oil and natural gas reserves even if the reserves cannot
be classified as proved when the drilling is completed, provided the exploratory well has found a sufficient quantity of reserves
to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic
and operating viability of the project. All other exploratory wells and costs are expensed. There were no capitalized costs for
exploratory activities during 2019.
The Company continues to capitalize exploratory well costs after the completion of
drilling when (a) the well has found a sufficient quantity of reserves to justify completion as a producing well, and (b) sufficient
progress has been made in assessing the reserves and the economic and operating viability of the project. If either condition is
not met or if the Company obtains information that raises substantial doubt about the economic or operational viability of the
project, the exploratory well would be assumed to be impaired, and its costs, net of any salvage value, would be charged to expense.
Asset retirement obligations
Asset retirement obligations relate to future costs associated with the plugging
and abandonment of oil and gas wells, the removal of equipment and facilities from leased acreage, and the return of such land
to its original condition. The Company determines its asset retirement obligation amounts by calculating the present value
of the estimated future cash outflows associated with its plug and abandonment obligations. The fair value of a liability
for an asset retirement obligation is recorded in the period in which it is incurred, and the cost of such liability increases
the carrying amount of the related long-lived asset by the same amount. The liability is accreted each period through charges
to depreciation, depletion and amortization expense, and the capitalized cost is depleted on a unit-of-production basis over the
proved developed reserves of the related asset. If an asset retirement obligation is settled for an amount other than the recorded
amount, a gain or loss is recognized.
|
Note 1.
|
Summary of Significant
Accounting Policies (continued)
|
Goodwill and Other Intangible Assets
Goodwill and indefinite life intangible
assets are not amortized, but are tested for potential impairment on an annual basis, or more often if events or circumstances
change that could cause goodwill or indefinite life intangible assets to become impaired. Other purchased intangible assets are
amortized over their estimated useful lives, generally on a straight-line basis. We perform reviews for impairment of intangible
assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment
loss is recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are
less than its carrying value. When an impairment is identified, we reduce the carrying value of the asset to its estimated fair
value. No impairments were recorded on goodwill or intangible assets during 2019, 2018 or 2017. Refer to Note 7 for information
regarding our goodwill and other intangible assets.
Dual Class Common Stock
Beginning in 2018, the Company has two
classes of common stock, designated Class A common stock and Class B common stock. Each Class A common share is entitled to one
vote. Class B common stock possesses economic rights equal to one-fifth (1/5th) of such rights of Class A common stock;
however, Class B common stock has no voting rights.
The following table presents shares authorized,
issued and outstanding.
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
|
December 31, 2017
|
|
Common stock authorized
|
|
|
500,000
|
|
|
|
10,000,000
|
|
|
|
500,000
|
|
|
|
10,000,000
|
|
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
|
|
|
206,864
|
|
|
|
2,068,640
|
|
|
|
206,864
|
|
|
|
2,068,640
|
|
|
|
2,142,202
|
|
Treasury stock held by the Company
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(74,589
|
)
|
Outstanding shares
|
|
|
206,864
|
|
|
|
2,068,640
|
|
|
|
206,864
|
|
|
|
2,068,640
|
|
|
|
2,067,613
|
|
On an equivalent Class A common stock basis,
there were 620,592 shares outstanding as of December 31, 2019 and 2018, and 620,284 shares outstanding as of December 31, 2017.
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 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 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 was 344,736, 348,108 and 368,150 for 2019, 2018 and 2017, respectively. There are no dilutive securities outstanding.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). On January 1, 2018,
we adopted Accounting Standards Codification Topic 606 (“ASC 606”). In accordance with ASC 606, we changed certain
characteristics of our revenue recognition accounting policy as described below. ASC 606 was applied using the modified retrospective
method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January
1, 2018. Comparative prior periods have not been adjusted.
|
Note 1.
|
Summary of Significant
Accounting Policies (continued)
|
The impact of ASC 606 on the Company’s balance sheet as
of December 31, 2018 was not material. The cumulative change in retained earnings as of January 1, 2018 was $90. Upon adoption
of ASC 606, the Company changed its restaurant operations accounting policies for the recognition of franchise fees, recording
of advertising arrangements, and recognition of gift card revenue. The adoption of ASC 606 did not have any significant impact
on our insurance or media/licensing businesses.
Restaurant operations
Restaurant operations revenues were disaggregated
as follows.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
578,164
|
|
|
$
|
740,922
|
|
|
$
|
781,856
|
|
Franchise royalties and fees
|
|
|
27,189
|
|
|
|
30,998
|
|
|
|
20,773
|
|
Other
|
|
|
4,867
|
|
|
|
3,770
|
|
|
|
4,524
|
|
|
|
$
|
610,220
|
|
|
$
|
775,690
|
|
|
$
|
807,153
|
|
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 royalties and fees are composed of royalties and fees from Steak n Shake
and Western Sizzlin franchisees. Royalties 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.
During the years ended December 31, 2019 and 2018, restaurant operations recognized
$1,725 and $3,096, respectively, in revenue related to initial franchise fees. As of December 31, 2019 and 2018, restaurant operations
had deferred revenue recorded in accrued expenses related to franchise fees of $7,976 and $9,075, respectively. Restaurant operations
expects to recognize approximately $928 in 2020 and the balance in the years 2021 through 2040.
Our advertising arrangements with franchisees are reported in franchise royalties
and fees. During the years ended December 31, 2019 and 2018, restaurant operations recognized $7,815 and $9,675, respectively,
in revenue related to franchisee advertising fees. As of December 31, 2019 and 2018, restaurant operations had deferred revenue
recorded in accrued expenses related to franchisee advertising fees of $3,043 and $2,255, respectively. Restaurant operations expects
to recognize approximately $1,522 of deferred revenue during 2020 and the balance in 2021.
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.
For the years ended December 31, 2019 and 2018, restaurant operations recognized
$22,869 and $27,081, respectively, of revenue from gift card redemptions. As of December 31, 2019 and 2018, restaurant operations
had deferred revenue recorded in accrued expenses related to unredeemed gift cards of $20,730 and $22,685, respectively. The Company
expects to recognize approximately $15,931 in 2020 and the balance in the years 2021 through 2023.
Insurance premiums and commissions
Insurance premiums are earned over the terms of the related policies. Expenses incurred
in connection with acquiring new insurance business, including acquisition costs, are charged to operations as incurred. Premiums
earned are stated net of amounts ceded to reinsurer.
