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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022
or
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☐ |
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
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BIGLARI HOLDINGS INC. |
(Exact name of registrant as specified in its charter) |
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Indiana |
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82-3784946 |
(State or other jurisdiction of incorporation) |
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(I.R.S. Employer Identification No.) |
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17802 IH 10 West,
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Suite 400
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San Antonio, |
TX |
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78257 |
(Address of principal executive offices) |
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(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:
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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.
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Large accelerated filer |
☐ |
Accelerated filer |
☒ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No
x
Number of shares of common stock outstanding as of May 3,
2022:
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Class A common stock – |
206,864 |
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Class B common stock – |
2,068,640 |
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BIGLARI HOLDINGS INC.
INDEX
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIGLARI HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
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March 31,
2022 |
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December 31,
2021 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
45,777 |
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$ |
42,349 |
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Investments |
87,150 |
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83,061 |
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Receivables |
22,427 |
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28,508 |
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Inventories |
4,376 |
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3,803 |
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Other current assets |
8,067 |
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7,088 |
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Total current assets |
167,797 |
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164,809 |
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Property and equipment |
347,609 |
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349,351 |
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Operating lease assets |
40,540 |
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42,538 |
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Goodwill and other intangible assets |
76,854 |
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77,010 |
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Investment partnerships |
242,368 |
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250,399 |
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Other assets |
10,686 |
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10,700 |
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Total assets |
$ |
885,854 |
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$ |
894,807 |
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Liabilities and shareholders’ equity |
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Liabilities |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ |
99,761 |
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$ |
100,467 |
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Loss and loss adjustment expenses |
14,443 |
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14,609 |
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Unearned premiums |
11,875 |
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11,667 |
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Current portion of lease obligations |
17,057 |
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16,898 |
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Total current liabilities |
143,136 |
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143,641 |
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Lease obligations |
101,156 |
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104,479 |
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Deferred taxes |
41,763 |
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46,533 |
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Asset retirement obligations |
10,520 |
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10,389 |
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Other liabilities |
1,982 |
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2,069 |
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Total liabilities |
298,557 |
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307,111 |
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Shareholders’ equity |
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Common stock |
1,138 |
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1,138 |
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Additional paid-in capital |
381,788 |
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381,788 |
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Retained earnings |
608,230 |
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608,528 |
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Accumulated other comprehensive loss |
(2,138) |
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(1,907) |
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Treasury stock, at cost |
(401,721) |
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(401,851) |
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Biglari Holdings Inc. shareholders’ equity |
587,297 |
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587,696 |
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Total liabilities and shareholders’ equity |
$ |
885,854 |
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$ |
894,807 |
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See accompanying Notes to Consolidated Financial
Statements.
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
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First Quarter |
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2022 |
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2021 |
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(Unaudited) |
Revenues |
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Restaurant operations |
$ |
59,847 |
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$ |
69,954 |
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Insurance premiums and other |
15,079 |
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14,619 |
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Oil and gas |
9,812 |
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8,592 |
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Licensing and media |
634 |
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1,123 |
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85,372 |
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94,288 |
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Cost and expenses |
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Restaurant cost of sales |
35,352 |
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45,616 |
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Insurance losses and underwriting expenses |
13,774 |
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11,146 |
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Oil and gas production costs |
3,819 |
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2,413 |
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Licensing and media costs |
953 |
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480 |
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Selling, general and administrative |
16,224 |
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15,540 |
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Impairments |
— |
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298 |
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Depreciation, depletion, and amortization |
7,871 |
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7,178 |
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Interest expense |
1,412 |
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2,741 |
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79,405 |
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85,412 |
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Other income |
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Investment gains |
225 |
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3,081 |
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Investment partnership gains (losses) |
(6,661) |
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81,766 |
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Total other income (expenses) |
(6,436) |
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84,847 |
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Earnings (loss) before income taxes |
(469) |
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93,723 |
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Income tax expense (benefit) |
(171) |
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22,016 |
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Net earnings (loss) |
$ |
(298) |
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$ |
71,707 |
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Net earnings (loss) per equivalent Class A share * |
$ |
(0.98) |
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$ |
223.29 |
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*Net earnings (loss) per equivalent Class B share outstanding are
one-fifth of the equivalent Class A share or $(0.20) for the first
quarter of 2022 and $44.66 for the first quarter of
2021.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
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First Quarter |
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2022 |
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2021 |
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(Unaudited) |
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Net earnings (loss) |
$ |
(298) |
|
|
$ |
71,707 |
|
|
|
|
|
Foreign currency translation |
(231) |
|
|
(444) |
|
|
|
|
|
Total comprehensive income (loss) |
$ |
(529) |
|
|
$ |
71,263 |
|
|
|
|
|
See accompanying Notes to Consolidated Financial
Statements.
BIGLARI HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2022 |
|
2021 |
|
(Unaudited) |
Operating activities |
|
|
|
Net earnings (loss) |
$ |
(298) |
|
|
$ |
71,707 |
|
Adjustments to reconcile net earnings (loss) to operating cash
flows: |
|
|
|
Depreciation, depletion, and amortization |
7,871 |
|
|
7,178 |
|
Provision for deferred income taxes |
(4,750) |
|
|
23,350 |
|
Asset impairments and other non-cash expenses |
— |
|
|
435 |
|
Gains on disposal of assets |
(133) |
|
|
(958) |
|
Investment and investment partnership (gains) losses |
6,436 |
|
|
(85,013) |
|
Distributions from investment partnerships |
4,500 |
|
|
150,570 |
|
Changes in receivables, inventories and other assets |
4,633 |
|
|
1,924 |
|
Changes in accounts payable and accrued expenses |
2,833 |
|
|
(3,895) |
|
Net cash provided by operating activities |
21,092 |
|
|
165,298 |
|
Investing activities |
|
|
|
Capital expenditures |
(9,293) |
|
|
(7,447) |
|
Proceeds from property and equipment disposals |
109 |
|
|
2,749 |
|
Purchases of limited partner interests |
(3,000) |
|
|
(3,000) |
|
Purchases of investments |
(50,086) |
|
|
(16,724) |
|
Sales of investments and redemptions of fixed maturity
securities |
46,193 |
|
|
15,642 |
|
Net cash used in investing activities |
(16,077) |
|
|
(8,780) |
|
Financing activities |
|
|
|
Principal payments on long-term debt |
— |
|
|
(149,952) |
|
Principal payments on direct financing lease
obligations |
(1,564) |
|
|
(2,609) |
|
Net cash used in financing activities |
(1,564) |
|
|
(152,561) |
|
Effect of exchange rate changes on cash |
(23) |
|
|
(22) |
|
Increase in cash, cash equivalents and restricted cash |
3,428 |
|
|
3,935 |
|
Cash, cash equivalents and restricted cash at beginning of
year |
43,687 |
|
|
29,666 |
|
Cash, cash equivalents and restricted cash at end of first
quarter |
$ |
47,115 |
|
|
$ |
33,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2022 |
|
2021 |
|
(Unaudited) |
Cash and cash equivalents |
$ |
45,777 |
|
|
$ |
28,438 |
|
Restricted cash in other long-term assets |
1,338 |
|
|
5,163 |
|
Cash, cash equivalents and restricted cash at end of first
quarter |
$ |
47,115 |
|
|
$ |
33,601 |
|
See accompanying Notes to Consolidated Financial
Statements.
