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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, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 001-38477
BIGLARI HOLDINGS INC.
(Exact name of registrant as specified in its charter)

Indiana 82-3784946
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)

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


BIGLARI HOLDINGS INC.
INDEX
Page No.
1
1
2
2
3
4
5



PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIGLARI HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30,
2021
December 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 27,795  $ 24,503 
Investments 99,006  94,861 
Receivables 23,885  19,185 
Inventories 3,102  2,737 
Other current assets 6,763  6,492 
Total current assets 160,551  147,778 
Property and equipment 352,822  316,122 
Operating lease assets 44,598  42,832 
Goodwill and other intangible assets 77,179  77,661 
Investment partnerships 273,089  419,550 
Other assets 11,132  14,025 
Total assets $ 919,371  $ 1,017,968 
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 100,898  $ 90,892 
Loss and loss adjustment expenses 13,401  14,652 
Unearned premiums 11,303  13,277 
Current portion of lease obligations 17,230  17,365 
Current portion of notes payable —  152,261 
Total current liabilities 142,832  288,447 
Lease obligations 107,949  111,645 
Deferred taxes 57,910  41,346 
Asset retirement obligations 10,314  10,022 
Other liabilities 1,800  1,680 
Total liabilities 320,805  453,140 
Shareholders’ equity
Common stock 1,138  1,138 
Additional paid-in capital 381,788  381,788 
Retained earnings 613,351  573,050 
Accumulated other comprehensive loss (1,909) (1,531)
Treasury stock, at cost (395,802) (389,617)
Biglari Holdings Inc. shareholders’ equity 598,566  564,828 
Total liabilities and shareholders’ equity $ 919,371  $ 1,017,968 
See accompanying Notes to Consolidated Financial Statements.
1

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
Third Quarter First Nine Months
2021 2020 2021 2020
(Unaudited) (Unaudited)
Revenues        
Restaurant operations $ 59,144  $ 79,674  $ 196,424  $ 272,582 
Insurance premiums and other 14,723  14,413  43,729  38,692 
Oil and gas 7,353  6,029  24,310  19,554 
Media and licensing 863  1,719  2,695  3,209 
82,083  101,835  267,158  334,037 
Cost and expenses
Restaurant cost of sales 41,694  54,062  129,297  194,737 
Insurance losses and underwriting expenses 10,672  11,290  31,733  28,866 
Oil and gas production costs 2,050  2,171  6,957  6,570 
Media and licensing costs 880  548  1,749  1,491 
Selling, general and administrative 16,889  19,902  50,848  54,974 
Impairments —  3,698  559  21,817 
Depreciation and amortization 7,682  7,275  22,239  24,284 
Interest expense on leases 1,462  1,593  4,619  4,679 
Interest expense on notes payable —  2,150  1,121  6,973 
81,329  102,689  249,122  344,391 
Other income
Investment gains 4,534  354  6,465  1,863 
Investment partnership gains (losses) (20,231) 27,218  27,344  (89,276)
(15,697) 27,572  33,809  (87,413)
Earnings (loss) before income taxes (14,943) 26,718  51,845  (97,767)
Income tax expense (benefit) (4,274) 5,617  11,544  (23,449)
Net earnings (loss) $ (10,669) $ 21,101  $ 40,301  $ (74,318)
Earnings per share
Net earnings (loss) per equivalent Class A share * $ (33.74) $ 60.07  $ 125.79  $ (213.31)
*Net earnings (loss) per equivalent Class B share outstanding are one-fifth of the equivalent Class A share or $(6.75) and $25.16 for the third quarter and first nine months of 2021, respectively, and $12.01 and $(42.66) for the third quarter and first nine months of 2020, respectively.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
  Third Quarter First Nine Months
  2021 2020 2021 2020
  (Unaudited) (Unaudited)
Net earnings (loss) $ (10,669) $ 21,101  $ 40,301  $ (74,318)
Foreign currency translation (49) 344  (378) 834 
Total comprehensive income (loss) $ (10,718) $ 21,445  $ 39,923  $ (73,484)
See accompanying Notes to Consolidated Financial Statements.

2

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
First Nine Months
2021 2020
(Unaudited)
Operating activities    
Net earnings (loss) $ 40,301  $ (74,318)
Adjustments to reconcile net earnings (loss) to operating cash flows:
Depreciation and amortization 22,239  24,284 
Provision for deferred income taxes 16,625  (23,755)
Asset impairments and other non-cash expenses 696  22,545 
Gains on disposal of assets (306) (1,251)
Investment gains and investment partnership gains/losses (34,461) 87,413 
Distributions from investment partnerships 172,420  97,330 
Changes in receivables, inventories and other assets 3,608  10,919 
Changes in accounts payable and accrued expenses (9,877) (36,800)
Net cash provided by operating activities 211,245  106,367 
Investing activities
Capital expenditures (46,486) (13,297)
Proceeds from property and equipment disposals 2,749  3,914 
Acquisition of business, net of cash acquired —  (34,240)
Purchases of limited partner interests (4,800) (69,330)
Purchases of investments (81,923) (240,351)
Redemptions of fixed maturity securities 74,678  241,223 
Net cash used in investing activities (55,782) (112,081)
Financing activities
Proceeds from revolving credit facility —  500 
Principal payments on long-term debt (149,952) (22,729)
Principal payments on direct financing lease obligations (4,634) (4,152)
Net cash used in financing activities (154,586) (26,381)
Effect of exchange rate changes on cash (85) (13)
Increase (decrease) in cash, cash equivalents and restricted cash 792  (32,108)
Cash, cash equivalents and restricted cash at beginning of year 29,666  70,696 
Cash, cash equivalents and restricted cash at end of third quarter $ 30,458  $ 38,588 
First Nine Months
2021 2020
(Unaudited)
Cash and cash equivalents $ 27,795  $ 33,164 
Restricted cash in other long-term assets 2,663  5,424 
Cash, cash equivalents and restricted cash at end of third quarter $ 30,458  $ 38,588 
See accompanying Notes to Consolidated Financial Statements.
3

BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(dollars in thousands)
Common
Stock
Additional Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive 
Income (Loss)
Treasury
Stock
Total
Balance at December 31, 2020 $ 1,138  $ 381,788  $ 573,050  $ (1,531) $ (389,617) $ 564,828 
Net earnings 71,707  71,707 
Other comprehensive loss (444) (444)
Adjustment to treasury stock for holdings in investment partnerships 3,049  3,049 
Balance at March 31, 2021 $ 1,138  $ 381,788  $ 644,757  $ (1,975) $ (386,568) $ 639,140 
Net earnings (loss) (20,737) (20,737)
Other comprehensive income 115  115 
Adjustment to treasury stock for holdings in investment partnerships (5,026) (5,026)
Balance at June 30, 2021 $ 1,138  $ 381,788  $ 624,020  $ (1,860) $ (391,594) $ 613,492 
Net earnings (loss) (10,669) (10,669)
Other comprehensive loss (49) (49)
Adjustment to treasury stock for holdings in investment partnerships (4,208) (4,208)
Balance at September 30, 2021 $ 1,138  $ 381,788  $ 613,351  $ (1,909) $ (395,802) $ 598,566 
Common
Stock
Additional 
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock  
Total
Balance at December 31, 2019 $ 1,138  $ 381,788  $ 611,039  $ (2,810) $ (374,857) $ 616,298 
Net earnings (loss) (137,885) (137,885)
Other comprehensive loss (312) (312)
Adjustment to treasury stock for holdings in investment partnerships 1,089  1,089 
Balance at March 31, 2020 $ 1,138  $ 381,788  $ 473,154  $ (3,122) $ (373,768) $ 479,190 
Net earnings 42,466  42,466 
Other comprehensive income 802  802 
Adjustment to treasury stock for holdings in investment partnerships 92  92 
Balance at June 30, 2020 $ 1,138  $ 381,788  $ 515,620  $ (2,320) $ (373,676) $ 522,550 
Net earnings (loss) 21,101  21,101 
Other comprehensive income 344  344 
Adjustment to treasury stock for holdings in investment partnerships (5,777) (5,777)
Balance at September 30, 2020 $ 1,138  $ 381,788  $ 536,721  $ (1,976) $ (379,453) $ 538,218 
See accompanying Notes to Consolidated Financial Statements.
4

BIGLARI HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(dollars in thousands, except share and per share data)
Note 1. Summary of Significant Accounting Policies
Description of Business
The accompanying unaudited consolidated financial statements of Biglari Holdings Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal recurring adjustments. The results for the interim periods shown are not necessarily indicative of results for the entire fiscal year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020.
Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of September 30, 2021, Mr. Biglari beneficially owns shares of the Company that represent approximately 65.0% of the economic interest and 70.3% of the voting interest.
Overview of the Impact of COVID-19
The novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March of 2020. Government and private sector responses to contain its spread began to affect our operating businesses significantly that same month. The COVID-19 pandemic has adversely affected nearly all of our operations, although the effects are varying significantly. The risks and uncertainties resulting from the pandemic may continue to affect our future earnings, cash flows and financial condition. The extent of such effects over the long term cannot be reasonably estimated at this time.
Business Acquisition
On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company, and its agency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance. The financial results for Southern Pioneer are included from the date of acquisition.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including Steak n Shake Inc., Western Sizzlin Corporation, First Guard Insurance Company, Maxim Inc., Southern Pioneer, and Southern Oil Company.  Intercompany accounts and transactions have been eliminated in consolidation.

Change in Presentation
Gain on debt extinguishment of $0 and $5,713 during the third quarter and first nine months of 2020, respectively, have been reclassified from other income to selling, general and administrative expenses. Loss and loss adjustment expenses and unearned premiums are reflected separately from accrued expenses on the consolidated balance sheet.
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.

5

Note 2. Earnings Per Share (continued)
The following table presents shares authorized, issued and outstanding on September 30, 2021 and December 31, 2020.
  September 30, 2021 December 31, 2020
  Class A Class B Class A Class B
Common stock authorized 500,000  10,000,000  500,000  10,000,000 
Common stock issued and outstanding 206,864  2,068,640  206,864  2,068,640 
On an equivalent Class A common stock basis, there were 620,592 shares outstanding as of September 30, 2021 and December 31, 2020.  The Company has applied the "two-class method" of computing earnings per share as prescribed in Accounting Standards Codification ("ASC") 260, "Earnings Per Share". The equivalent Class A common stock applied for computing earnings per share excludes the proportional shares of Biglari Holdings' stock held by the investment partnerships. The equivalent Class A common stock for the earnings per share calculation during the third quarters of 2021 and 2020 was 316,236 and 351,288, respectively.  The equivalent Class A common stock for the earnings per share calculation during the first nine months of 2021 and 2020 was 320,377 and 348,396, respectively.
Note 3. Investments

Investments were $99,006 and $94,861 as of September 30, 2021 and December 31, 2020, respectively.  We classify investments in fixed maturity securities at the acquisition date as either available-for-sale or held-to-maturity and re-evaluate the classification at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Realized gains and losses on disposals of investments are determined on a specific identification basis. Dividends earned on investments are reported as investment income by our insurance companies. We consider investment income as a component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

