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What changed in Biglari Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Biglari Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+109 added−114 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in Biglari Holdings Inc.'s 2023 10-K

109 paragraphs added · 114 removed · 89 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeEach restaurant’s general manager has primary responsibility for the day-to-day operations of his or her unit. Restaurant operations obtain food products and supplies from independent national distributors. Purchases are centrally negotiated to ensure uniformity in product quality. Franchise Partner Restaurants Steak n Shake offers a franchise partner program to transition company-operated restaurants to franchise partnerships.
Biggest changeCompany-Operated Restaurants A typical company-operated restaurant management team consists of a general manager, a restaurant manager, and other managers, depending on the sales volume of the restaurant. Each restaurant’s general manager has primary responsibility for the day-to-day operations of his or her unit. Restaurant operations obtain food products and supplies from independent national distributors.
Admitted insurers are generally required to obtain regulatory approval of their policy forms and premium rates. Except for regulatory considerations, there are virtually no barriers to entry into the insurance industry. First Guard is a direct underwriter of commercial truck insurance, selling physical damage and nontrucking liability insurance to truckers.
Admitted insurers are generally required to obtain regulatory approval of their policy forms and premium rates. Except for regulatory considerations, there are virtually no barriers to entry into the insurance industry. First Guard is a direct underwriter of commercial truck insurance, primarily selling physical damage and nontrucking liability insurance to truckers.
Biglari Holdings’ insurance operations may be affected by extraordinary weather conditions or other factors, any of which may have a significant effect upon the frequency or severity of claims. 2 Table of Contents Oil and Gas Business The Company's oil and gas operations are conducted through two entities, Southern Oil Company (“Southern Oil”) and Abraxas Petroleum Corporation (“Abraxas Petroleum”).
Biglari Holdings’ insurance operations may be affected by extraordinary weather conditions or other factors, any of which may have a significant effect upon the frequency or severity of claims. Oil and Gas Business The Company's oil and gas operations are conducted through two entities, Southern Oil Company (“Southern Oil”) and Abraxas Petroleum Corporation (“Abraxas Petroleum”).
Similar to our traditional domestic franchise agreements, a typical international franchise development agreement includes development and franchise fees in addition to subsequent royalty fees based on the gross sales of each restaurant. Competition The restaurant business is one of the most intensely competitive industries.
Similar to our traditional domestic franchise agreements, a typical international franchise development agreement includes development and franchise fees in addition to subsequent royalty fees based on the gross sales of each restaurant. 1 Table of Contents Competition The restaurant business is one of the most intensely competitive industries.
In addition, publishing is a highly competitive business. Maxim products are marketed under various registered brand names, including, but not limited to, “MAXIM®” and “Maxim®.” Investments The Company and its subsidiaries have invested in The Lion Fund, L.P., and The Lion Fund II, L.P. (collectively, “the investment partnerships”). The investment partnerships operate as private investment funds.
Maxim products are marketed under various registered brand names, including, but not limited to, “MAXIM®” and “Maxim®.” Investments The Company and its subsidiaries have invested in The Lion Fund, L.P., and The Lion Fund II, L.P. (collectively, “the investment partnerships”). The investment partnerships operate as private investment funds.
As of December 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. Restaurant Operations The Company’s restaurant operations are conducted through two subsidiaries: Steak n Shake Inc. (“Steak n Shake”) and Western Sizzlin Corporation (“Western Sizzlin”) for a combined 545 units.
As of December 31, 2023, Mr. Biglari beneficially owns shares of the Company that represent approximately 66.8% of the economic interest and approximately 71.0% of the voting interest. Restaurant Operations The Company’s restaurant operations are conducted through two subsidiaries: Steak n Shake Inc. (“Steak n Shake”) and Western Sizzlin Corporation (“Western Sizzlin”) for a combined 492 units.
Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico. Abraxas Petroleum operates oil and natural gas wells in the Permian Basin. On September 14, 2022, the Company purchased Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum for a purchase price of $80 million.
Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico. Abraxas Petroleum operates oil and natural gas wells in the Permian Basin. 2 Table of Contents On September 14, 2022, the Company purchased Preferred Shares of Abraxas Petroleum for $80.0 million.
Restaurant operations typically seek franchisees with both the financial resources necessary to fund successful development and significant experience in the restaurant/retail business. Both restaurant chains assist franchisees with the development and ongoing operation of their restaurants. In addition, personnel assist franchisees with site selection, approve restaurant sites, and provide prototype plans, construction support, and specifications.