Oil and gas
Revenues are derived from the sale of produced oil and natural gas. Revenue
is recognized when the performance obligation is satisfied, which typically occurs at the point in time when control of the product
transfers to the customer. Payment is due within 30 days of delivery.
|
Note 1.
|
Summary of Significant
Accounting Policies (continued)
|
Media advertising and other
Magazine subscription and advertising revenues
are recognized at the magazine cover date. The unearned portion of magazine subscriptions is deferred until the magazine’s
cover date, at which time a proportionate share of the gross subscription price is recognized as revenues, net of any commissions
paid to subscription agents. Also included in subscription revenues are revenues generated from single-copy sales of magazines
through retail outlets such as newsstands, supermarkets, convenience stores and drugstores and on certain digital devices, which
may or may not result in future subscription sales. Revenues from retail outlet sales are recognized based on gross sales less
a provision for estimated returns. License revenue is recognized when earned. We derive value and revenues from intellectual property
assets through a range of licensing and business activities, including licensing and syndication of our trademarks and copyrights
in the United States and internationally.
Restaurant Cost of Sales
Cost of sales includes the cost of food,
restaurant operating costs and restaurant rent expense. Cost of sales excludes depreciation and amortization, which is presented
as a separate line item on the consolidated statement of earnings.
Insurance Losses and Underwriting
Expenses
Liabilities for estimated unpaid losses
and loss adjustment expenses with respect to claims occurring on or before the balance sheet date are established under insurance
contracts issued by our insurance subsidiaries. Such estimates include provisions for reported claims or case estimates, provisions
for incurred but not reported claims and legal and administrative costs to settle claims. The estimates of unpaid losses and amounts
recoverable under reinsurance are established and continually reviewed by using a variety of actuarial, statistical and analytical
techniques. Reinsurance contracts do not relieve the ceding company of its obligations to indemnify policyholders with respect
to the underlying insurance contracts. Liabilities for insurance losses of $3,211 and $1,891 are included in accrued expenses in
the consolidated balance sheet as of December 31, 2019 and 2018, respectively.
Oil and Gas Production Costs
Oil and gas production costs are composed
of lease operating expenses and production taxes.
Marketing Expense
Advertising costs are charged to expense
at the later of the date the expenditure is incurred or the date the promotional item is first communicated. Marketing expense
is included in selling, general and administrative expenses in the consolidated statement of earnings.
Insurance Reserves
We self-insure a significant portion of
expected losses under our workers’ compensation, general liability, auto, directors and officers liability, and medical liability
insurance programs, and record a reserve for our estimated losses on all unresolved open claims and our estimated incurred but
not reported claims at the anticipated cost to us. Insurance reserves are recorded in accrued expenses in the consolidated balance
sheet.
Savings Plans
Several of our subsidiaries also sponsor
deferred compensation and defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee contributions
to the plans are subject to regulatory limitations and the specific plan provisions. Some of the plans allow for discretionary
contributions as determined by management. Employer contributions expensed with respect to these plans were not material.
Foreign Currency Translation
The Company has certain subsidiaries located
in foreign jurisdictions. For subsidiaries whose functional currency is other than the U.S. dollar, the translation of functional
currency statements to U.S. dollar statements uses end-of-period exchange rates for assets and liabilities, weighted average exchange
rates for revenue and expenses, and historical rates for equity. The resulting currency translation adjustment is recorded in accumulated
other comprehensive income, as a component of equity.
Use of Estimates
Preparation of the consolidated financial
statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from the estimates.
New Accounting Standards
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance
on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For available for sale
debt securities, credit losses should be measured in a manner similar to current GAAP; however, ASU 2016-13 will require that credit
losses be presented as an allowance rather than as a write-down. The amendments in this update are effective for financial statements
issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently
evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and related disclosures.
|
Note 1.
|
Summary of Significant
Accounting Policies (continued)
|
In February 2016, the FASB issued ASU 2016-02,
Leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842). We adopted ASC 842 “Leases”
on January 1, 2019. Most significantly, ASC 842 requires a lessee to recognize a liability to make lease payments and an asset
with respect to its right to use the underlying asset for the lease term. We applied ASC 840 to all comparative periods which included
a cumulative-effect adjustment of $1,499 to retained earnings on January 1, 2019. Adoption of ASC 842 also resulted in an increase
to total assets and liabilities due to the recording of operating lease assets of $63,261 and operating lease liabilities of $69,671
as of January 1, 2019 and due to the recording of finance lease assets of $11,638 and finance lease liabilities of $11,784. The
difference between the asset and liability amounts primarily relates to previously recorded deferred/prepaid rent. The standard
had a material impact on our consolidated balance sheets but did not have a material impact on our consolidated statements of earnings
and statements of cash flow. The most significant impact was the recognition of right-of-use assets and lease liabilities for operating
leases.
In adopting and applying ASC 842, we elected
the package of practical expedients permitted under the transition guidance within the new standard which, among other things,
allows us to carry forward the historical lease classification. In addition, we elected certain practical expedients and accounting
policies, including an accounting policy election to keep leases with an initial term of 12 months or less from the balance sheet.
We recognize those lease payments in the consolidated statements of earnings on a straight-line basis over the lease term.
Investments were $44,856 and $33,860 as
of December 31, 2019 and 2018, respectively. Investments in equity securities and a related derivative position of $4,463 are included
in other current assets as of December 31, 2018. The investments are recorded at fair value.
|
Note 3.
|
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 is the general partner
of the investment partnerships and is an entity solely owned by Mr. Biglari.
|
Note 3.
|
Investment Partnerships
(continued)
|
The fair value and adjustment for Company
common stock held by the investment partnerships to determine carrying value of our partnership interest is presented below.
|
|
Fair Value
|
|
|
Company Common Stock
|
|
|
Carrying
Value
|
|
Partnership interest at December 31, 2016
|
|
$
|
972,707
|
|
|
$
|
395,070
|
|
|
$
|
577,637
|
|
Investment partnership gains (losses)
|
|
|
(41,740
|
)
|
|
|
(48,705
|
)
|
|
|
6,965
|
|
Distributions (net of contributions of $3,707)
|
|
|
(5,688
|
)
|
|
|
|
|
|
|
(5,688
|
)
|
Increase in proportionate share of Company stock held
|
|
|
|
|
|
|
12,893
|
|
|
|
(12,893
|
)
|
Partnership interest at December 31, 2017
|
|
$
|
925,279
|
|
|
$
|
359,258
|
|
|
$
|
566,021
|
|
Investment partnership gains (losses)
|
|
|
(180,517
|
)
|
|
|
(220,928
|
)
|
|
|
40,411
|
|
Distributions (net of reinvestments of $39,040)
|
|
|
(29,660
|
)
|
|
|
|
|
|
|
(29,660
|
)
|
Increase in proportionate share of Company stock held
|
|
|
|
|
|
|
19,292
|
|
|
|
(19,292
|
)
|
Partnership interest at December 31, 2018
|
|
$
|
715,102
|
|
|
$
|
157,622
|
|
|
$
|
557,480
|
|
Investment partnership gains (losses)
|
|
|
80,350
|
|
|
|
2,217
|
|
|
|
78,133
|
|
Distributions (net of reinvestments of $40,000)
|
|
|
(129,329
|
)
|
|
|
|
|
|
|
(129,329
|
)
|
Increase in proportionate share of Company stock held
|
|
|
|
|
|
|
742
|
|
|
|
(742
|
)
|
Partnership interest at December 31, 2019
|
|
$
|
666,123
|
|
|
$
|
160,581
|
|
|
$
|
505,542
|
|
The carrying value of the investment partnerships
net of deferred taxes is presented below.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Carrying value of investment partnerships
|
|
$
|
505,542
|
|
|
$
|
557,480
|
|
Deferred tax liability related to investment partnerships
|
|
|
(56,518
|
)
|
|
|
(92,703
|
)
|
Carrying value of investment partnerships net of deferred taxes
|
|
$
|
449,024
|
|
|
$
|
464,777
|
|
The Company’s proportionate share
of Company stock held by investment partnerships at cost is $374,857 and $374,231 at December 31, 2019 and 2018, 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.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Gains from investment partnerships
|
|
$
|
78,133
|
|
|
$
|
40,411
|
|
|
$
|
6,965
|
|
Tax expense (benefit)
|
|
|
17,360
|
|
|
|
7,171
|
|
|
|
(4,115
|
)
|
Contribution to net earnings
|
|
$
|
60,773
|
|
|
$
|
33,240
|
|
|
$
|
11,080
|
|
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 2019, 2018 and 2017.