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, 2021 |
$ |
1,138 |
|
|
$ |
381,788 |
|
|
$ |
608,528 |
|
|
$ |
(1,907) |
|
|
$ |
(401,851) |
|
|
$ |
587,696 |
|
Net earnings (loss) |
|
|
|
|
(298) |
|
|
|
|
|
|
(298) |
|
Other comprehensive loss |
|
|
|
|
|
|
(231) |
|
|
|
|
(231) |
|
Adjustment to treasury stock for holdings in investment
partnerships |
|
|
|
|
|
|
|
|
130 |
|
|
130 |
|
Balance at March 31, 2022 |
$ |
1,138 |
|
|
$ |
381,788 |
|
|
$ |
608,230 |
|
|
$ |
(2,138) |
|
|
$ |
(401,721) |
|
|
$ |
587,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (loss) |
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial
Statements.
BIGLARI HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(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, 2021.
Biglari Holdings is a holding company owning subsidiaries engaged
in a number of diverse business activities, including property and
casualty insurance, licensing and media, restaurants, and oil and
gas. The Company’s largest operating subsidiaries are involved in
the franchising and operating of restaurants. Biglari Holdings is
founded and led by Sardar Biglari, Chairman and Chief Executive
Officer of the Company.
Biglari Holdings’ management system combines decentralized
operations with centralized finance decision-making. Operating
decisions for the various business units are made by their
respective managers. All major investment and capital allocation
decisions are made for the Company and its subsidiaries by Mr.
Biglari.
As of March 31, 2022, Mr. Biglari beneficially owns shares of
the Company that represent approximately 66.3% of the economic
interest and approximately 70.4% of the voting
interest.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, including Steak n Shake
Inc., Western Sizzlin Corporation, First Guard Insurance Company,
Maxim Inc., Southern Pioneer Property & Casualty Insurance
Company, and Southern Oil Company. Intercompany accounts and
transactions have been eliminated in consolidation.
Note 2. Earnings Per Share
Earnings per share of common stock is based on the weighted average
number of shares outstanding during the year. The shares of Company
stock attributable to our limited partner interest in The Lion
Fund, L.P. and The Lion Fund II, L.P. (collectively, the
“investment partnerships”) — based on our proportional ownership
during this period — are considered treasury stock on the
consolidated balance sheet and thereby deemed not to be included in
the calculation of weighted average common shares
outstanding. However, these shares are legally
outstanding.
The following table presents shares authorized, issued and
outstanding on March 31, 2022 and December 31,
2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
|
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 |
|
Note 2. Earnings Per Share
(continued)
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. In the tabulation below
is the equivalent Class A common stock for earnings per share.
There are no dilutive securities outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
March 31, 2021 |
Equivalent Class A common stock outstanding |
620,592 |
|
|
620,592 |
|
Proportional ownership of Company stock held by investment
partnerships |
316,020 |
|
|
299,453 |
|
Equivalent Class A common stock for earnings per share |
304,572 |
|
|
321,139 |
|
Note 3. Investments
Investments net of deferred taxes is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
Investments |
$ |
87,150 |
|
|
$ |
83,061 |
|
Deferred tax liability related to investments |
(607) |
|
|
(845) |
|
Investments net of deferred taxes |
$ |
86,543 |
|
|
$ |
82,216 |
|
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 result. However, we consider
investment gains and losses, whether realized or unrealized, as
non-operating.
Investment gains for the first quarter of 2022 and 2021 were $225
and $3,081, respectively.
Note 4. Investment Partnerships
The Company reports on the limited partnership interests in
investment partnerships under the equity method of
accounting. We record our proportional share of equity in the
investment partnerships but exclude Company common stock held by
said partnerships. The Company’s pro-rata share of its common
stock held by the investment partnerships is recorded as treasury
stock even though these shares are legally outstanding. The
Company records gains/losses from investment partnerships
(inclusive of the investment partnerships’ unrealized gains and
losses on their securities) in the consolidated statements of
earnings based on our carrying value of these
partnerships. The fair value is calculated net of the general
partner’s accrued incentive fees. Gains and losses on Company
common stock included in the earnings of these partnerships are
eliminated because they are recorded as treasury
stock.
Biglari Capital Corp. is the general partner of the investment
partnerships 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 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Company
Common Stock |
|
Carrying Value |
Partnership interest at December 31, 2021 |
$ |
474,201 |
|
|
$ |
223,802 |
|
|
$ |
250,399 |
|
Investment partnership gains (losses) |
(909) |
|
|
5,752 |
|
|
(6,661) |
|
Distributions (net of contributions) |
(1,500) |
|
|
|
|
(1,500) |
|
Changes in proportionate share of Company stock held |
|
|
(130) |
|
|
130 |
|
Partnership interest at March 31, 2022 |
$ |
471,792 |
|
|
$ |
229,424 |
|
|
$ |
242,368 |
|
Note 4. Investment Partnerships
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Company
Common Stock |
|
Carrying Value |
Partnership interest at December 31, 2020 |
$ |
590,926 |
|
|
$ |
171,376 |
|
|
$ |
419,550 |
|
Investment partnership gains (losses) |
110,918 |
|
|
29,152 |
|
|
81,766 |
|
Distributions (net of contributions) |
(147,570) |
|
|
|
|
(147,570) |
|
Changes in proportionate share of Company stock held |
|
|
(3,049) |
|
|
3,049 |
|
Partnership interest at March 31, 2021 |
$ |
554,274 |
|
|
$ |
197,479 |
|
|
$ |
356,795 |
|
The carrying value of the investment partnerships net of deferred
taxes is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
|
December 31, 2021 |
Carrying value of investment partnerships |
$ |
242,368 |
|
|
$ |
250,399 |
|
Deferred tax liability related to investment
partnerships |
(39,516) |
|
|
(44,532) |
|
Carrying value of investment partnerships net of deferred
taxes |
$ |
202,852 |
|
|
$ |
205,867 |
|
The Company’s proportionate share of Company stock held by
investment partnerships at cost was $401,721 and $401,851 at
March 31, 2022 and December 31, 2021, respectively, and
was 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 interest is assessed according to our
proportional ownership interest of the fair value of investments
held by the investment partnerships. Unrealized gains and losses on
marketable securities held by the investment partnerships affect
our net earnings.