Both restaurant chains assist franchisees with the development and ongoing operation of their restaurants. In addition, personnel assist franchisees with site selection, approve restaurant sites, and provide prototype plans, construction support, and specifications. Restaurant operations staff provides both on-site and off-site instruction to franchise restaurant management and associates.
Founded in 1934 in Normal, Illinois, on Route 66, Steak n Shake is a classic American brand serving premium burgers and milkshakes. Steak n Shake is headquartered in Indianapolis, Indiana. Founded in 1962 in Augusta, Georgia, Western Sizzlin is a steak and buffet concept serving signature steak dishes as well as other classic American menu items.
Steak n Shake is headquartered in Indianapolis, Indiana. Founded in 1962 in Augusta, Georgia, Western Sizzlin is a steak and buffet concept serving signature steak dishes as well as other classic American menu items. Western Sizzlin also operates two other concepts: Great American Steak & Buffet, and Wood Grill Buffet. Western Sizzlin is headquartered in Roanoke, Virginia.
The franchise agreement stipulates that the franchisee make an upfront investment totaling ten thousand dollars. Steak n Shake, as the franchisor, assesses a fee of up to 15% of sales as well as 50% of profits. Potential franchise partners are screened based on entrepreneurial attitude and ability, but they become franchise partners based on achievement.
Steak n Shake, as the franchisor, assesses a fee of up to 15% of sales as well as 50% of profits. Potential franchise partners are screened based on entrepreneurial attitude and ability, but they become franchise partners based on achievement. Each must meet the gold standard in service. Franchise partners are single-unit owner-operators.
Each must meet the gold standard in service. Franchise partners are single-unit owner-operators. Traditional Franchise Restaurants Restaurant operations’ traditional franchising program extends the brands to areas in which there are no current development plans for company stores. The expansion plans include seeking qualified new franchisees and expanding relationships with current franchisees.
Traditional Franchise Restaurants Restaurant operations’ traditional franchising program extends the brands to areas in which there are no current development plans for company stores. The expansion plans include seeking qualified new franchisees and expanding relationships with current franchisees. Restaurant operations typically seek franchisees with both the financial resources necessary to fund successful development and significant experience in the restaurant/retail business.
Restaurant operations staff provides both on-site and off-site instruction to franchise restaurant management and associates. 1 Table of Contents International We have a corporate office in Monaco and an international organization with personnel in various functions to support our international business.
International We have a corporate office in Monaco and an international organization with personnel in various functions to support our international business.
Southern Oil is headquartered in Madisonville, Louisiana, and Abraxas Petroleum is headquartered in San Antonio, Texas. Brand Licensing Business Maxim’s business lies principally in brand licensing. Maxim is headquartered in New York, New York. Maxim competes for licensing business with other companies. The nature of the licensing business is predicated on projects that materialize with irregularity.
Maxim is headquartered in New York, New York. Maxim competes for licensing business with other companies. The nature of the licensing business is predicated on projects that materialize with irregularity. In addition, publishing is a highly competitive business.
On October 26, 2022, the Company exchanged the Preferred Shares for 90% of the outstanding common stock of Abraxas Petroleum. The oil and gas industry is fundamentally a commodity business. Southern Oil’s and Abraxas Petroleum’s operations and earnings, therefore, may be significantly affected by changes in oil and natural gas prices.
On October 26, 2022, the Company exchanged the Preferred Shares for 90% of the outstanding common stock of Abraxas Petroleum. On June 14, 2023, the remaining 10% of the outstanding common stock of Abraxas Petroleum was acquired for $5.4 million. The oil and gas industry is fundamentally a commodity business.
Biglari Holdings’ oil and gas operations compete with fully integrated, major global petroleum companies, as well as independent and national petroleum companies. In addition, our companies are subject to a variety of risks inherent in the oil and gas business, including a wide range of local, state, and federal regulations.
In addition, our companies are subject to a variety of risks inherent in the oil and gas business, including a wide range of local, state, and federal regulations. Southern Oil is headquartered in Madisonville, Louisiana, and Abraxas Petroleum is headquartered in San Antonio, Texas. Brand Licensing Business Maxim’s business lies principally in brand licensing.
As of December 31, 2022, Steak n Shake had 177 company-operated restaurants, 175 franchise partner units, and 154 traditional franchise units. Of the 177 company-operated units, 39 are currently closed but Steak n Shake intends to refranchise a majority of them. Western Sizzlin had 3 company-operated restaurants and 36 franchise units.