Investment gains for the third quarter and first nine months of 2021 were $4,534 and $6,465, respectively, which include a $5,047 gain on the sale of real estate. The Company purchased 26 acres of land in Murfreesboro, Tennessee in 2014 for $2,145 and sold it in the third quarter of 2021. Investment gains for the third quarter and first nine months of 2020 were $354 and $1,863, 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 they are legally outstanding.  The Company records gains/losses from investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses on their securities) in the consolidated statements of earnings based on our carrying value of these partnerships. The fair value is calculated net of the general partner’s accrued incentive fees. Gains and losses on Company common stock included in the earnings of these partnerships are eliminated because they are recorded as treasury stock.  Biglari Capital Corp. (“Biglari Capital”) is the general partner of the investment partnerships and is an entity solely owned by Mr. Biglari.
The fair value and adjustment for Company common stock held by the investment partnerships to determine the carrying value of our partnership interest is presented below.
  Fair Value Company
Common Stock
Carrying Value
Partnership interest at December 31, 2020 $ 590,926  $ 171,376  $ 419,550 
Investment partnership gains (losses) 110,690  83,346  27,344 
Distributions (net of contributions) (167,620) (167,620)
Increase in proportionate share of Company stock held 6,185  (6,185)
Partnership interest at September 30, 2021 $ 533,996  $ 260,907  $ 273,089 
6

Note 4. Investment Partnerships (continued)

  Fair Value Company
Common Stock
Carrying Value
Partnership interest at December 31, 2019 $ 666,123  $ 160,581  $ 505,542 
Investment partnership gains (losses) (123,524) (34,248) (89,276)
Distributions (net of contributions) (28,000) (28,000)
Decrease in proportionate share of Company stock held 4,596  (4,596)
Partnership interest at September 30, 2020 $ 514,599  $ 130,929  $ 383,670 
The carrying value of the investment partnerships net of deferred taxes is presented below.
  September 30,
2021
December 31, 2020
Carrying value of investment partnerships $ 273,089  $ 419,550 
Deferred tax liability related to investment partnerships (54,432) (44,805)
Carrying value of investment partnerships net of deferred taxes $ 218,657  $ 374,745 
The Company’s proportionate share of Company stock held by investment partnerships at cost is $395,802 and $389,617 at September 30, 2021 and December 31, 2020, respectively, and is recorded as treasury stock. 
The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock.  Fair value of our partnership interests 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
  2021 2020 2021 2020
Gains (losses) on investment partnership $ (20,231) $ 27,218  $ 27,344  $ (89,276)
Tax expense (benefit) (4,946) 6,163  6,175  (21,337)
Contribution to net earnings $ (15,285) $ 21,055  $ 21,169  $ (67,939)
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 consolidated financial statements.
There were no incentive reallocations from Biglari Holdings to Biglari Capital during the first nine months of 2021 and 2020.







7

Note 4. Investment Partnerships (continued)

Summarized financial information for The Lion Fund, L.P. and The Lion Fund II, L.P. is presented below.
  Equity in Investment Partnerships
  Lion Fund Lion Fund II
Total assets as of September 30, 2021 $ 132,351  $ 583,989 
Total liabilities as of September 30, 2021 $ 1,490  $ 101,956 
Revenue for the first nine months of 2021 $ 35,639  $ 94,078 
Earnings for the first nine months of 2021 $ 35,584  $ 93,548 
Biglari Holdings' ownership interest as of September 30, 2021 62.4  % 93.9  %
Total assets as of December 31, 2020 $ 112,970  $ 566,663 
Total liabilities as of December 31, 2020 $ 189  $ 25,453 
Revenue for the first nine months of 2020 $ (18,941) $ (119,644)
Earnings for the first nine months of 2020 $ (18,992) $ (120,849)
Biglari Holdings' ownership interest as of September 30, 2020 66.2  % 95.3  %
Revenue in the above summarized financial information of the investment partnerships includes investment income and unrealized gains and losses on investments.
Note 5. Property and Equipment
Property and equipment is composed of the following.
  September 30,
2021
December 31,
2020
Land $ 144,774  $ 142,601 
Buildings 147,947  138,734 
Land and leasehold improvements 148,296  141,351 
Equipment 223,815  192,735 
Oil and gas properties 73,752  75,900 
Construction in progress 2,482  1,032 
  741,066  692,353 
Less accumulated depreciation and amortization (388,244) (376,231)
Property and equipment, net $ 352,822  $ 316,122 
Depletion expense related to oil and gas properties was $5,875 and $9,249 during the first nine months of 2021 and 2020, respectively, and is included in depreciation and amortization within the consolidated statement of earnings.
During the first nine months of 2021, the Company recorded impairment charges of $559 related to closed stores. The Company recorded impairment charges of $18,117 in the first nine months of 2020. The fair value of the long-lived assets was determined based on Level 3 inputs using a discounted cash flow model and quoted prices for the properties.
Note 6. Goodwill and Other Intangible Assets
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of the net assets acquired in connection with business acquisitions.
8

Note 6. Goodwill and Other Intangible Assets (continued)
A reconciliation of the change in the carrying value of goodwill is as follows.
  Goodwill
Goodwill at December 31, 2020
$ 53,596 
Change in foreign exchange rates during the first nine months of 2021 (36)
Goodwill at September 30, 2021
$ 53,560 
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. In response to the adverse effects of the COVID-19 pandemic, during 2020 we considered whether goodwill needed to be evaluated for impairment for certain restaurant reporting units. We considered the available facts and made qualitative assessments and judgments for what we believed represented reasonably possible outcomes. No impairment charges for goodwill were recorded in the first nine months of 2021 or 2020.
Western Sizzlin has experienced a decline in its franchised units for several years. If Western Sizzlin's franchised units continue to decline, an impairment of its goodwill may be necessary.
Other Intangible Assets
Intangible assets with indefinite lives are composed of the following.
  Trade Names Lease Rights Total
Balance at December 31, 2020
$ 15,876  $ 8,189  $ 24,065 
Change in foreign exchange rates during the first nine months of 2021 —  (446) (446)
Balance at September 30, 2021
$ 15,876  $ 7,743  $ 23,619 
During the first nine months of 2020, the Company recorded impairment charges of $3,700 on lease rights related to our international restaurant operations.
Fair values were determined using Level 3 inputs and available market data. 
Note 7. Restaurant Operations Revenues
Restaurant operations revenues were as follows.
  Third Quarter First Nine Months
  2021 2020 2021 2020
Net sales $ 41,916  $ 67,617  $ 146,269  $ 241,832 
Franchise partner fees 11,508  6,894  31,744  14,775 
Franchise royalties and fees 4,865  4,421  14,594  13,704 
Other 855  742  3,817  2,271 
  $ 59,144  $ 79,674  $ 196,424  $ 272,582 
Net Sales
Net sales are composed of retail sales of food through company-operated stores. Company-operated store revenues are recognized, net of discounts and sales taxes, when our obligation to perform is satisfied at the point of sale. Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.