|
Note 3.
|
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 December 31, 2019
|
|
$
|
117,135
|
|
|
$
|
758,663
|
|
Total liabilities as of December 31, 2019
|
|
$
|
158
|
|
|
$
|
114,639
|
|
Revenue for the year ended December 31, 2019
|
|
$
|
10,637
|
|
|
$
|
85,831
|
|
Earnings for the year ended December 31, 2019
|
|
$
|
10,567
|
|
|
$
|
78,604
|
|
Biglari Holdings’ ownership interest
|
|
|
66.1
|
%
|
|
|
92.9
|
%
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2018
|
|
$
|
107,207
|
|
|
$
|
901,750
|
|
Total liabilities as of December 31, 2018
|
|
$
|
447
|
|
|
$
|
202,770
|
|
Revenue for the year ended December 31, 2018
|
|
$
|
(92,093
|
)
|
|
$
|
(120,431
|
)
|
Earnings for the year ended December 31, 2018
|
|
$
|
(92,159
|
)
|
|
$
|
(130,193
|
)
|
Biglari Holdings’ ownership interest
|
|
|
65.9
|
%
|
|
|
92.2
|
%
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2017
|
|
$
|
203,560
|
|
|
$
|
1,060,737
|
|
Total liabilities as of December 31, 2017
|
|
$
|
157
|
|
|
$
|
199,974
|
|
Revenue for the year ended December 31, 2017
|
|
$
|
(13,322
|
)
|
|
$
|
(25,283
|
)
|
Earnings for the year ended December 31, 2017
|
|
$
|
(13,383
|
)
|
|
$
|
(35,740
|
)
|
Biglari Holdings’ ownership interest
|
|
|
64.3
|
%
|
|
|
92.3
|
%
|
Revenue in the above summarized financial
information of the investment partnerships includes investment income and unrealized gains and losses on investments.
|
Note 4.
|
Other Current Assets
|
Other current assets include the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred commissions on gift cards sold by third parties
|
|
$
|
3,379
|
|
|
$
|
3,218
|
|
Prepaid contractual obligations
|
|
|
3,070
|
|
|
|
1,555
|
|
Investment in equity security and related derivative position
|
|
|
—
|
|
|
|
4,463
|
|
Other current assets
|
|
$
|
6,449
|
|
|
$
|
9,236
|
|
|
Note 5.
|
Property and Equipment
|
Property and equipment is composed of the
following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Land
|
|
$
|
150,147
|
|
|
$
|
146,015
|
|
Buildings
|
|
|
144,243
|
|
|
|
142,658
|
|
Land and leasehold improvements
|
|
|
157,141
|
|
|
|
158,938
|
|
Equipment
|
|
|
196,264
|
|
|
|
201,738
|
|
Oil and gas properties
|
|
|
77,475
|
|
|
|
—
|
|
Construction in progress
|
|
|
3,789
|
|
|
|
1,703
|
|
|
|
|
729,059
|
|
|
|
651,052
|
|
Less accumulated depreciation and amortization
|
|
|
(378,432
|
)
|
|
|
(376,336
|
)
|
Property and equipment, net
|
|
$
|
350,627
|
|
|
$
|
274,716
|
|
Depreciation and amortization expense for
property and equipment for 2019, 2018 and 2017 was $18,881, $18,646 and $20,706, respectively. Depletion expense related to oil
and gas properties was $8,077 during 2019 and is included in depreciation and amortization within the consolidated statement of earnings.
The Company recorded an impairment to restaurant
long-lived assets of $8,186, $5,677 and $1,789 during 2019, 2018 and 2017, respectively. 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. The fair value
of the assets impaired was not material for any of the applicable periods.
The property and equipment cost related to finance obligations as of December 31,
2019 is as follows: $59,104 of buildings, $49,891 of land, $26,924 of land and leasehold improvements, and $52,240 of accumulated
depreciation.
|
Note 6.
|
Asset Retirement Obligations
|
A reconciliation of the ending aggregate carrying amount of
asset retirement obligations is as follows.
|
|
December 31,
|
|
|
|
2019
|
|
Acquired balance
|
|
$
|
10,542
|
|
Liabilities settled
|
|
|
(88
|
)
|
Accretion expense
|
|
|
177
|
|
Asset retirement obligation
|
|
$
|
10,631
|
|
As of December 31, 2019, $184 is classified
as current and is included in accounts payable and accrued expenses in the consolidated balance sheets.
|
Note 7.
|
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. No goodwill was recorded
with the acquisition of Southern Oil.
A reconciliation of the change in the carrying
value of goodwill is as follows.
|
|
Restaurants
|
|
|
Other
|
|
|
Total
|
|
Goodwill at December 31, 2016
|
|
$
|
28,090
|
|
|
$
|
11,913
|
|
|
$
|
40,003
|
|
Change in foreign exchange rates during 2017
|
|
|
78
|
|
|
|
—
|
|
|
|
78
|
|
Goodwill at December 31, 2017
|
|
$
|
28,168
|
|
|
$
|
11,913
|
|
|
$
|
40,081
|
|
Change in foreign exchange rates during 2018
|
|
|
(29
|
)
|
|
|
—
|
|
|
|
(29
|
)
|
Goodwill at December 31, 2018
|
|
$
|
28,139
|
|
|
$
|
11,913
|
|
|
$
|
40,052
|
|
Change in foreign exchange rates during 2019
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
(12
|
)
|
Goodwill at December 31, 2019
|
|
$
|
28,127
|
|
|
$
|
11,913
|
|
|
$
|
40,040
|
|
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 2019, 2018 or 2017.
|
Note 7.