As of December 31, 2023, Steak n Shake had 148 company-operated restaurants, 181 franchise partner units, and 128 traditional franchise units. Western Sizzlin had 3 company-operated restaurants and 32 franchise units. Founded in 1934 in Normal, Illinois, on Route 66, Steak n Shake is a classic American brand serving premium burgers and milkshakes.
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Western Sizzlin also operates two other concepts: Great American Steak & Buffet, and Wood Grill Buffet. Western Sizzlin is headquartered in Roanoke, Virginia. 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.
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Purchases are centrally negotiated to ensure uniformity in product quality. Franchise Partner Restaurants Steak n Shake offers a franchise partner program to transition company-operated restaurants to franchise partnerships. The franchise agreement stipulates that the franchisee make an upfront investment totaling ten thousand dollars.
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In response to COVID-19, our restaurants were required to close their dining rooms in the first quarter of 2020, and the majority of those dining rooms remained closed during 2020. Steak n Shake reopened the majority of dining rooms during 2021, and in doing so has implemented a self-service model.
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Southern Oil’s and Abraxas Petroleum’s operations and earnings, therefore, may be significantly affected by changes in oil and natural gas prices. Biglari Holdings’ oil and gas operations compete with fully integrated, major global petroleum companies, as well as independent and national petroleum companies.
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Our restaurant operations followed the guidance of health officials in determining the appropriate restrictions to put in place for each restaurant. Company-Operated Restaurants A typical company-operated restaurant management team consists of a general manager, a restaurant manager, and other managers, depending on the sales volume of the restaurant.
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As of December 31, 2023, the fair value of the investment partnerships was $472.8 million. In addition, the Company held marketable securities (outside the investment partnerships) of $91.9 million at fair value. Employees As of December 31, 2023, the Company employed 2,466 persons.
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The COVID-19 pandemic caused oil demand to decrease significantly during the second and third quarters of 2020, which created oversupplied markets and lower commodity prices and margins. In response, the Company cut production and expenses in its oil and natural gas business during 2020.
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However, the significant increase in average crude oil and natural gas prices in 2021 and 2022 as compared to 2020 resulting from the lifting of COVID-19 restrictions, the resumption of normal economic activity, and the resulting improvement in supply and demand fundamentals caused Southern Oil to return to full production during 2021 and 2022.
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As of December 31, 2022, the fair value of the investments was $383.0 million. These investments are subject to a rolling five-year lock-up period under the terms of the respective partnership agreements. Employees As of December 31, 2022, the Company employed 2,559 persons.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEpidemics, pandemics, or other outbreaks, including COVID-19, could hurt our operating businesses and investments. The outbreak of COVID-19 adversely affected our operations and investments, and in the future it or other epidemics, pandemics, or outbreaks may do the same.
Biggest changeEpidemics, pandemics, or outbreaks may adversely affect our operations and investments.
Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, disease or food-borne illnesses, inclement weather, or other conditions could adversely affect the availability, quality, and cost of 5 Table of Contents ingredients, which would likely lower revenues, damage our reputation, or otherwise harm our business.
Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, disease or food-borne illnesses, inclement weather, or other conditions could adversely affect the availability, quality, and cost of ingredients, which would likely lower revenues, damage our reputation, or otherwise harm our business.
Litigation or changes in national, state, or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and natural gas, could adversely affect our operations and profitability. Item 1B. Unresolved Staff Comments None. 8 Table of Contents
Litigation or changes in national, state, or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and natural gas, could adversely affect our operations and profitability. Item 1B. Unresolved Staff Comments None.
We cannot predict whether we will continue to be able to anticipate and react to changing food costs by adjusting our purchasing practices, menu offerings, and menu prices, and a failure to do so could adversely affect our operating results. Adverse weather conditions or losses due to casualties could negatively impact our operating performance.
We cannot predict whether we will continue to be able to anticipate and react to changing food costs by adjusting our purchasing practices, menu offerings, and menu prices, and a failure to do so could adversely affect our operating results. 5 Table of Contents Adverse weather conditions or losses due to casualties could negatively impact our operating performance.
There can be no assurance that the fees paid will be commensurate with the benefits received. 6 Table of Contents The incentive allocation to which Mr.
There can be no assurance that the fees paid will be commensurate with the benefits received. The incentive allocation to which Mr.