9

Note 7. Restaurant Operations Revenues (continued)
Franchise Partner Fees
Franchise partner fees are composed of up to 15% of sales as well as 50% of profits. We are therefore fully affected by the operating results of the business, unlike in a traditional franchising arrangement, where the franchisor obtains a royalty fee based on sales only. 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 franchisees under lease arrangements. Both real estate and equipment rental payments are charged to franchisees and are recognized in accordance with ASC 842, "Leases". During the third quarter of 2021 and 2020, restaurant operations recognized $4,277 and $1,606, respectively, in franchise partner fees related to rental fees. During the nine months ended September 30, 2021, and September 30, 2020, restaurant operations recognized $10,910 and $3,617, respectively, in franchise partner fees related to rental fees.
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 which can be redeemed for retail food sales within our stores. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as net sales upon redemption. Restaurant operations estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as other revenue in proportion to the rate of gift card redemptions by vintage.
Note 8. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include the following.
  September 30,
2021
December 31,
2020
Accounts payable $ 42,307  $ 26,537 
Gift card liability 21,174  21,822 
Insurance accruals 6,221  6,559 
Salaries, wages and vacation 8,378  8,285 
Deferred revenue 7,546  9,324 
Taxes payable 4,317  10,922 
Professional fees 6,169  5,882 
Other 4,786  1,561 
Accounts payable and accrued expenses $ 100,898  $ 90,892 

Note 9. Notes Payable and Lease Obligations
Steak n Shake Credit Facility
On March 19, 2014, Steak n Shake and its subsidiaries entered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000. The term loan was scheduled to mature on March 19, 2021. As of December 31, 2020, $152,506 was outstanding. The Company repaid Steak n Shake's outstanding balance in full on February 19, 2021.
10

Note 9. Notes Payable and Lease Obligations (continued)
Lease obligations include the following.
Current portion of lease obligations September 30,
2021
December 31,
2020
Finance lease liabilities $ 1,536  $ 1,897 
Finance obligations 4,948  4,854 
Operating lease liabilities 10,746  10,614 
Total current portion of lease obligations $ 17,230  $ 17,365 
Long-term lease obligations
Finance lease liabilities $ 5,627  $ 7,034 
Finance obligations 64,315  68,148 
Operating leases liabilities 38,007  36,463 
Total long-term lease obligations $ 107,949  $ 111,645 
Note 10. Leased Assets and Lease Commitments

Nature of Leases
The Company operates restaurants that are located on sites owned by us and leased from third parties. In addition, the Company owns sites and leases sites from third parties that are leased and/or subleased to franchisees.
Company as Lessee
A significant portion of our operating and finance lease portfolio includes restaurant locations. Operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.
Total lease cost consists of the following.
Third Quarter First Nine Months
2021 2020 2021 2020
Finance lease costs:
Amortization of right-of-use assets $ 404  $ 279  $ 1,205  $ 1,087 
Interest on lease liabilities 126  136  399  392 
Operating lease costs * 240  2,096  1,403  8,321 
Total lease costs $ 770  $ 2,511  $ 3,007  $ 9,800 
*Includes short-term leases, variable lease costs and sublease income.
















11

Note 10. Leased Assets and Lease Commitments (continued)
Supplemental cash flow information related to leases is as follows.
  First Nine Months
  2021 2020
Cash paid for amounts included in the measurement of lease liabilities:    
Financing cash flows from finance leases $ 1,226  $ 1,132 
Operating cash flows from finance leases $ 384  $ 463 
Operating cash flows from operating leases $ 9,806  $ 10,382 
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities $ —  $ 73 

Supplemental balance sheet information related to leases is as follows.
September 30,
2021
December 31,
2020
Finance leases:
Property and equipment, net $ 6,005  $ 6,501 
Weighted-average lease terms and discount rates are as follows.
September 30,
2021
Weighted-average remaining lease terms:
Finance leases 5.2 years
Operating leases 5.3 years
Weighted-average discount rates:
Finance leases 7.0  %
Operating leases 6.9  %
Maturities of lease liabilities as of September 30, 2021 are as follows.
Year Operating
Leases
Finance
Leases
2021 $ 4,217  $ 543 
2022 12,457  1,816 
2023 11,204  1,551 
2024 9,244  1,534 
2025 7,605  1,298 
After 2025 13,699  1,814 
Total lease payments 58,426  8,556 
Less interest 9,673  1,393 
Total lease liabilities $ 48,753  $ 7,163 





12

Note 10. Leased Assets and Lease Commitments (continued)
Company as Lessor
The components of lease income are as follows.
Third Quarter First Nine Months
2021 2020 2021 2020
Operating lease income $ 3,211  $ 1,428  $ 8,471  $ 3,259 
Variable lease income 1,370  449  3,375  1,183 
Total lease income $ 4,581  $ 1,877  $ 11,846  $ 4,442 