Gains/losses from investment partnerships recorded in the Company’s
consolidated statements of earnings are presented
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Gains (losses) from investment partnerships |
$ |
(6,661) |
|
|
$ |
81,766 |
|
|
|
|
|
Tax expense (benefit) |
(1,860) |
|
|
19,117 |
|
|
|
|
|
Contribution to net earnings |
$ |
(4,801) |
|
|
$ |
62,649 |
|
|
|
|
|
On December 31 of each year, the general partner of the
investment partnerships, Biglari Capital Corp., will earn an
incentive reallocation fee for the Company’s investments equal to
25% of the net profits above an annual hurdle rate of 6% over the
previous high-water mark. Our policy is to accrue an estimated
incentive fee throughout the year. The total incentive reallocation
from Biglari Holdings to Biglari Capital Corp. includes gains on
the Company’s common stock. Gains and losses on the Company’s
common stock and the related incentive reallocations are eliminated
in our financial statements.
There were no incentive reallocations from Biglari Holdings to
Biglari Capital Corp. during the first quarters of 2022 and
2021.
Note 4. Investment Partnerships
(continued)
Summarized financial information for The Lion Fund, L.P. and The
Lion Fund II, L.P. is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Investment Partnerships |
|
Lion Fund |
|
Lion Fund II |
Total assets as of March 31, 2022 |
$ |
123,634 |
|
|
$ |
533,454 |
|
Total liabilities as of March 31, 2022 |
$ |
20,162 |
|
|
$ |
101,230 |
|
Revenue for the first quarter of 2022 |
$ |
969 |
|
|
$ |
(1,249) |
|
Earnings for the first quarter of 2022 |
$ |
926 |
|
|
$ |
(1,581) |
|
Biglari Holdings’ ownership interest as of March 31,
2022 |
62.5 |
% |
|
93.9 |
% |
|
|
|
|
Total assets as of December 31, 2021 |
$ |
114,749 |
|
|
$ |
564,022 |
|
Total liabilities as of December 31, 2021 |
$ |
7,763 |
|
|
$ |
130,417 |
|
Revenue for the first quarter of 2021 |
$ |
18,016 |
|
|
$ |
105,347 |
|
Earnings for the first quarter of 2021 |
$ |
17,998 |
|
|
$ |
105,274 |
|
Biglari Holdings’ ownership interest as of March 31,
2021 |
61.3 |
% |
|
94.0 |
% |
Revenue in the financial information of the investment
partnerships, summarized above, includes investment income and
unrealized gains and losses on investments.
Note 5. Property and Equipment
Property and equipment is composed of the following.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
|
December 31,
2021 |
Land |
$ |
144,605 |
|
|
$ |
144,605 |
|
Buildings |
149,162 |
|
|
148,605 |
|
Land and leasehold improvements |
147,355 |
|
|
147,349 |
|
Equipment |
225,955 |
|
|
224,581 |
|
Oil and gas properties |
74,150 |
|
|
74,147 |
|
Construction in progress |
4,180 |
|
|
2,815 |
|
|
745,407 |
|
|
742,102 |
|
Less accumulated depreciation, depletion, and
amortization |
(397,798) |
|
|
(392,751) |
|
Property and equipment, net |
$ |
347,609 |
|
|
$ |
349,351 |
|
Depletion expense related to oil and gas properties was $1,380 and
$2,244 during the first quarter of 2022 and 2021,
respectively.
The Company recorded an impairment to restaurant long-lived assets
of $298 in the first quarter of 2021 related to underperforming
stores. 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. There were no impairments in
2022.
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.
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, 2021
|
$ |
53,547 |
|
Change in foreign exchange rates during the first quarter of
2022 |
(12) |
|
Goodwill at March 31, 2022
|
$ |
53,535 |
|
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.
GAAP allows entities testing for impairment the option of
performing a qualitative assessment before calculating the fair
value of a reporting unit for the goodwill impairment test. We use
both qualitative and quantitative assessments. The valuation
methodology and underlying financial information included in our
quantitative determination of fair value require significant
management judgments. We use both market and income approaches to
derive fair value of reporting units utilizing a quantitative
assessment. 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 was recorded in the first quarter of 2022 or 2021.
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, 2021
|
$ |
15,876 |
|
|
$ |
7,587 |
|
|
$ |
23,463 |
|
Change in foreign exchange rates during the first quarter of
2022 |
— |
|
|
(144) |
|
|
(144) |
|
Balance at March 31, 2022
|
$ |
15,876 |
|
|
$ |
7,443 |
|
|
$ |
23,319 |
|
Intangible assets with indefinite lives consist of trade names and
lease rights. Fair values were determined using Level 3 inputs and
available market data.
Note 7. Restaurant Operations Revenues
Restaurant operations revenues were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Net sales |
$ |
38,216 |
|
|
$ |
54,950 |
|
|
|
|
|
Franchise partner fees |
15,624 |
|
|
7,853 |
|
|
|
|
|
Franchise royalties and fees |
5,146 |
|
|
5,135 |
|
|
|
|
|
Other |
861 |
|
|
2,016 |
|
|
|
|
|
|
$ |
59,847 |
|
|
$ |
69,954 |
|
|
|
|
|
Net Sales
Net sales are composed of retail sales of food through
company-operated stores. Company-operated store revenues are
recognized, net of discounts and sales taxes, when our obligation
to perform is satisfied at the point of sale. Sales taxes related
to these sales are collected from customers and remitted to the
appropriate taxing authority and are not reflected in the Company’s
consolidated statements of earnings as revenue.
Franchise Partner Fees
Franchise partner fees are composed of up to 15% of sales as well
as 50% of profits. We are therefore fully affected by the operating
results of the business, unlike in a traditional franchising
arrangement, where the franchisor obtains a royalty fee based on
sales only. We generate most of our revenue from our share of the
franchise partners’ profits. An initial franchise fee of ten
thousand dollars is recognized when the operator becomes a
franchise partner. The Company recognizes franchise partner fees
monthly as underlying restaurant sales occur.
Note 7. Restaurant Operations Revenues
(continued)
The Company leases or subleases property and equipment to franchise
partners under lease arrangements. Both real estate and equipment
rental payments are charged to franchise partners and are
recognized in accordance with ASC 842, “Leases”.
During the first quarter of 2022 and 2021, restaurant operations
recognized $4,774 and $2,900, respectively, in franchise partner
fees related to rental income.
Franchise Royalties and Fees
Franchise royalties and fees from Steak n Shake and Western Sizzlin
franchisees are based upon a percentage of sales of the franchise
restaurant and are recognized as earned. Franchise royalties are
billed on a monthly basis. Initial franchise fees when a new
restaurant opens or at the start of a new franchise term are
recorded as deferred revenue when received and recognized as
revenue over the term of the franchise agreement.
Other Revenue
Restaurant operations sells gift cards to customers which can be
redeemed for retail food sales within our stores. Gift cards are
recorded as a liability when issued and are subsequently recorded
as net sales upon redemption. Restaurant operations estimates
breakage related to gift cards when the likelihood of redemption is
remote. This estimate utilizes historical trends based on the
vintage of the gift card. Breakage on gift cards is recorded as
other revenue in proportion to the rate of gift card redemptions by
vintage.