|
Goodwill and
Other Intangible Assets (continued)
|
Other Intangible Assets
Other intangible assets are composed of
the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Total
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Total
|
|
Franchise agreement
|
|
$
|
5,310
|
|
|
$
|
(5,178
|
)
|
|
$
|
132
|
|
|
$
|
5,310
|
|
|
$
|
(4,647
|
)
|
|
$
|
663
|
|
Other
|
|
|
810
|
|
|
|
(792
|
)
|
|
|
18
|
|
|
|
810
|
|
|
|
(774
|
)
|
|
|
36
|
|
Total
|
|
|
6,120
|
|
|
|
(5,970
|
)
|
|
|
150
|
|
|
|
6,120
|
|
|
|
(5,421
|
)
|
|
|
699
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
15,876
|
|
|
|
—
|
|
|
|
15,876
|
|
|
|
15,876
|
|
|
|
—
|
|
|
|
15,876
|
|
Other assets with indefinite lives
|
|
|
11,323
|
|
|
|
—
|
|
|
|
11,323
|
|
|
|
11,539
|
|
|
|
—
|
|
|
|
11,539
|
|
Total intangible assets
|
|
$
|
33,319
|
|
|
$
|
(5,970
|
)
|
|
$
|
27,349
|
|
|
$
|
33,535
|
|
|
$
|
(5,421
|
)
|
|
$
|
28,114
|
|
Intangible assets subject to amortization
consist of franchise agreements connected with the purchase of Western Sizzlin as well as rights to favorable leases related to
prior acquisitions. These intangible assets are being amortized over their estimated weighted average of useful lives ranging from
eight to twelve years.
Amortization expense for 2019, 2018 and
2017 was $549, $562 and $567, respectively. The Company’s intangible assets with definite lives will fully amortize in 2020.
During 2018, the Company purchased lease
rights totaling $2,503.
|
Note 8.
|
Accounts Payable and Accrued Expenses
|
Accounts payable and accrued expenses include
the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Accounts payable
|
|
$
|
32,626
|
|
|
$
|
41,967
|
|
Gift card liability
|
|
|
20,745
|
|
|
|
22,685
|
|
Salaries, wages, and vacation
|
|
|
10,667
|
|
|
|
13,107
|
|
Deferred revenue
|
|
|
10,454
|
|
|
|
11,681
|
|
Taxes payable
|
|
|
29,275
|
|
|
|
11,214
|
|
Self-insurance accruals
|
|
|
11,070
|
|
|
|
8,394
|
|
Other
|
|
|
6,242
|
|
|
|
8,217
|
|
Accounts payable and accrued expenses
|
|
$
|
121,079
|
|
|
$
|
117,265
|
|
|
Note 9.
|
Other Liabilities
|
Other liabilities include the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Non qualified deferred compensation
|
|
$
|
1,716
|
|
|
$
|
1,801
|
|
Other
|
|
|
348
|
|
|
|
912
|
|
Deferred rent expense
|
|
|
—
|
|
|
|
6,468
|
|
Other liabilities
|
|
$
|
2,064
|
|
|
$
|
9,181
|
|
The components of the provision for income
taxes consist of the following.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
41,005
|
|
|
$
|
(1,688
|
)
|
|
$
|
544
|
|
State
|
|
|
7,301
|
|
|
|
1,204
|
|
|
|
816
|
|
Deferred
|
|
|
(38,545
|
)
|
|
|
(2,153
|
)
|
|
|
(64,321
|
)
|
Inome tax expense (benefit)
|
|
$
|
9,761
|
|
|
$
|
(2,637
|
)
|
|
$
|
(62,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of effective income tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax at U.S. statutory rates
|
|
$
|
11,579
|
|
|
$
|
3,519
|
|
|
$
|
(4,512
|
)
|
State income taxes, net of federal benefit
|
|
|
1,573
|
|
|
|
741
|
|
|
|
259
|
|
Tax rate changes
|
|
|
—
|
|
|
|
(1,342
|
)
|
|
|
(51,707
|
)
|
Federal income tax credits
|
|
|
(3,004
|
)
|
|
|
(4,587
|
)
|
|
|
(3,158
|
)
|
Dividends received deduction
|
|
|
(955
|
)
|
|
|
(2,142
|
)
|
|
|
(6,304
|
)
|
Valuation allowance
|
|
|
441
|
|
|
|
658
|
|
|
|
742
|
|
Foreign tax rate differences
|
|
|
116
|
|
|
|
349
|
|
|
|
1,598
|
|
Other
|
|
|
11
|
|
|
|
167
|
|
|
|
121
|
|
Inome tax expense (benefit)
|
|
$
|
9,761
|
|
|
$
|
(2,637
|
)
|
|
$
|
(62,961
|
)
|
On December 22, 2017, new federal income
tax legislation, the Tax Cuts and Jobs Act (“Act”), was signed into law. Effective January 1, 2018, the U.S. corporate
federal statutory income tax rate was reduced from 35.0% to 21.0% and required re-measurement of deferred balances to the new statutory
rates as of December 31, 2017.
The Act also imposed a mandatory one-time
transition tax on undistributed international earnings. We do not expect to have any additional tax liability related to a transition
tax. The Company did not have a net tax expense or benefit on income from international operations. Earnings (losses) before income
taxes derived from domestic operations during 2019, 2018 and 2017 were $57,877, $21,700 and $(6,230), respectively. Losses before
income taxes derived from international operations during 2019, 2018 and 2017 were $2,736, $4,945, and $6,660, respectively.
As of December 31, 2019, we had $348 of
unrecognized tax benefits, including $62 of interest and penalties, which are included in other long-term liabilities in the consolidated
balance sheet. As of December 31, 2018, we had $341 of unrecognized tax benefits, including $43 of interest and penalties, which
are included in other long-term liabilities in the consolidated balance sheet. Our continuing practice is to recognize interest
expense and penalties related to income tax matters in income tax expense. The unrecognized tax benefits of $348 would impact the
effective income tax rate if recognized. Adjustments to the Company’s unrecognized tax benefit for gross increases for the
current period tax position, gross decreases for prior period tax positions and the lapse of statute of limitations during 2019,
2018 and 2017 were not significant.
We file income tax returns which are periodically
audited by various foreign, federal, state, and local jurisdictions. With few exceptions, we are no longer subject to federal,
state, and local tax examinations for fiscal years prior to 2016. We believe we have certain state income tax exposures related
to fiscal years 2015 through 2019. Because of the expiration of the various state statutes of limitations for these fiscal years,
it is possible that the total amount of unrecognized tax benefits will decrease by approximately $157 within 12 months.