The following table displays the Company's future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2021. Franchise partner leases and subleases are short-term leases and have been excluded from the table.
Operating Leases
Year Subleases Owned Properties
2021 $ 190  $ 62 
2022 725  247 
2023 537  247 
2024 454  247 
2025 454  250 
After 2025 1,916  1,052 
Total future minimum receipts $ 4,276  $ 2,105 
Note 11. Accumulated Other Comprehensive Income
Accumulated other comprehensive loss increased $49 and decreased $344 during the third quarters of 2021 and 2020, respectively. During the first nine months of 2021, accumulated other comprehensive loss increased by $378 and decreased by $834 during the first nine months of 2020.  As of September 30, 2021 and 2020, the balances in accumulated other comprehensive loss were $1,909 and $1,976, respectively.  There were no reclassifications from accumulated other comprehensive loss to earnings during the first nine months of 2021 and 2020.  All changes in accumulated other comprehensive loss were due to foreign currency translation adjustments.
Note 12. Income Taxes
In determining the quarterly provision for income taxes, the Company used a discrete effective tax rate method based on statutory tax rates for the first nine months of 2021 and 2020. Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and underlying income tax rates applicable to the various taxing jurisdictions.
Income tax benefit for the third quarter of 2021 was $4,274 compared to an income tax expense of $5,617 for the third quarter of 2020.  Income tax expense for the first nine months of 2021 was $11,544 compared to a benefit of $23,449 for the first nine months of 2020.  The variance in income taxes between 2021 and 2020 is attributable to taxes on income generated by the investment partnerships.  Investment partnership pretax gains were $27,344 during the first nine months of 2021 compared to pretax losses of $89,276 during the first nine months of 2020. 
Note 13. Commitments and Contingencies

We are involved in various legal proceedings and have certain unresolved claims pending. We believe, based on examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided in our consolidated financial statements is not likely to have a material effect on our results of operations, financial position or cash flow.

13

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.
The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.
Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets. 
Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.
Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and we may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.
The following methods and assumptions were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:
Cash equivalents: Cash equivalents primarily consist of money market funds which are classified within Level 1 of the fair value hierarchy.
Equity securities: The Company’s investments in equity securities are classified within Levels 1 and 2 of the fair value hierarchy. 
Bonds: The Company’s investments in bonds consist of both corporate and government debt. Bonds are classified within Level l or Level 2 of the fair value hierarchy.
Non-qualified deferred compensation plan investments: The assets of the non-qualified plan are set up in a rabbi trust. They represent mutual funds and publicly traded securities, each of which are classified within Level 1 of the fair value hierarchy.
Derivative instruments: Options related to equity securities are marked to market each reporting period and are classified within Level 2 of the fair value hierarchy depending on the instrument.
14

Note 14. Fair Value of Financial Assets (continued)
As of September 30, 2021 and December 31, 2020, the fair values of financial assets were as follows.
September 30, 2021 December 31, 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 25,575  $ —  $ —  $ 25,575  $ 23,885  $ —  $ —  $ 23,885 
Equity securities
Consumer goods 8,349  2,810  —  11,159  7,274  5,652  —  12,926 
Insurance 4,536  —  —  4,536  261  —  —  261 
Bonds
Government 52,876  —  —  52,876  39,472  14,043  —  53,515 
Corporate 6,947  —  —  6,947  —  5,406  —  5,406 
Options on equity securities —  1,653  —  1,653  —  2,911  —  2,911 
Non-qualified deferred compensation plan investments 1,596  —  —  1,596  1,368  —  —  1,368 
Total assets at fair value $ 99,879  $ 4,463  $ —  $ 104,342  $ 72,260  $ 28,012  $ —  $ 100,272 
There were no changes in our valuation techniques used to measure fair values on a recurring basis.
Note 15. Related Party Transactions
Service Agreement
The Company is party to a service agreement with Biglari Enterprises LLC and Biglari Capital Corp. (collectively, the “Biglari Entities”) under which the Biglari Entities provide services to the Company. The service agreement has a five-year term, effective on October 1, 2017.  The Company paid Biglari Enterprises $6,300 in service fees during the first nine months of 2021 and 2020. The service agreement does not alter the hurdle rate connected with the incentive reallocation paid to Biglari Capital Corp.  The Biglari Entities are owned by Mr. Biglari. 
Incentive Agreement
The Incentive Agreement establishes a performance-based annual incentive payment for Mr. Biglari contingent upon the growth in adjusted equity in each year attributable to our operating businesses. In order for Mr. Biglari to receive any incentive, our operating businesses must achieve an annual increase in shareholders’ equity in excess of 6% (the “Hurdle Rate”) above the previous highest level (the “High Water Mark”). Mr. Biglari will receive 25% of any incremental book value created above the High Water Mark plus the Hurdle Rate. In any year in which book value declines, our operating businesses must completely recover their deficit from the previous High Water Mark, along with attaining the Hurdle Rate, before Mr. Biglari becomes eligible to receive any further incentive payment.
Note 16. Business Segment Reporting
Our reportable business segments are organized in a manner that reflects how management views those business activities. Our restaurant operations include Steak n Shake and Western Sizzlin. Our insurance operations include First Guard and Southern Pioneer.  The Company also reports segment information for Maxim and Southern Oil. Other business activities not specifically identified with reportable business segments are presented in corporate. We report our earnings from investment partnerships separate from our corporate expenses. We assess and measure segment operating results based on segment earnings as disclosed below. Segment earnings from operations are neither necessarily indicative of cash available to fund cash requirements, nor synonymous with cash flow from operations. The tabular information that follows shows data of our reportable segments reconciled to amounts reflected in the consolidated financial statements.
15