Note 8. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include the
following.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
|
December 31,
2021 |
Accounts payable |
$ |
34,946 |
|
|
$ |
36,684 |
|
Gift card and other marketing |
17,548 |
|
|
19,244 |
|
Insurance accruals |
5,108 |
|
|
6,428 |
|
Salaries, wages and vacation |
6,570 |
|
|
5,905 |
|
Deferred revenue |
8,194 |
|
|
6,683 |
|
Taxes payable |
16,038 |
|
|
11,392 |
|
Professional fees |
7,969 |
|
|
11,731 |
|
Other |
3,388 |
|
|
2,400 |
|
Accounts payable and accrued expenses |
$ |
99,761 |
|
|
$ |
100,467 |
|
Note 9. Notes Payable
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. The Company
repaid the balance of Steak n Shake’s term facility on February 19,
2021.
Note 10. Lease Assets and Obligations
Lease obligations include the following.
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of lease obligations |
March 31,
2022 |
|
December 31,
2021 |
Finance lease liabilities |
$ |
1,318 |
|
|
$ |
1,414 |
|
Finance obligations |
5,029 |
|
|
4,944 |
|
Operating lease liabilities |
10,710 |
|
|
10,540 |
|
Total current portion of lease obligations |
$ |
17,057 |
|
|
$ |
16,898 |
|
|
|
|
|
Long-term lease obligations |
|
|
|
Finance lease liabilities |
$ |
5,021 |
|
|
$ |
5,347 |
|
Finance obligations |
62,327 |
|
|
63,119 |
|
Operating lease liabilities |
33,808 |
|
|
36,013 |
|
Total long-term lease obligations |
$ |
101,156 |
|
|
$ |
104,479 |
|
Nature of Leases
Steak n Shake and Western Sizzlin operate restaurants that are
located on sites owned by us and leased from third parties. In
addition, they own sites and lease sites from third parties that
are leased and/or subleased to franchise partners and
franchisees.
Lease Costs
A significant portion of our operating and finance lease portfolio
includes restaurant locations. We recognize fixed lease expense for
operating leases on a straight-line basis over the lease term. For
finance leases, we recognize amortization expense on the
right-of-use asset and interest expense on the lease liability over
the lease term.
Total lease cost consists of the following.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Finance lease costs: |
|
|
|
|
|
|
|
Amortization of right-of-use assets |
$ |
363 |
|
|
$ |
419 |
|
|
|
|
|
Interest on lease liabilities |
115 |
|
|
147 |
|
|
|
|
|
Operating and variable lease costs |
3,612 |
|
|
3,765 |
|
|
|
|
|
Sublease income |
(4,069) |
|
|
(2,655) |
|
|
|
|
|
Total lease costs |
$ |
21 |
|
|
$ |
1,676 |
|
|
|
|
|
Supplemental cash flow information related to leases is as
follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2022 |
|
2021 |
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
|
Financing cash flows from finance leases |
$ |
421 |
|
|
$ |
529 |
|
Operating cash flows from finance leases |
$ |
115 |
|
|
$ |
132 |
|
Operating cash flows from operating leases |
$ |
3,067 |
|
|
$ |
4,186 |
|
Note 10. Lease Assets and Obligations
(continued)
Supplemental balance sheet information related to leases is as
follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
|
December 31,
2021 |
Finance leases: |
|
|
|
Property and equipment, net |
$ |
5,271 |
|
|
$ |
5,634 |
|
Weighted-average lease terms and discount rates are as
follows.
|
|
|
|
|
|
|
March 31,
2022 |
Weighted-average remaining lease terms: |
|
Finance
leases |
4.91 years |
Operating leases |
4.99 years |
|
|
Weighted-average discount rates: |
|
Finance leases |
7.0 |
% |
Operating leases |
6.9 |
% |
Maturities of lease liabilities as of March 31, 2022 are as
follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Operating
Leases |
|
Finance
Leases |
2022 |
|
$ |
10,298 |
|
|
$ |
1,298 |
|
2023 |
|
11,259 |
|
|
1,551 |
|
2024 |
|
9,433 |
|
|
1,534 |
|
2025 |
|
7,854 |
|
|
1,298 |
|
2026 |
|
5,203 |
|
|
959 |
|
After 2026 |
|
8,730 |
|
|
855 |
|
Total lease payments |
|
52,777 |
|
|
7,495 |
|
Less interest |
|
8,259 |
|
|
1,156 |
|
Total lease liabilities |
|
$ |
44,518 |
|
|
$ |
6,339 |
|
Lease Income
The components of lease income are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Operating lease income |
$ |
4,724 |
|
|
$ |
2,363 |
|
|
|
|
|
Variable lease income |
313 |
|
|
849 |
|
|
|
|
|
Total lease income |
$ |
5,037 |
|
|
$ |
3,212 |
|
|
|
|
|
Note 10. Lease Assets and Obligations
(continued)
The following table displays the Company’s future minimum rental
receipts for non-cancelable leases and subleases as of
March 31, 2022. Franchise partner leases and subleases are
short-term leases and have been excluded from the
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases |
Year |
|
Subleases |
|
Owned Properties |
2022 |
|
$ |
582 |
|
|
$ |
247 |
|
2023 |
|
371 |
|
|
247 |
|
2024 |
|
338 |
|
|
247 |
|
2025 |
|
273 |
|
|
255 |
|
2026 |
|
— |
|
|
233 |
|
After 2026 |
|
— |
|
|
753 |
|
Total future minimum receipts |
|
$ |
1,564 |
|
|
$ |
1,982 |
|
|
|
|
|
|
Note 11. Accumulated Other Comprehensive Income
Accumulated other comprehensive income decreased $231 and $444
during the first quarters of 2022 and 2021, respectively. There
were no reclassifications from accumulated other comprehensive loss
to earnings during the first quarters of 2022 and 2021. 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 an estimated annual effective tax rate for the first
quarter of 2022 and a discrete effective tax rate method based on
statutory tax rates for the first quarter of 2021. Our periodic
effective income tax rate is affected by the relative mix of pretax
earnings or losses and underlying income tax rates applicable to
the various taxing jurisdictions.
Income tax benefit for the first quarter of 2022 was $171 compared
to an income tax expense of $22,016 for the first quarter of
2021. The variance in income taxes between 2022 and 2021 is
attributable to taxes on income generated by the investment
partnerships. Investment partnership pretax losses were
$6,661 during the first quarter of 2022 compared to pretax gains of
$81,766 during the first quarter of 2021.
Note 13. Commitments and Contingencies
We are involved in various legal proceedings and have certain
unresolved claims pending. We believe, based on examination of
these matters and experiences to date, that the ultimate liability,
if any, in excess of amounts already provided in our consolidated
financial statements is not likely to have a material effect on our
results of operations, financial position or cash
flow.
Note 14. Fair Value of Financial Assets
The fair values of substantially all of our financial instruments
were measured using market or income approaches. Considerable
judgment may be required in interpreting market data used to
develop the estimates of fair value. Accordingly, the fair values
presented are not necessarily indicative of the amounts that could
be realized in an actual current market exchange. The use of
alternative market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value.
Note 14. Fair Value of Financial Assets
(continued)
The hierarchy for measuring fair value consists of Levels 1 through
3, which are described below.
•Level
1 – Inputs represent unadjusted quoted prices for identical assets
or liabilities exchanged in active markets.