Deferred tax assets and liabilities are
determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the
currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.
|
Note 10.
|
Income Taxes
(continued)
|
Our deferred tax assets and liabilities
consist of the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Insurance reserves
|
|
$
|
1,304
|
|
|
$
|
1,816
|
|
Compensation accruals
|
|
|
438
|
|
|
|
677
|
|
Gift card accruals
|
|
|
3,280
|
|
|
|
2,515
|
|
Net operating loss credit carryforward
|
|
|
6,017
|
|
|
|
5,547
|
|
Valuation allowance on net operating losses
|
|
|
(5,419
|
)
|
|
|
(4,978
|
)
|
Fixed assets and depletable assets basis difference
|
|
|
4,776
|
|
|
|
—
|
|
Income tax credit carryforward
|
|
|
6,300
|
|
|
|
4,965
|
|
Other
|
|
|
(36
|
)
|
|
|
953
|
|
Total deferred tax assets
|
|
|
16,660
|
|
|
|
11,495
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
56,519
|
|
|
|
92,743
|
|
Fixed asset basis difference
|
|
|
—
|
|
|
|
934
|
|
Goodwill and intangibles
|
|
|
14,371
|
|
|
|
4,689
|
|
Total deferred tax liabilities
|
|
|
70,890
|
|
|
|
98,366
|
|
Net deferred tax liability
|
|
$
|
(54,230
|
)
|
|
$
|
(86,871
|
)
|
Accrued expenses on the balance sheet include
income taxes payable of $17,767 as of December 31, 2019. Receivables on the balance sheet include income taxes receivable of $2,022
as of December 31, 2018. Income taxes paid during 2019, 2018 and 2017 were $30,375, $810 and $3,211, respectively. Income tax refunds
during 2019, 2018 and 2017 were $1,546, $8 and $0, respectively.
|
Note 11.
|
Notes Payable and Other Borrowings
|
Notes payable and other borrowings include the following.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Current portion of notes payable and other borrowings
|
|
|
|
|
|
|
Notes payable
|
|
$
|
2,200
|
|
|
$
|
2,200
|
|
Unamortized original issue discount
|
|
|
(348
|
)
|
|
|
(334
|
)
|
Unamortized debt issuance costs
|
|
|
(634
|
)
|
|
|
(609
|
)
|
Finance obligations
|
|
|
4,252
|
|
|
|
4,463
|
|
Finance lease liabilities
|
|
|
1,633
|
|
|
|
—
|
|
Total current portion of notes payable and other borrowings
|
|
$
|
7,103
|
|
|
$
|
5,720
|
|
|
|
|
|
|
|
|
|
|
Long-term notes payable and other borrowings
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
179,298
|
|
|
$
|
181,498
|
|
Unamortized original issue discount
|
|
|
(89
|
)
|
|
|
(438
|
)
|
Unamortized debt issuance costs
|
|
|
(163
|
)
|
|
|
(796
|
)
|
Finance obligations
|
|
|
74,497
|
|
|
|
59,737
|
|
Finance lease liabilities
|
|
|
9,639
|
|
|
|
—
|
|
Total long-term notes payable and other borrowings
|
|
$
|
263,182
|
|
|
$
|
240,001
|
|
|
Note 11.
|
Notes Payable
and Other Borrowings (continued)
|
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 is scheduled to mature on March 19, 2021. As of December 31, 2019, $181,498 was outstanding. The Company
is evaluating refinancing options. Alternative financing may not be available on terms commensurate with its current financing
arrangement. Biglari Holdings is not a guarantor under the credit facility.
The term loan amortizes in equal quarterly
installments at an annual rate of 1.0% of the original principal amount of the term loan, subject to mandatory prepayments from
excess cash flow, asset sales and other events described in the credit agreement. The balance will be due at maturity.
Borrowings bear interest at a rate per
annum equal to a base rate or a Eurodollar rate (minimum of 1%) plus an applicable margin. Interest on the term loan is based on
a Eurodollar rate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. The interest rate
on the term loan was 5.55% as of December 31, 2019.
The credit agreement includes customary
affirmative and negative covenants and events of default. Steak n Shake’s credit facility contains restrictions on its ability
to pay dividends to Biglari Holdings.
The term loan is secured by first priority
security interests in substantially all the assets of Steak n Shake. Disruptions in debt capital markets that restrict access to
funding when needed could adversely affect the results of operations, liquidity and capital resources of Steak n Shake.
Expected principal payments for notes payable
as of December 31, 2019, are as follows.
2020
|
|
|
2,200
|
|
2021
|
|
|
179,298
|
|
Total
|
|
$
|
181,498
|
|
The fair value of long-term debt, excluding
capitalized lease obligations, was approximately $145,000 at December 31, 2019. The fair value of our debt was estimated based
on quoted market prices. The fair value was determined to be a Level 3 fair value measurement.
Western Sizzlin Revolver
As of December 31, 2019 and 2018,
Western Sizzlin had no debt outstanding under its revolver.
Interest
Interest paid on debt and obligations under
leases are as follows.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Interest paid on debt
|
|
$
|
11,273
|
|
|
$
|
10,655
|
|
|
$
|
9,969
|
|
Interest paid on obligations under leases
|
|
$
|
7,816
|
|
|
$
|
8,207
|
|
|
$
|
9,132
|
|
|
Note 12.
|
Leased Assets and Lease Commitments
|
The Company adopted ASC 842 on January
1, 2019, as discussed in Note 1. Under ASC 842, leases are generally classified as either operating right-of-use assets or
finance lease assets. Right-of-use assets represent the Company's right to use an underlying asset during the lease term. Right-of-use
liabilities represent the Company's obligation to make lease payments arising from the lease. These assets and liabilities are calculated
by using the net present value of fixed lease payments over the lease term. The Company's lease terms include options
to extend or terminate the lease when it is reasonably certain that the option will be exercised. The Company applied
an incremental borrowing rate to determine the present value of lease payments. Finance lease agreements include an interest rate
that is used to determine the present value of future lease payments.
|
Note 12.
|
Leased Assets
and Lease Commitments (continued)
|
A significant portion of our operating
and finance lease portfolio includes restaurant locations. The Company’s operating leases with a term of 12 months or greater
were recognized as operating right-of-use assets and liabilities and recorded as operating lease assets and operating lease liabilities.
Historical capital leases and certain historical build-to-suit leases were reclassified from obligations under leases to finance
lease assets and liabilities. Finance lease assets are recorded in property and equipment and finance lease liabilities are recorded
in notes payable and other borrowings. Historical sale-and-leaseback transactions in which the Company is deemed to have a continued
interest in the leased asset are recorded as property and equipment and as finance obligations. Finance obligations are recorded
in notes payable and other borrowings.
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.
|
|
2019
|
|
Finance lease costs:
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
1,952
|
|
Interest on lease liabilities
|
|
|
828
|
|
Operating lease costs *
|
|
|
16,483
|
|
Total lease costs
|
|
$
|
19,263
|
|
*Includes short-term leases, variable lease costs and sublease
income, which are immaterial.