Note 16. Business Segment Reporting (continued)
A disaggregation of our consolidated data for the third quarters and first nine months of 2021 and 2020 is presented in the tables that follow.
Revenue
Third Quarter First Nine Months
2021 2020 2021 2020
Operating Businesses:
Restaurant Operations:
Steak n Shake $ 56,993  $ 78,313  $ 190,517  $ 267,637 
Western Sizzlin 2,151  1,361  5,907  4,945 
Total Restaurant Operations 59,144  79,674  196,424  272,582 
Insurance Operations:
First Guard 8,656  7,898  25,250  23,194 
Southern Pioneer 6,067  6,515  18,479  15,498 
Total Insurance Operations 14,723  14,413  43,729  38,692 
Southern Oil 7,353  6,029  24,310  19,554 
Maxim 863  1,719  2,695  3,209 
$ 82,083  $ 101,835  $ 267,158  $ 334,037 

  Earnings (Losses) Before Income Taxes
  Third Quarter First Nine Months
  2021 2020 2021 2020
Operating Businesses:
Restaurant Operations:
Steak n Shake $ (2,959) $ (63) $ 5,733  $ (6,362)
Western Sizzlin 247  (396) 707  (937)
Total Restaurant Operations (2,712) (459) 6,440  (7,299)
Insurance Operations:
First Guard 2,934  2,152  8,204  7,193 
Southern Pioneer 908  518  3,194  1,458 
Total Insurance Operations 3,842  2,670  11,398  8,651 
Southern Oil 2,982  592  9,047  1,355 
Maxim (56) 1,150  867  1,605 
Interest expense not allocated to segments —  (2,150) (1,121) (6,973)
Total Operating Businesses 4,056  1,803  26,631  (2,661)
Corporate and Investments:
Corporate and other (3,302) (2,657) (8,595) (7,693)
Investment gains 4,534  354  6,465  1,863 
Investment partnership gains (losses) (20,231) 27,218  27,344  (89,276)
Total Corporate and Investments (18,999) 24,915  25,214  (95,106)
  $ (14,943) $ 26,718  $ 51,845  $ (97,767)
16


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 
(dollars in thousands except per share data)
Overview
Biglari Holdings is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings was founded and is led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. The Company’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of September 30, 2021, Mr. Biglari beneficially owns shares of the Company that represent approximately 65.0% of the economic interest and 70.3% of the voting interest.
On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company and its agency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). The Company's financial results include the results of Southern Pioneer from the date of acquisition.
Net earnings (loss) attributable to Biglari Holdings shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes. 
  Third Quarter First Nine Months
  2021 2020 2021 2020
Operating businesses:        
Restaurant $ (1,515) $ (15) $ 5,146  $ (6,199)
Insurance 2,985  2,204  8,902  6,819 
Oil and gas 2,325  389  7,016  1,278 
Media and licensing (43) 885  662  1,236 
Interest expense —  (1,612) (841) (5,219)
Total operating businesses 3,752  1,851  20,885  (2,085)
Corporate and other (2,526) (2,081) (6,649) (5,762)
Investment gains 3,390  276  4,896  1,468 
Investment partnership gains (losses) (15,285) 21,055  21,169  (67,939)
  $ (10,669) $ 21,101  $ 40,301  $ (74,318)
Restaurant businesses include Steak n Shake Inc. and Western Sizzlin Corporation.  Steak n Shake and Western Sizzlin are engaged in the ownership, operation, and franchising of restaurants.
Insurance businesses are composed of First Guard Insurance Company ("First Guard") and Southern Pioneer. First Guard is a direct underwriter of commercial trucking insurance, selling physical damage and nontrucking liability insurance to truckers.  Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance.
Oil and gas business is composed of Southern Oil Company ("Southern Oil"). 
Media and licensing business is composed of Maxim Inc.
17


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Restaurants
Steak n Shake and Western Sizzlin comprise 581 company-operated and franchise restaurants as of September 30, 2021.
Steak n Shake Western Sizzlin
  Company-
operated
Franchise
Partner
Traditional
Franchise
Company-
operated
Franchise Total
Total stores as of December 31, 2020
276  86  194  39  598 
Corporate stores transitioned (54) 54  —  —  —  — 
Net restaurants opened (closed) (1) —  (15) —  (1) (17)
Total stores as of September 30, 2021
221  140  179  38  581 
Total stores as of December 31, 2019
368  29  213  48  662 
Corporate stores transitioned (41) 40  —  —  — 
Net restaurants opened (closed) (67) —  (15) (1) (9) (92)
Total stores as of September 30, 2020
260  69  199  39  570 
As of September 30, 2021, 42 of the 221 company-operated Steak n Shake stores were temporarily closed.

18


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Earnings of our restaurant operations are summarized below.
Third Quarter First Nine Months
2021 2020 2021 2020
Revenue
Net sales $ 41,916  $ 67,617  $ 146,269  $ 241,832 
Franchise partner fees 11,508  6,894  31,744  14,775 
Franchise royalties and fees 4,865  4,421  14,594  13,704 
Other revenue 855  742  3,817  2,271 
Total revenue 59,144  79,674  196,424  272,582 
Restaurant cost of sales
Cost of food 13,123  31.3  % 19,508  28.9  % 43,404  29.7  % 70,880  29.3  %
Restaurant operating costs 24,496  58.4  % 30,451  45.0  % 71,751  49.1  % 110,903  45.9  %
Occupancy costs 4,075  9.7  % 4,103  6.1  % 14,142  9.7  % 12,954  5.4  %
Total cost of sales 41,694  54,062  129,297  194,737 
Selling, general and administrative
General and administrative 9,255  15.6  % 12,059  15.1  % 27,416  14.0  % 30,146  11.1  %
Marketing 2,302  3.9  % 3,891  4.9  % 10,212  5.2  % 18,406  6.8  %
Other expenses 1,332  2.3  % 454  0.6  % 2,266  1.2  % 1,721  0.6  %
Total selling, general and administrative 12,889  21.8  % 16,404  20.6  % 39,894  20.3  % 50,273  18.4  %
Impairments —  (3,698) (559) (21,817)
Depreciation and amortization (5,811) (4,376) (15,615) (14,088)
Gain on debt extinguishment —  —  —  5,713 
Interest on finance leases and obligations (1,462) (1,593) (4,619) (4,679)
Earnings (loss) before income taxes (2,712) (459) 6,440  (7,299)
Income tax expense (benefit) (1,197) (444) 1,294  (1,100)
Contribution to net earnings $ (1,515) $ (15) $ 5,146  $ (6,199)
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.