•Level
2 – Inputs include directly or indirectly observable inputs (other
than Level 1 inputs) such as quoted prices for similar assets or
liabilities exchanged in active or inactive markets; quoted prices
for identical assets or liabilities exchanged in inactive markets;
other inputs that may be considered in fair value determinations of
the assets or liabilities, such as interest rates and yield curves,
volatilities, prepayment speeds, loss severities, credit risks and
default rates; and inputs that are derived principally from or
corroborated by observable market data by correlation or other
means. Pricing evaluations generally reflect discounted expected
future cash flows, which incorporate yield curves for instruments
with similar characteristics, such as credit ratings, estimated
durations and yields for other instruments of the issuer or
entities in the same industry sector.
•Level
3 – Inputs include unobservable inputs used in the measurement of
assets and liabilities. Management is required to use its own
assumptions regarding unobservable inputs because there is little,
if any, market activity in the assets or liabilities and we may be
unable to corroborate the related observable inputs. Unobservable
inputs require management to make certain projections and
assumptions about the information that would be used by market
participants in pricing assets or liabilities.
The following methods and assumptions were used to determine the
fair value of each class of the following assets recorded at fair
value in the consolidated balance sheets:
Cash equivalents:
Cash equivalents primarily consist of money market funds which are
classified as Level 1 of the fair value hierarchy.
Equity securities:
The Company’s investments in equity securities are classified as
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 as 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 as Level 1 of the fair value
hierarchy.
Derivative instruments:
Options related to equity securities are marked to market each
reporting period and are classified as Level 2 of the fair value
hierarchy depending on the instrument.
Note 14. Fair Value of Financial Assets
(continued)
As of March 31, 2022 and December 31, 2021, the fair
values of financial assets were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
$ |
17,790 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,790 |
|
|
$ |
18,447 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,447 |
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer goods |
9,836 |
|
|
2,003 |
|
|
— |
|
|
11,839 |
|
|
10,775 |
|
|
2,368 |
|
|
— |
|
|
13,143 |
|
Insurance |
134 |
|
|
— |
|
|
— |
|
|
134 |
|
|
6,513 |
|
|
— |
|
|
— |
|
|
6,513 |
|
Technology |
2,878 |
|
|
— |
|
|
— |
|
|
2,878 |
|
|
2,887 |
|
|
— |
|
|
— |
|
|
2,887 |
|
Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government |
66,413 |
|
|
— |
|
|
— |
|
|
66,413 |
|
|
54,584 |
|
|
— |
|
|
— |
|
|
54,584 |
|
Corporate |
4,100 |
|
|
— |
|
|
— |
|
|
4,100 |
|
|
4,512 |
|
|
— |
|
|
— |
|
|
4,512 |
|
Options on equity securities |
— |
|
|
2,461 |
|
|
— |
|
|
2,461 |
|
|
— |
|
|
2,095 |
|
|
— |
|
|
2,095 |
|
Non-qualified deferred compensation plan investments |
1,528 |
|
|
— |
|
|
— |
|
|
1,528 |
|
|
1,607 |
|
|
— |
|
|
— |
|
|
1,607 |
|
Total assets at fair value |
$ |
102,679 |
|
|
$ |
4,464 |
|
|
$ |
— |
|
|
$ |
107,143 |
|
|
$ |
99,325 |
|
|
$ |
4,463 |
|
|
$ |
— |
|
|
$ |
103,788 |
|
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
business and administrative related services to the Company. The
Biglari Entities are owned by Mr. Biglari. The service agreement
has a five-year term, effective on October 1, 2017.
The Company paid Biglari Enterprises $2,100 in service fees during
the first quarter of 2022 and 2021. The service agreement does not
alter the hurdle rate connected with the incentive reallocation
paid to Biglari Capital Corp.
Incentive Agreement
The Incentive Agreement establishes a performance-based annual
incentive payment for Mr. Biglari contingent upon the growth in
adjusted equity in each year attributable to our operating
businesses. In order for Mr. Biglari to receive any incentive, our
operating businesses must achieve an annual increase in
shareholders’ equity in excess of 6% (the “Hurdle Rate”) above the
previous highest level (the “High Water Mark”). Mr. Biglari will
receive 25% of any incremental book value created above the High
Water Mark plus the Hurdle Rate. 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.
Note 16. Business Segment Reporting
(continued)
A disaggregation of our consolidated data for the first quarters of
2022 and 2021 is presented in the tables which follow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Operating Businesses: |
|
|
|
|
|
|
|
Restaurant Operations: |
|
|
|
|
|
|
|
Steak n Shake |
$ |
57,753 |
|
|
$ |
68,301 |
|
|
|
|
|
Western Sizzlin |
2,094 |
|
|
1,653 |
|
|
|
|
|
Total Restaurant Operations |
59,847 |
|
|
69,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Operations: |
|
|
|
|
|
|
|
Underwriting |
|
|
|
|
|
|
|
First Guard |
8,731 |
|
|
8,077 |
|
|
|
|
|
Southern Pioneer |
5,438 |
|
|
5,613 |
|
|
|
|
|
Investment income and other |
910 |
|
|
929 |
|
|
|
|
|
Total Insurance Operations |
15,079 |
|
|
14,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern Oil |
9,812 |
|
|
8,592 |
|
|
|
|
|
Maxim |
634 |
|
|
1,123 |
|
|
|
|
|
|
$ |
85,372 |
|
|
$ |
94,288 |
|
|
|
|
|
Note 16. Business Segment Reporting
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Losses) Before Income Taxes |
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Operating Businesses: |
|
|
|
|
|
|
|
Restaurant Operations: |
|
|
|
|
|
|
|
Steak n Shake |
$ |
4,198 |
|
|
$ |
5,456 |
|
|
|
|
|
Western Sizzlin |
232 |
|
|
92 |
|
|
|
|
|
Total Restaurant Operations |
4,430 |
|
|
5,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Operations: |
|
|
|
|
|
|
|
Underwriting: |
|
|
|
|
|
|
|
First Guard |
732 |
|
|
2,131 |
|
|
|
|
|
Southern Pioneer |
(337) |
|
|
413 |
|
|
|
|
|
Investment income and other |
969 |
|
|
693 |
|
|
|
|
|
Total Insurance Operations |
1,364 |
|
|
3,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern Oil |
3,921 |
|
|
3,039 |
|
|
|
|
|
Maxim |
(336) |
|
|
623 |
|
|
|
|
|
Interest expense not allocated to segments |
— |
|
|
(1,121) |
|
|
|
|
|
Total Operating Businesses |
9,379 |
|
|
11,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other |
(3,412) |
|
|
(2,450) |
|
|
|
|
|
Investment gains |
225 |
|
|
3,081 |
|
|
|
|
|
Investment partnership gains (losses) |
(6,661) |
|
|
81,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(469) |
|
|
$ |
93,723 |
|
|
|
|
|
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(dollars in thousands except per share data)
Overview
Biglari Holdings Inc. is a holding company owning subsidiaries
engaged in a number of diverse business activities, including
property and casualty insurance, licensing and media, restaurants,
and oil and gas. The Company’s largest operating subsidiaries are
involved in the franchising and operating of restaurants. Biglari
Holdings is founded and led by Sardar Biglari, Chairman and Chief
Executive Officer of the Company.