Supplemental cash flow information related to leases is as follows.
|
|
Year Ended
December 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Financing cash flows from finance leases
|
|
$
|
1,610
|
|
Operating cash flows from finance leases
|
|
$
|
828
|
|
Operating cash flows from operating leases
|
|
$
|
16,863
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
Finance lease liabilities
|
|
$
|
1,097
|
|
Operating lease liabilities
|
|
$
|
11,069
|
|
Supplemental balance sheet information related to leases is
as follows.
|
|
December 31, 2019
|
|
Finance leases:
|
|
|
|
|
Property and equipment, net
|
|
$
|
10,783
|
|
|
|
|
|
|
Current portion of notes payable and other borrowings
|
|
$
|
1,633
|
|
Long-term notes payable and other borrowings
|
|
|
9,639
|
|
Total finance lease liablities
|
|
$
|
11,272
|
|
Weighted-average lease terms and discount rates are as follows.
|
|
2019
|
|
Weighted-average remaining lease terms:
|
|
|
|
|
Finance leases
|
|
|
8.4 years
|
|
Operating leases
|
|
|
6.4 years
|
|
|
|
|
|
|
Weighted-average discount rates:
|
|
|
|
|
Finance leases
|
|
|
7.1%
|
|
Operating leases
|
|
|
6.9%
|
|
|
Note 12.
|
Leased Assets
and Lease Commitments (continued)
|
Maturities of lease liabilities as of December 31, 2019 are
as follows.
Year
|
|
Operating Leases
|
|
|
Finance
Leases
|
|
2020
|
|
$
|
15,584
|
|
|
$
|
2,377
|
|
2021
|
|
|
14,759
|
|
|
|
2,358
|
|
2022
|
|
|
12,622
|
|
|
|
1,869
|
|
2023
|
|
|
10,794
|
|
|
|
1,669
|
|
2024
|
|
|
8,680
|
|
|
|
1,633
|
|
After 2024
|
|
|
18,576
|
|
|
|
5,170
|
|
Total lease payments
|
|
|
81,015
|
|
|
|
15,076
|
|
Less interest
|
|
|
16,109
|
|
|
|
3,804
|
|
Total lease liabilities
|
|
$
|
64,906
|
|
|
$
|
11,272
|
|
On December 31, 2018, obligations under non-cancelable finance
obligations, capital leases, and operating leases (excluding real estate taxes, insurance and maintenance costs) require the following
minimum future rental payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Year
|
|
|
Finance Obligations
|
|
|
|
Capital Leases
|
|
|
|
Total
|
|
|
|
Operating Property
|
|
|
|
Non-Operating Property
|
|
2019
|
|
$
|
11,114
|
|
|
$
|
55
|
|
|
$
|
11,169
|
|
|
$
|
17,914
|
|
|
$
|
483
|
|
2020
|
|
|
8,040
|
|
|
|
55
|
|
|
|
8,095
|
|
|
|
16,691
|
|
|
|
554
|
|
2021
|
|
|
5,925
|
|
|
|
55
|
|
|
|
5,980
|
|
|
|
16,787
|
|
|
|
578
|
|
2022
|
|
|
2,951
|
|
|
|
5
|
|
|
|
2,956
|
|
|
|
15,603
|
|
|
|
599
|
|
2023
|
|
|
1,587
|
|
|
|
—
|
|
|
|
1,587
|
|
|
|
14,071
|
|
|
|
539
|
|
After 2023
|
|
|
1,673
|
|
|
|
—
|
|
|
|
1,673
|
|
|
|
36,709
|
|
|
|
1,790
|
|
Total minimum future rental payments
|
|
|
31,290
|
|
|
|
170
|
|
|
|
31,460
|
|
|
$
|
117,775
|
|
|
$
|
4,543
|
|
Less amount representing interest
|
|
|
18,004
|
|
|
|
60
|
|
|
|
18,064
|
|
|
|
|
|
|
|
|
|
Total principal obligations under leases
|
|
|
13,286
|
|
|
|
110
|
|
|
|
13,396
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
4,433
|
|
|
|
30
|
|
|
|
4,463
|
|
|
|
|
|
|
|
|
|
Non-current principal obligations under leases
|
|
|
8,853
|
|
|
|
80
|
|
|
|
8,933
|
|
|
|
|
|
|
|
|
|
Residual value at end of lease term
|
|
|
50,744
|
|
|
|
60
|
|
|
|
50,804
|
|
|
|
|
|
|
|
|
|
Obligations under leases
|
|
$
|
59,597
|
|
|
$
|
140
|
|
|
$
|
59,737
|
|
|
|
|
|
|
|
|
|
Rent expense is presented below.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Minimum rent
|
|
$
|
17,968
|
|
|
$
|
20,158
|
|
|
$
|
18,157
|
|
Contingent rent
|
|
|
1,050
|
|
|
|
1,470
|
|
|
|
1,839
|
|
Rent expense
|
|
$
|
19,018
|
|
|
$
|
21,628
|
|
|
$
|
19,996
|
|
|
Note 13.
|
Related Party Transactions
|
Services Agreement
During 2017, the Company entered into a
services agreement with Biglari Enterprises LLC and Biglari Capital Corp. (collectively, the “Biglari Entities”) under
which the Biglari Entities provide business and administrative related services to the Company. The Biglari Entities are owned
by Mr. Biglari. The services agreement has a five-year term, effective on October 1, 2017. The fixed fee is $700 per month for
the first year with adjustments in years two through five. The monthly fee remained at $700 during 2019. The Company paid Biglari
Enterprises $8,400 in service fees during 2019 and 2018. The services agreement does not alter the hurdle rate connected with the
incentive reallocation paid to Biglari Capital Corp. by the Company.
Investments in The Lion Fund, L.P. and
The Lion Fund II, L.P.
As of December 31, 2019, the Company’s investments in The Lion Fund, L.P. and The Lion Fund II, L.P. had a fair value
of $666,123.
|
Note 13.
|
Related Party
Transactions (continued)
|
Contributions to and distributions from
The Lion Fund, L.P. and The Lion Fund II, L.P. were as follows.
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Contributions of cash
|
|
$
|
40,000
|
|
|
$
|
39,040
|
|
|
$
|
3,707
|
|
Distributions of cash
|
|
|
(169,329
|
)
|
|
|
(68,700
|
)
|
|
|
(9,395
|
)
|
|
|
$
|
(129,329
|
)
|
|
$
|
(29,660
|
)
|
|
$
|
(5,688
|
)
|
As the general partner of the investment
partnerships, Biglari Capital on December 31 of each year will earn an incentive reallocation fee for the Company’s investments
equal to 25% of the net profits above a hurdle rate of 6% over the previous high-water mark. Our policy is to accrue an estimated
incentive fee throughout the year. In 2019, 2018 and 2017, no incentive reallocation was earned.
License Agreement
During 2013,
the Company entered into a Trademark License Agreement (the “License Agreement”) with Mr. Biglari. The Company and
its subsidiaries paid no royalties to Mr. Biglari under the License Agreement during its term. The License Agreement was terminated
on March 26, 2019.
Incentive Agreement Amendment
The Incentive Agreement was amended on
March 26, 2019 to remove the annual limitation on Mr. Biglari’s incentive compensation, as well as the requirement of Mr.