The novel coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March of 2020. Government and private sector responses to contain its spread began to affect our operating businesses significantly that same month. The COVID-19 pandemic has adversely affected our restaurant operations, as our restaurants were required to close their dining rooms during the first quarter of 2020.

The majority of Steak n Shake’s dining rooms remained closed through the end of 2020. Steak n Shake has been reopening its dining rooms this year, and in doing so has implemented a self-service model. The transformation has resulted in higher capital expenditures in 2021 as compared to 2020. In the first nine months of 2021, Steak n Shake spent $29,708 in capital expenditures related to the conversion of table-service restaurants to self-service restaurants.


19


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Net sales for the third quarter and first nine months of 2021 were $41,916 and $146,269, respectively, representing a decrease of $25,701 or 38.0%, and $95,563 or 39.5%, compared to the third quarter and first nine months of 2020, respectively. The year-over-year decrease in revenue of company-operated restaurants is primarily due to the shift of company units to franchise partner units. 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 restaurants’ 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 with each transition of a company-operated unit to a franchise partner unit.

Franchise partner fees were $11,508 during the third quarter of 2021, compared to $6,894 during the third quarter of 2020. Franchise partner fees were $31,744 during the first nine months of 2021, compared to $14,775 during the first nine months of 2020. As of September 30, 2021, there were 140 franchise partner units, compared to 69 franchise partner units as of September 30, 2020.

The cost of food during the third quarter and first nine months of 2021 was $13,123, and $43,404, respectively, compared to $19,508, and $70,880 in the third quarter and first nine months of 2020, respectively. Restaurant operating costs during the third quarter of 2021 were $24,496, compared to $30,451 in the third quarter of 2020. Restaurant operating costs during the first nine months of 2021 were $71,751, compared to $110,903 in the first nine months of 2020. The decreases in cost of food and operating costs are mainly attributable to the transitioning of company-operated units to franchise partner units. The increase in operating costs as a percentage of net sales is mainly attributable to increasing wages. The Company expects to increase menu prices in the fourth quarter to improve margins.

General and administrative costs during the third quarter and first nine months of 2021 were $9,255 and $27,416, respectively, compared to $12,059 and $30,146 in the third quarter and first nine months of 2020, respectively. The year-over-year general and administrative costs were lower in 2021 primarily because of legal and professional fees incurred during the third quarter of 2020.

Marketing expenses during the third quarter and first nine months of 2021 were $2,302 and $10,212, respectively, compared to $3,891 and $18,406 during the third quarter and first nine months of 2020, respectively. Marketing expenses decreased primarily due to the decision to shift to a digital marketing strategy.

Our restaurants recorded an impairment to long-lived assets of $0 and $3,698 in the third quarters of 2021 and 2020, respectively, and $559 and $21,817 in the first nine months of 2021 and 2020, respectively. The 2021 impairments are primarily attributable to Steak n Shake store closures. The 2020 impairments were connected to dining room closures during the pandemic.
Insurance
We view our insurance businesses as possessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Business units are operated under separate local management. Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer.
Underwriting results of our insurance operations are summarized below.
Third Quarter First Nine Months
2021 2020 2021 2020
Underwriting gain attributable to:
First Guard $ 2,832  $ 2,077  $ 7,922  $ 6,953 
Southern Pioneer 397  60  1,511  (229)
Pre-tax underwriting gain 3,229  2,137  9,433  6,724 
Income tax expense 681  449  1,984  1,412 
Net underwriting gain $ 2,548  $ 1,688  $ 7,449  $ 5,312 


20


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Earnings of our insurance operations are summarized below.
Third Quarter First Nine Months
2021 2020 2021 2020
Premiums written $ 13,901  $ 13,427  $ 41,166  $ 35,590 
Insurance losses 6,657  7,419  20,040  18,494 
Underwriting expenses 4,015  3,871  11,693  10,372 
Pre-tax underwriting gain 3,229  2,137  9,433  6,724 
Other income and expenses      
Investment income and commissions 646  817  2,033  2,749 
Other expenses (33) (284) (68) (822)
Total other income 613  533  1,965  1,927 
Earnings before income taxes 3,842  2,670  11,398  8,651 
Income tax expense 857  466  2,496  1,832 
Contribution to net earnings $ 2,985  $ 2,204  $ 8,902  $ 6,819 

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
2021 2020 2021 2020
Amount % Amount % Amount % Amount %
Premiums written $ 8,458  100.0  % $ 7,505  100.0  % $ 24,760  100.0  % $ 22,195  100.0  %
Insurance losses 3,935  46.5  % 3,736  49.8  % 11,746  47.4  % 10,268  46.3  %
Underwriting expenses 1,691  20.0  % 1,692  22.5  % 5,092  20.6  % 4,974  22.4  %
Total losses and expenses 5,626  66.5  % 5,428  72.3  % 16,838  68.0  % 15,242  68.7  %
Pre-tax underwriting gain $ 2,832  $ 2,077  $ 7,922  $ 6,953 