Biglari Holdings’ management system combines decentralized
operations with centralized finance decision-making. Operating
decisions for the various business units are made by their
respective managers. All major investment and capital allocation
decisions are made for the Company and its subsidiaries by Mr.
Biglari.
As of March 31, 2022, Mr. Biglari beneficially owns shares of
the Company that represent approximately 66.3% of the economic
interest and 70.4% of the voting interest.
Net earnings (loss) attributable to Biglari Holdings shareholders
are disaggregated in the table that follows. Amounts are recorded
after deducting income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Operating businesses: |
|
|
|
|
|
|
|
Restaurant |
$ |
3,262 |
|
|
$ |
4,118 |
|
|
|
|
|
Insurance |
1,044 |
|
|
2,531 |
|
|
|
|
|
Oil and gas |
2,924 |
|
|
2,355 |
|
|
|
|
|
Brand licensing |
(251) |
|
|
480 |
|
|
|
|
|
Interest expense |
— |
|
|
(841) |
|
|
|
|
|
Corporate and other |
(2,651) |
|
|
(1,999) |
|
|
|
|
|
Total operating businesses |
4,328 |
|
|
6,644 |
|
|
|
|
|
Investment gains |
175 |
|
|
2,414 |
|
|
|
|
|
Investment partnership gains (losses) |
(4,801) |
|
|
62,649 |
|
|
|
|
|
|
$ |
(298) |
|
|
$ |
71,707 |
|
|
|
|
|
Restaurants
Our restaurant businesses, which include Steak n Shake and Western
Sizzlin, comprise 575 company-operated and franchise restaurants as
of March 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steak n Shake |
|
Western Sizzlin |
|
Company-
operated |
|
Franchise
Partner |
|
Traditional
Franchise |
|
Company-
operated |
|
Franchise |
|
Total |
Total stores as of December 31, 2021
|
199 |
|
|
159 |
|
|
178 |
|
|
3 |
|
|
38 |
|
|
577 |
|
Corporate stores transitioned |
(12) |
|
|
12 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net restaurants opened (closed) |
(3) |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
(2) |
|
Total stores as of March 31, 2022
|
184 |
|
|
171 |
|
|
179 |
|
|
3 |
|
|
38 |
|
|
575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stores as of December 31, 2020
|
276 |
|
|
86 |
|
|
194 |
|
|
3 |
|
|
39 |
|
|
598 |
|
Corporate stores transitioned |
(22) |
|
|
22 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net restaurants opened (closed) |
(1) |
|
|
— |
|
|
(5) |
|
|
— |
|
|
(1) |
|
|
(7) |
|
Total stores as of March 31, 2021
|
253 |
|
|
108 |
|
|
189 |
|
|
3 |
|
|
38 |
|
|
591 |
|
As of March 31, 2022, 40 of the 184 company-operated Steak n
Shake stores were closed. We plan to refranchise a majority of our
closed company-operated restaurants.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Restaurant operations are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
38,216 |
|
|
|
|
$ |
54,950 |
|
|
|
|
|
|
|
|
|
|
|
Franchise partner fees |
15,624 |
|
|
|
|
7,853 |
|
|
|
|
|
|
|
|
|
|
|
Franchise royalties and fees |
5,146 |
|
|
|
|
5,135 |
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
861 |
|
|
|
|
2,016 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
59,847 |
|
|
|
|
69,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of food |
10,960 |
|
|
28.7 |
% |
|
15,554 |
|
|
28.3 |
% |
|
|
|
|
|
|
|
|
Restaurant operating costs |
20,032 |
|
|
52.4 |
% |
|
25,197 |
|
|
45.9 |
% |
|
|
|
|
|
|
|
|
Occupancy costs |
4,360 |
|
|
11.4 |
% |
|
4,865 |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
Total cost of sales |
35,352 |
|
|
|
|
45,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
8,650 |
|
|
14.5 |
% |
|
7,680 |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
Marketing |
3,744 |
|
|
6.3 |
% |
|
4,623 |
|
|
6.6 |
% |
|
|
|
|
|
|
|
|
Other expenses |
45 |
|
|
0.1 |
% |
|
(141) |
|
|
(0.2) |
% |
|
|
|
|
|
|
|
|
Total selling, general and administrative |
12,439 |
|
|
20.8 |
% |
|
12,162 |
|
|
17.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments |
— |
|
|
|
|
(298) |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
(6,214) |
|
|
|
|
(4,710) |
|
|
|
|
|
|
|
|
|
|
|
Interest on finance leases and obligations |
(1,412) |
|
|
|
|
(1,620) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
4,430 |
|
|
|
|
5,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
1,168 |
|
|
|
|
1,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to net earnings |
$ |
3,262 |
|
|
|
|
$ |
4,118 |
|
|
|
|
|
|
|
|
|
|
|
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”), declared a pandemic by the
World Health Organization in March 2020, caused governments to
impose restrictive measures to contain its spread. The COVID-19
pandemic adversely affected our restaurant operations and financial
results. Our restaurants were required to close their dining rooms
during the first quarter of 2020. The majority of Steak n Shake’s
dining rooms were reopened during 2021, and in doing so a
self-service model has been implemented.
Net sales for 2022 were $38,216, representing a decrease of $16,734
or 30.5% compared to 2021. The decrease in revenue of company-owned
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 restaurant’s
profits, along with certain fees, are recorded as revenue. Because
we derive most of our revenue from our share of the profits,
revenue will continue to decline as we transition from
company-operated units to a franchise partner units.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Franchise partner fees were $15,624 during 2022, as compared to
$7,853 during 2021.
As of March 31, 2022, there were 171 franchise partner units,
compared to 108 franchise partner units as of March 31, 2021.
For a franchise partner to be awarded a restaurant, he or she must
demonstrate the gold standard in service.
The franchise royalties and fees generated by the traditional
franchising business were $5,146 during 2022, as compared to $5,135
during 2021.
The cost of food in 2022 was $10,960 or 28.7% of net sales, as
compared to $15,554 or 28.3% of net sales in 2021. The decrease in
cost was due to a reduction in the number of company-operated
stores. Restaurant operating costs during 2022 were $20,032 or
52.4% of net sales, as compared to $25,197 or 45.9% of net sales in
2021.
General and administrative costs increased by $970 in 2022 compared
to 2021, primarily because of an increase in personnel
costs.
Marketing expenses were relatively flat as a percentage of total
revenue in 2022 as compared to 2021.
The Company recorded impairment charges of $298 in the first
quarter of 2021 related to underperforming stores. There were no
impairments in 2022.
Insurance
We view our insurance businesses as possessing two activities:
underwriting and investing. Underwriting decisions are the
responsibility of the unit managers, whereas investing decisions
are the responsibility of our Chairman and CEO, Sardar Biglari. Our
business units are operated under separate local management.