Biglari to use 30% of his incentive payments to purchase shares of the Company. In connection with the amendment, the change of
control and severance provisions contained in the Incentive Agreement were eliminated and the License Agreement was terminated.
The amendment was effective in 2019.
|
Note 14.
|
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 alleges 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 alleges claims of breach of fiduciary duty by the members of our
Board of Directors. This shareholder sought to enjoin the shareholder vote on April 26, 2018 to approve the dual class structure.
On April 16, 2018, the shareholder withdrew their motion to enjoin the shareholder vote on April 26, 2018.
|
Note 14.
|
Commitments
and Contingencies (continued)
|
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 allege 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. The shareholders seek, for themselves and on behalf of all other shareholders as a class, a declaration that the
defendants breached their duty to the shareholders and the class, and to recover unspecified damages, pre-judgment and post-judgment
interest, and an award of their attorneys’ fees and other costs.
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. The Indiana Supreme Court has not ruled
upon the petition to transfer.
On September 8, 2014, two former restaurant
manager employees filed a purported class action lawsuit against Steak n Shake (Drake v. Steak n Shake). On January 30, 2017, a
former restaurant manager employee filed a purported class action lawsuit against Steak n Shake (Clendenen v. Steak n Shake). The
plaintiffs generally allege claims that Steak n Shake improperly classified its managerial employees as exempt. On July 26, 2019,
the Company agreed to settle both cases for $8,350 and the Court approved the terms of the settlement. The settlement is reflected
in selling, general and administrative expenses in the consolidated statement of earnings.
|
Note 15.
|
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.
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 sheet:
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 Level 1 of the fair value hierarchy.
Bonds: The Company’s investments
in bonds are classified within Level 1 of the fair value hierarchy.
|
Note 15.
|
Fair Value of
Financial Assets (continued)
|
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 1 or 2 of the fair value
hierarchy depending on the instrument.
As of December 31, 2019 and 2018 the fair values of financial
assets were as follows.
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
43,095
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,095
|
|
|
$
|
21,448
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,448
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer goods
|
|
|
—
|
|
|
|
6,397
|
|
|
|
—
|
|
|
|
6,397
|
|
|
|
1,708
|
|
|
|
4,100
|
|
|
|
—
|
|
|
|
5,808
|
|
Insurance
|
|
|
25
|
|
|
|
—
|
|
|
|
|
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Bonds
|
|
|
38,911
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,911
|
|
|
|
32,404
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,404
|
|
Options on equity securities
|
|
|
—
|
|
|
|
2,166
|
|
|
|
—
|
|
|
|
2,166
|
|
|
|
—
|
|
|
|
2,755
|
|
|
|
—
|
|
|
|
2,755
|
|
Non-qualified deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation plan investments
|
|
|
2,175
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,175
|
|
|
|
2,149
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,149
|
|
Total assets at fair value
|
|
$
|
84,206
|
|
|
$
|
8,563
|
|
|
$
|
—
|
|
|
$
|
92,769
|
|
|
$
|
57,709
|
|
|
$
|
6,855
|
|
|
$
|
—
|
|
|
$
|
64,564
|
|
There were no changes in our valuation
techniques used to measure fair values on a recurring basis.
|
Note 16.
|
Accumulated Other Comprehensive Income
|
Changes in the balances of each component
of accumulated other comprehensive income (loss), net of tax, were as follows.
|
|
2019
|
|
2018
|
|
|
Foreign
Currency
Translation
Adjustments
|
|
Investment
Gain (Loss)
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Foreign
Currency
Translation
Adjustments
|
|
Investment
Gain
(Loss)
|
|
Accumulated
Other
Comprehensive
Loss
|
Beginning Balance
|
|
$
|
(2,516
|
)
|
|
$
|
—
|
|
|
$
|
(2,516
|
)
|
|
$
|
(1,462
|
)
|
|
$
|
58
|
|
|
$
|
(1,404
|
)
|
Reclassification to (earnings) loss
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
(58
|
)
|
Foreign currency translation
|
|
|
(294
|
)
|
|
|
|
|
(294
|
)
|
|
|
(1,054
|
)
|
|
|
|
|
|
|
(1,054
|
)
|
Ending Balance
|
|
$
|
(2,810
|
)
|
|
$
|
—
|
|
|
$
|
(2,810
|
)
|
|
$
|
(2,516
|
)
|
|
$
|
—
|
|
|
$
|
(2,516
|
)
|
|
|
2017
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
|
|
Investment
Gain (Loss)
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Beginning Balance
|
|
$
|
(3,447
|
)
|
|
$
|
(137
|
)
|
|
$
|
(3,584
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications
|
|
|
|
|
|
|
195
|
|
|
|
195
|
|
Foreign currency translation
|
|
|
1,985
|
|
|
|
|
|
|
|
1,985
|
|
Ending Balance
|
|
$
|
(1,462
|
)
|
|
$
|
58
|
|
|
$
|
(1,404
|
)
|
There were no reclassifications from accumulated
other comprehensive income to earnings during 2019 and 2017. Reclassifications made from accumulated other comprehensive income
to the statement of earnings were $58 of income to earnings during 2018.
|
Note 17.
|
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. The Company also reports segment information for First Guard, Southern Oil and Maxim. Other business activities
not specifically identified with reportable business segments are presented in “other” within total operating businesses.
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.
A disaggregation of our consolidated data for each of the three
most recent years is presented in the tables which follow.
|
|
Revenue
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Operating Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Steak n Shake
|
|
$
|
595,004
|
|
|
$
|
760,565
|
|
|
$
|
792,827
|
|
Western
|
|
|
15,216
|
|
|
|
15,125
|
|
|
|
14,326
|
|
Total Restaurant Operations
|
|
|
610,220
|
|
|
|
775,690
|
|
|
|
807,153
|
|
First Guard
|
|
|
30,083
|
|
|
|
27,628
|
|
|
|
24,943
|
|
Southern Oil
|
|
|
24,436
|
|
|
|
—
|
|
|
|
—
|
|
Maxim
|
|
|
4,099
|
|
|
|
6,576
|
|
|
|
7,708
|
|
|
|
$
|
668,838
|
|
|
$
|
809,894
|
|
|
$
|
839,804
|
|
|
|
|
Earnings (Loss) Before Income Taxes
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Operating Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Steak n Shake
|
|
$
|
(18,575
|
)
|
|
$
|
(10,657
|
)
|
|
$
|
431
|
|
Western
|
|
|
1,756
|
|
|
|
2,046
|
|
|
|
1,860
|
|
Total Restaurant Operations
|
|
|
(16,819
|
)
|
|
|
(8,611
|
)
|
|
|
2,291
|
|
First Guard
|
|
|
7,103
|
|
|
|
6,215
|
|
|
|
4,770
|
|
Southern Oil
|
|
|
8,032
|
|
|
|
—
|
|
|
|
—
|
|
Maxim
|
|
|
742
|
|
|
|
1,068
|
|
|
|
(439
|
)
|
Other
|
|
|
994
|
|
|
|
635
|
|
|
|
669
|
|
Total Operating Businesses
|
|
|
52
|
|
|
|
(693
|
)
|
|
|
7,291
|
|
Corporate and investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
(10,602
|
)
|
|
|
(11,286
|
)
|
|
|
(16,106
|
)
|
Investment partnership gains
|
|
|
78,133
|
|
|
|
40,411
|
|
|
|
6,965
|
|
Total corporate
|
|
|
67,531
|
|
|
|
29,125
|
|
|
|
(9,141
|
)
|
Interest expense on notes
|
|
|
|
|
|
|
|
|
|
|
|
|
payable and other borrowings
|
|
|
(12,442
|
)
|
|
|
(11,677
|
)
|
|
|
(11,040
|
)
|
|
|
$
|
55,141
|
|
|
$
|
16,755
|
|
|
$
|
(12,890
|
)
|
|
Note 17.