21


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

Southern Pioneer underwrites garage liability insurance, commercial property, as well as homeowners and dwelling fire insurance. The financial results for Southern Pioneer are from the date of acquisition March 9, 2020. A summary of Southern Pioneer’s underwriting results follows.
Third Quarter First Nine Months
2021 2020 2021 2020
Amount % Amount % Amount % Amount %
Premiums written $ 5,443  100.0  % $ 5,922  100.0  % $ 16,406  100.0  % $ 13,395  100.0  %
Insurance losses 2,722  50.0  % 3,683  62.2  % 8,294  50.6  % 8,226  61.4  %
Underwriting expenses 2,324  42.7  % 2,179  36.8  % 6,601  40.2  % 5,398  40.3  %
Total losses and expenses 5,046  92.7  % 5,862  99.0  % 14,895  90.8  % 13,624  101.7  %
Pre-tax underwriting gain $ 397  $ 60  $ 1,511  $ (229)
Insurance - Investment Income
A summary of net investment income attributable to our insurance operations follows.
Third Quarter First Nine Months
2021 2020 2021 2020
Interest, dividends and other investment income:
First Guard $ 54  $ 75  $ 84  $ 246 
Southern Pioneer 141  121  568  821 
Pre-tax investment income 195  196  652  1,067 
Income tax expense 41  41  137  224 
Net investment income $ 154  $ 155  $ 515  $ 843 
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.
Oil and Gas
Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.  Earnings for Southern Oil are summarized below.
Third Quarter First Nine Months
2021 2020 2021 2020
Oil and gas revenue $ 7,353  $ 6,029  $ 24,310  $ 19,554 
Oil and gas production costs 2,050  2,171  6,957  6,570 
Depreciation, depletion and accretion 1,717  2,804  6,286  9,651 
General and administrative expenses 604  462  2,020  1,978 
Earnings before income taxes 2,982  592  9,047  1,355 
Income tax expense 657  203  2,031  77 
Contribution to net earnings $ 2,325  $ 389  $ 7,016  $ 1,278 

22


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
The COVID-19 pandemic caused oil demand to significantly decrease in early 2020, creating oversupplied markets that resulted in lower commodity prices and margins. However, crude oil prices increased in mid-2020 in response to the lifting of COVID-19 restrictions.
Media and Licensing
Maxim's business lies principally in media and licensing. Earnings of our media and licensing operations are summarized below.
Third Quarter First Nine Months
2021 2020 2021 2020
Media and licensing revenue $ 863  $ 1,719  $ 2,695  $ 3,209 
Media and licensing costs 880  548  1,749  1,491 
General and administrative expenses 39  21  79  113 
Earnings before income taxes (56) 1,150  867  1,605 
Income tax expense (benefit) (13) 265  205  369 
Contribution to net earnings $ (43) $ 885  $ 662  $ 1,236 
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 gains net of tax for the third quarter and first nine months of 2021 were $3,390 and $4,896, respectively. Investment gains net of tax were $276 and $1,468 during the third quarter and first nine months of 2020, respectively. Investment gains during the third quarter of 2021 included a gain from the sale of real estate of $3,785, net of tax. Dividends earned on investments are reported as other income by our insurance companies. We consider investment income as a component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating.
Earnings (loss) from our investments in partnerships are summarized below.
  Third Quarter First Nine Months
  2021 2020 2021 2020
Investment partnership gains (losses) $ (20,231) $ 27,218  $ 27,344  $ (89,276)
Tax expense (benefit) (4,946) 6,163  6,175  (21,337)
Contribution to net earnings $ (15,285) $ 21,055  $ 21,169  $ (67,939)
Investment partnership gains include gains/losses from changes in market values of underlying investments and dividends earned by the partnerships.  Dividend income has a lower effective tax rate than income from capital gains.  Changes in the market values of investments can be highly volatile. 
The investment partnerships hold the Company’s common stock as investments. The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding. Gains and losses on Company common stock included in the earnings of the partnerships are eliminated.
Investments affect our reported quarterly earnings based on their carrying value. We do not regard the quarterly or annual fluctuations in our investments to be meaningful in understanding the operating results of our businesses.

23


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Interest Expense
The Company’s interest expense is summarized below.
  Third Quarter First Nine Months
  2021 2020 2021 2020
Interest expense on notes payable $ —  $ 2,150  $ 1,121  $ 6,973 
Tax benefit —  538  280  1,754 
Interest expense net of tax $ —  $ 1,612  $ 841  $ 5,219 
Steak n Shake’s term loan was scheduled to mature on March 19, 2021. As of December 31, 2020, $152,506 was outstanding. The Company repaid Steak n Shake's outstanding balance in full on February 19, 2021.
Corporate and Other
Corporate expenses exclude the activities in the restaurant, media and licensing, insurance, and oil and gas businesses. Corporate net losses during the third quarter and first nine months of 2021 were relatively flat compared to the same period during 2020.
Income Taxes
Income tax benefit for the third quarter of 2021 was $4,274 compared to an income tax expense of $5,617 for the third quarter of 2020.  Income tax expense for the first nine months of 2021 was $11,544 compared to a benefit of $23,449 for the first nine months of 2020.  The variance in income taxes between 2021 and 2020 is attributable to taxes on income generated by the investment partnerships.  Investment partnership pretax gains were $27,344 during the first nine months of 2021 compared to pretax losses of $89,276 during the first nine months of 2020.
Financial Condition
Consolidated cash and investments are summarized below.
  September 30,
2021
December 31,
2020
Cash and cash equivalents $ 27,795  $ 24,503 
Investments 99,006  94,861 
Fair value of interest in investment partnerships 533,996  590,926 
Total cash and investments 660,797  710,290 
Less: portion of Company stock held by investment partnerships (260,907) (171,376)
Carrying value of cash and investments on balance sheet $ 399,890  $ 538,914 
Liquidity
Our balance sheet continues to maintain significant liquidity.  Consolidated cash flow activities are summarized below.