Biglari Holdings’ insurance operations consist of First Guard and
Southern Pioneer.
Underwriting results of our insurance operations are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Underwriting gain attributable to: |
|
|
|
|
|
|
|
First Guard |
$ |
732 |
|
|
$ |
2,131 |
|
|
|
|
|
Southern Pioneer |
(337) |
|
|
413 |
|
|
|
|
|
Pretax underwriting gain |
395 |
|
|
2,544 |
|
|
|
|
|
Income tax expense |
83 |
|
|
534 |
|
|
|
|
|
Net underwriting gain |
$ |
312 |
|
|
$ |
2,010 |
|
|
|
|
|
Earnings of our insurance operations are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Premiums earned |
$ |
14,169 |
|
|
$ |
13,690 |
|
|
|
|
|
Insurance losses |
9,588 |
|
|
7,021 |
|
|
|
|
|
Underwriting expenses |
4,186 |
|
|
4,125 |
|
|
|
|
|
Pretax underwriting gain |
395 |
|
|
2,544 |
|
|
|
|
|
Other income and expenses |
|
|
|
|
|
|
|
Investment income |
213 |
|
|
166 |
|
|
|
|
|
Other income (expenses) |
756 |
|
|
527 |
|
|
|
|
|
Total other income |
969 |
|
|
693 |
|
|
|
|
|
Earnings before income taxes |
1,364 |
|
|
3,237 |
|
|
|
|
|
Income tax expense |
320 |
|
|
706 |
|
|
|
|
|
Contribution to net earnings |
$ |
1,044 |
|
|
$ |
2,531 |
|
|
|
|
|
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
Amount |
|
% |
|
Amount |
|
% |
|
|
|
|
|
|
|
|
Premiums earned |
$ |
8,731 |
|
|
100.0 |
% |
|
$ |
8,077 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance losses |
6,188 |
|
|
70.9 |
% |
|
4,002 |
|
|
49.5 |
% |
|
|
|
|
|
|
|
|
Underwriting expenses |
1,811 |
|
|
20.7 |
% |
|
1,944 |
|
|
24.1 |
% |
|
|
|
|
|
|
|
|
Total losses and expenses |
7,999 |
|
|
91.6 |
% |
|
5,946 |
|
|
73.6 |
% |
|
|
|
|
|
|
|
|
Pretax underwriting gain |
$ |
732 |
|
|
|
|
$ |
2,131 |
|
|
|
|
|
|
|
|
|
|
|
Southern Pioneer
Southern Pioneer underwrites garage liability and commercial
property insurance, as well as homeowners and dwelling fire
insurance.
A summary of Southern Pioneer’s underwriting results
follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
Amount |
|
% |
|
Amount |
|
% |
|
|
|
|
|
|
|
|
Premiums earned |
$ |
5,438 |
|
|
100.0 |
% |
|
$ |
5,613 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance losses |
3,400 |
|
|
62.5 |
% |
|
3,019 |
|
|
53.8 |
% |
|
|
|
|
|
|
|
|
Underwriting expenses |
2,375 |
|
|
43.7 |
% |
|
2,181 |
|
|
38.9 |
% |
|
|
|
|
|
|
|
|
Total losses and expenses |
5,775 |
|
|
106.2 |
% |
|
5,200 |
|
|
92.7 |
% |
|
|
|
|
|
|
|
|
Pretax underwriting gain (loss) |
$ |
(337) |
|
|
|
|
$ |
413 |
|
|
|
|
|
|
|
|
|
|
|
Insurance - Investment Income
A summary of net investment income attributable to our insurance
operations follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2022 |
|
2021 |
Interest, dividends and other investment income: |
|
|
|
First Guard |
$ |
74 |
|
|
$ |
17 |
|
Southern Pioneer |
139 |
|
|
149 |
|
Pretax investment income |
213 |
|
|
166 |
|
Income tax expense |
45 |
|
|
35 |
|
Net investment income |
$ |
168 |
|
|
$ |
131 |
|
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.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Oil and Gas
Southern Oil primarily operates oil and natural gas properties
offshore in the shallow waters of the Gulf of Mexico.
Earnings for Southern Oil are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Oil and gas revenue |
$ |
9,812 |
|
|
$ |
8,592 |
|
|
|
|
|
Oil and gas production costs |
3,819 |
|
|
2,413 |
|
|
|
|
|
Depreciation, depletion and accretion |
1,519 |
|
|
2,378 |
|
|
|
|
|
General and administrative expenses |
553 |
|
|
762 |
|
|
|
|
|
Earnings before income taxes |
3,921 |
|
|
3,039 |
|
|
|
|
|
Income tax expense |
997 |
|
|
684 |
|
|
|
|
|
Contribution to net earnings |
$ |
2,924 |
|
|
$ |
2,355 |
|
|
|
|
|
Brand Licensing
Maxim’s business lies principally in licensing and media. Earnings
of operations are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Licensing and media revenue |
$ |
634 |
|
|
$ |
1,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and media costs |
953 |
|
|
480 |
|
|
|
|
|
General and administrative expenses |
17 |
|
|
20 |
|
|
|
|
|
Earnings before income taxes |
(336) |
|
|
623 |
|
|
|
|
|
Income tax expense (benefit) |
(85) |
|
|
143 |
|
|
|
|
|
Contribution to net earnings |
$ |
(251) |
|
|
$ |
480 |
|
|
|
|
|
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 first quarter of 2022 and 2021
were $175 and $2,414, respectively. 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.
Earnings (loss) from our investments in partnerships are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Investment partnership gains (losses) |
$ |
(6,661) |
|
|
$ |
81,766 |
|
|
|
|
|
Tax expense (benefit) |
(1,860) |
|
|
19,117 |
|
|
|
|
|
Contribution to net earnings |
$ |
(4,801) |
|
|
$ |
62,649 |
|
|
|
|
|
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. These gains and losses have
caused and will continue to cause significant volatility in our
periodic earnings.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
The investment partnerships hold the Company’s common stock as
investments. The Company’s pro-rata share of its common stock held
by the investment partnerships is recorded as treasury stock even
though these shares are legally outstanding. Gains and losses on
Company common stock included in the earnings of the partnerships
are eliminated in the Company’s consolidated financial
results.
Interest Expense
The Company’s interest expense is summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
2022 |
|
2021 |
|
|
|
|
Interest expense on notes payable |
$ |
— |
|
|
$ |
1,121 |
|
|
|
|
|
Tax benefit |
— |
|
|
280 |
|
|
|
|
|
Interest expense net of tax |
$ |
— |
|
|
$ |
841 |
|
|
|
|
|
Steak n Shake’s term loan was scheduled to mature on March 19,
2021. The Company repaid Steak n Shake’s outstanding balance in
full on February 19, 2021.
Corporate and Other
Corporate expenses exclude the activities of the restaurant,
insurance, brand licensing, and oil and gas businesses.
Corporate and other net losses during the first quarter
of 2022 were relatively flat compared to the same period
during 2021.