|
Business Segment Reporting (continued)
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Operating Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Steak n Shake
|
|
$
|
9,951
|
|
|
$
|
14,982
|
|
|
$
|
7,565
|
|
Western
|
|
|
72
|
|
|
|
61
|
|
|
|
410
|
|
Total Restaurant Operations
|
|
|
10,023
|
|
|
|
15,043
|
|
|
|
7,975
|
|
First Guard
|
|
|
43
|
|
|
|
236
|
|
|
|
43
|
|
Southern Oil
|
|
|
7,594
|
|
|
|
—
|
|
|
|
—
|
|
Maxim
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
19
|
|
|
|
14
|
|
|
|
16
|
|
Total Operating Businesses
|
|
|
17,679
|
|
|
|
15,293
|
|
|
|
8,034
|
|
Corporate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Consolidated results
|
|
$
|
17,679
|
|
|
$
|
15,293
|
|
|
$
|
8,034
|
|
|
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Operating Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Steak n Shake
|
|
$
|
20,533
|
|
|
$
|
18,180
|
|
|
$
|
19,987
|
|
Western
|
|
|
641
|
|
|
|
651
|
|
|
|
636
|
|
Total Restaurant Operations
|
|
|
21,174
|
|
|
|
18,831
|
|
|
|
20,623
|
|
First Guard
|
|
|
85
|
|
|
|
76
|
|
|
|
56
|
|
Southern Oil (includes depletion expense of $8,077)
|
|
|
8,218
|
|
|
|
—
|
|
|
|
—
|
|
Maxim
|
|
|
—
|
|
|
|
27
|
|
|
|
50
|
|
Other
|
|
|
66
|
|
|
|
287
|
|
|
|
287
|
|
Total Operating Businesses
|
|
|
29,543
|
|
|
|
19,221
|
|
|
|
21,016
|
|
Corporate
|
|
|
35
|
|
|
|
97
|
|
|
|
432
|
|
Consolidated results
|
|
$
|
29,578
|
|
|
$
|
19,318
|
|
|
$
|
21,448
|
|
|
Note 17.
|
Business Segment Reporting (continued)
|
A disaggregation of our consolidated assets is presented
in the table that follows.
|
|
Identifiable Assets
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Reportable segments:
|
|
|
|
|
|
|
|
|
Restaurant Operations:
|
|
|
|
|
|
|
|
|
Steak n Shake
|
|
$
|
385,259
|
|
|
$
|
330,100
|
|
Western
|
|
|
18,322
|
|
|
|
16,444
|
|
Total Restaurant Operations
|
|
|
403,581
|
|
|
|
346,544
|
|
First Guard
|
|
|
58,808
|
|
|
|
51,565
|
|
Southern Oil
|
|
|
82,257
|
|
|
|
—
|
|
Maxim
|
|
|
16,549
|
|
|
|
18,143
|
|
Other
|
|
|
20,732
|
|
|
|
19,774
|
|
Corporate
|
|
|
51,840
|
|
|
|
35,987
|
|
Investment partnerships
|
|
|
505,542
|
|
|
|
557,480
|
|
Total assets
|
|
$
|
1,139,309
|
|
|
$
|
1,029,493
|
|
|
Note 18.
|
Quarterly Financial Data (Unaudited)
|
|
|
1st Quarter
|
|
|
2nd Quarter
|
|
|
3rd Quarter
|
|
|
4th Quarter
|
|
For the year ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
181,859
|
|
|
$
|
168,343
|
|
|
$
|
160,216
|
|
|
$
|
158,420
|
|
Gross profit
|
|
|
22,837
|
|
|
|
30,454
|
|
|
|
38,467
|
|
|
|
43,307
|
|
Costs and expenses
|
|
|
199,384
|
|
|
|
169,518
|
|
|
|
157,272
|
|
|
|
145,398
|
|
Earnings (loss) before income taxes
|
|
|
11,562
|
|
|
|
27,870
|
|
|
|
(631
|
)
|
|
|
16,340
|
|
Net earnings (loss)
|
|
|
9,818
|
|
|
|
21,974
|
|
|
|
(17
|
)
|
|
|
13,605
|
|
Net earnings (loss) per equivalent Class A share
|
|
$
|
28.36
|
|
|
$
|
63.50
|
|
|
$
|
(0.05
|
)
|
|
$
|
39.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
202,225
|
|
|
$
|
208,739
|
|
|
$
|
203,582
|
|
|
$
|
195,348
|
|
Gross profit
|
|
|
36,430
|
|
|
|
42,727
|
|
|
|
36,153
|
|
|
|
33,145
|
|
Costs and expenses
|
|
|
203,391
|
|
|
|
203,778
|
|
|
|
204,518
|
|
|
|
201,979
|
|
Earnings (loss) before income taxes
|
|
|
(2,611
|
)
|
|
|
(8,429
|
)
|
|
|
(24,902
|
)
|
|
|
52,697
|
|
Net earnings (loss)
|
|
|
(1,814
|
)
|
|
|
(7,539
|
)
|
|
|
(13,703
|
)
|
|
|
42,448
|
|
Net earnings (loss) per equivalent Class A share
|
|
$
|
(5.15
|
)
|
|
$
|
(21.73
|
)
|
|
$
|
(39.50
|
)
|
|
$
|
122.53
|
|
We define gross profit as net revenue less restaurant cost of sales, media cost
of sales, oil and natural gas production costs and insurance losses and underwriting expenses, which excludes depreciation and
amortization.
|
Note 19.
|
Supplemental Disclosures of Cash Flow Information
|
Capital expenditures in accounts payable at December 31, 2019, 2018 and 2017 were
$339, $1,776 and $1,036, respectively.
In 2019, we had new finance lease obligations of $5,026 and retirements of
$940. In 2018, we had new capital lease obligations of $1,000 and lease retirements of $11,557. During 2017, we had new capital
lease obligations of $1,952 and lease retirements of $5,030.