Income Taxes
Income tax benefit for the first quarter of 2022 was $171 compared
to an income tax expense of $22,016 for the first quarter of 2021.
The variance in income taxes between 2022 and 2021 is attributable
to taxes on income generated by the investment partnerships.
Investment partnership pretax losses were $6,661 during the first
quarter of 2022 compared to pretax gains of $81,766 during the
first quarter of 2021.
Financial Condition
Consolidated cash and investments are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31,
2021 |
Cash and cash equivalents |
$ |
45,777 |
|
|
$ |
42,349 |
|
Investments |
87,150 |
|
|
83,061 |
|
Fair value of interest in investment partnerships |
471,792 |
|
|
474,201 |
|
Total cash and investments |
604,719 |
|
|
599,611 |
|
Less: portion of Company stock held by investment
partnerships |
(229,424) |
|
|
(223,802) |
|
Carrying value of cash and investments on balance sheet |
$ |
375,295 |
|
|
$ |
375,809 |
|
Unrealized gains/losses of Biglari Holdings’ stock held by the
investment partnerships are eliminated in the Company’s
consolidated financial results.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Liquidity
Our balance sheet continues to maintain significant
liquidity. Consolidated cash flow activities are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
2022 |
|
2021 |
Net cash provided by operating activities |
$ |
21,092 |
|
|
$ |
165,298 |
|
Net cash used in investing activities |
(16,077) |
|
|
(8,780) |
|
Net cash used in financing activities |
(1,564) |
|
|
(152,561) |
|
Effect of exchange rate changes on cash |
(23) |
|
|
(22) |
|
Increase in cash, cash equivalents and restricted cash |
$ |
3,428 |
|
|
$ |
3,935 |
|
Cash provided by operating activities was $21,092 during 2022
compared to $165,298 in 2021. The decrease in cash provided
by operating activities is mainly attributable to distributions
from investment partnerships
of $4,500 for
2022 and $150,570 for 2021. The distributions during 2021 were
primarily used to repay Steak n Shake’s debt.
Cash used in investing activities during 2022 was $16,077 compared
to $8,780 in 2021. Capital expenditures were $1,846 higher in 2022
compared to 2021. The increase in capital expenditures relates to
Steak n Shake’s continued transformation to counter service.
Proceeds from property disposals were $2,640 higher during 2021
compared to 2022. Purchases of investments, net of maturities and
sales, were $2,811 higher during 2022 compared to
2021.
Cash used in financing activities was $150,997 higher in 2021
compared to 2022. The Company repaid Steak n Shake’s debt and made
principal payments on direct financing lease obligations of
$152,561 during 2021.
We intend to meet the working capital needs of our operating
subsidiaries principally through anticipated cash flows generated
from operations and cash on hand. We continually review available
financing alternatives.
Steak n Shake Credit Facility
On March 19, 2014, Steak n Shake and its subsidiaries entered into
a credit agreement which provided for a senior secured term
loan facility in an aggregate principal amount of $220,000. The
term loan was scheduled to mature on March 19, 2021. The Company
repaid the balance of Steak n Shake’s term facility on February 19,
2021.
Critical Accounting Policies
Management’s discussion and analysis of financial condition and
results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. Certain
accounting policies require management to make estimates and
judgments concerning transactions that will be settled several
years in the future. Amounts recognized in our consolidated
financial statements from such estimates are necessarily based on
numerous assumptions involving varying and potentially significant
degrees of judgment and uncertainty. Accordingly, the amounts
currently reflected in our consolidated financial statements will
likely increase or decrease in the future as additional information
becomes available. There have been no material changes to
critical accounting policies previously disclosed in our annual
report on Form 10-K for the year ended December 31,
2021.
Recently Issued Accounting Pronouncements
No recently issued accounting pronouncements were applicable for
this Quarterly Report on Form 10-Q.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. In
general, forward-looking statements include estimates of future
revenues, cash flows, capital expenditures, or other financial
items, and assumptions underlying any of the foregoing.
Forward-looking statements reflect management’s current
expectations regarding future events and use words such as
“anticipate,” “believe,” “expect,” “may,” and other similar
terminology. A forward-looking statement is neither a prediction
nor a guarantee of future events or circumstances, and those future
events or circumstances may not occur. Investors should not place
undue reliance on the forward-looking statements, which speak only
as of the date of this report. These forward-looking statements are
all based on currently available operating, financial, and
competitive information and are subject to various risks and
uncertainties. Our actual future results and trends may differ
materially depending on a variety of factors, many beyond our
control, including, but not limited to, the risks and uncertainties
described in Item 1A, Risk Factors of our annual report on Form
10-K and Item 1A of this report. We undertake no obligation to
publicly update or revise them, except as may be required by
law.
Item 3.
Quantitative
and Qualitative Disclosures About Market Risk
The majority of our investments are conducted through investment
partnerships which generally hold common stocks. We also hold
marketable securities directly. Through investment partnerships we
hold concentrated positions. A significant decline in the general
stock market or in the prices of major investments may produce a
large net loss and decrease in our consolidated shareholders’
equity. Decreases in values of equity investments can have a
materially adverse effect on our earnings and on consolidated
shareholders’ equity.
We prefer to hold equity investments for very long periods of time
so we are not troubled by short-term price volatility with respect
to our investments. Market prices for equity securities are subject
to fluctuation. Consequently, the amount realized in the subsequent
sale of an investment may significantly differ from the reported
market value. A hypothetical 10% increase or decrease in the market
price of our investments would result in a respective increase or
decrease in the carrying value of our investments of $32,952 along
with a corresponding change in shareholders’ equity of
approximately 4%.
We have had minimal exposure to foreign currency exchange rate
fluctuations in the first quarters of 2022 and 2021.
Southern Oil’s business is fundamentally a commodity business. This
means Southern Oil’s operations and earnings may be significantly
affected by changes in oil and gas prices. Such commodity prices
depend on local, regional and global events or conditions that
affect supply and demand for oil and gas. Any material decline in
crude oil or natural gas prices could have a material adverse
effect on Southern Oil’s operations.
Item 4.
Controls
and Procedures
Based on an evaluation of our disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), our
Chief Executive Officer and Controller have concluded that our
disclosure controls and procedures were effective as of
March 31, 2022.
There have been no changes in our internal control over financial
reporting that occurred during the quarter ended March 31,
2022 that have materially affected, or that are reasonably likely
to materially affect, our internal control over financial
reporting.
PART II OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Information in response to this Item is included in Note 13 to the
Consolidated Financial Statements included in Part 1, Item 1 of
this Form 10-Q and is incorporated herein by
reference.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors as
previously disclosed in Item 1A to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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Exhibit Number |
|
Description |
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|
|
101 |
|
Interactive Data Files. |
|
|
|
104 |
|
Cover page Interactive Data File (embedded within the Inline XBRL
document and contained in Exhibit 101) |
_________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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|
Biglari Holdings Inc. |
|
|
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|
|
Date: May 6, 2022 |
By: |
/s/ BRUCE
LEWIS
|
|
|
|
Bruce Lewis |
|
|
|
Controller |
|
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