Biglari, as Chairman and Chief Executive Officer of Biglari Capital, is entitled with respect to our investments under the terms of the respective partnership agreements is equal to 25% of the net profits allocated to the limited partners in excess of a 6% hurdle rate over the previous high-water mark.
Biglari, as Chairman and Chief Executive Officer of Biglari Capital, is entitled with respect to our investments under the terms of the respective partnership agreements is equal to 25% of the net profits allocated to the limited partners in excess of a 6% hurdle rate over the previous high-water mark. 6 Table of Contents Our investments may be concentrated, and fair values are subject to a loss in value.
Our investments may be concentrated, and fair values are subject to a loss in value. The majority of our investments are held through the investment partnerships, which generally invest in common stocks. These investments may be largely concentrated in the common stocks of a few investees.
The majority of our investments are held through the investment partnerships, which generally invest in common stocks. These investments may be largely concentrated in the common stocks of a few investees.
This is or may be due to closures or restrictions requested or mandated by governmental authorities, disruption to supply chains and workforce, reduction of demand for our products and services, credit losses when customers and other counterparties fail to satisfy their obligations to us, and volatility in global equity securities markets, among other factors.
This is or may be due to closures or restrictions requested or mandated by governmental authorities, disruption to supply chains and workforce, reduction of demand for our products and services, credit losses when customers and other counterparties fail to satisfy their obligations to us, and volatility in global equity securities markets, among other factors. 4 Table of Contents Potential changes in laws or regulations may have a negative impact on our Class A common stock and Class B common stock.
Our operating businesses are subject to normal economic cycles, which affect the general economy or the specific industries in which they operate. Significant deterioration of economic conditions over a prolonged period could produce a material adverse effect on one or more of our significant operations. Our operating businesses face a variety of risks associated with doing business in foreign markets.
Our operating businesses are subject to normal economic cycles, which affect the general economy or the specific industries in which they operate. Significant deterioration of economic conditions over a prolonged period could produce a material adverse effect on one or more of our significant operations. Epidemics, pandemics, or other outbreaks could hurt our operating businesses and investments.
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There is no assurance that our international operations will remain profitable. Our international operations are subject to all of the risks associated with our domestic operations, as well as a number of additional risks, varying substantially country by country.
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These include, inter alia , international economic and political conditions, corruption, terrorism, social and ethnic unrest, foreign currency fluctuations, differing cultures, and consumer preferences. In addition, we may become subject to foreign governmental regulations that impact the way we do business with our international franchisees and vendors.
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These include antitrust and tax requirements, anti-boycott regulations, international trade regulations, the USA Patriot Act, the Foreign Corrupt Practices Act, Office of Foreign Assets Control regulations, and 4 Table of Contents applicable local laws. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could harm our business and our financial condition.
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Potential changes in laws or regulations may have a negative impact on our Class A common stock and Class B common stock.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSteak n Shake Western Sizzlin Company Operated Franchise Partner Traditional Franchise Company Operated Franchise Total Domestic: Alabama 1 1 4 — 5 11 Arkansas — — 4 — 7 11 California — — 2 — — 2 Colorado 1 — — — — 1 Delaware — — 1 — — 1 Florida 20 57 7 — — 84 Georgia 7 12 11 — 4 34 Illinois 37 18 9 — — 64 Indiana 39 21 1 — — 61 Iowa 2 1 1 — — 4 Kansas — — 4 — — 4 Kentucky 1 11 9 — — 21 Louisiana — — 1 — — 1 Maryland — — 1 — 1 2 Michigan 13 4 1 — — 18 Mississippi — — 6 — 1 7 Missouri 10 11 22 — — 43 Nebraska — — 1 — — 1 Nevada — — 8 — — 8 North Carolina 1 5 2 — 6 14 Ohio 30 19 1 — 1 51 Oklahoma — — 2 — 2 4 Pennsylvania 4 — 1 — — 5 South Carolina — 1 2 — 2 5 Tennessee 1 7 10 — 3 21 Texas 6 7 13 — 1 27 Virginia — — 4 2 3 9 Washington, D.C. — — 1 — — 1 West Virginia — — 2 1 — 3 International: France 2 — 23 — — 25 Monaco 1 — — — — 1 Spain 1 — — — — 1 Total 177 175 154 3 36 545 As of December 31, 2022, 39 of the 177 Steak n Shake company-operated stores were closed.
Biggest changeSteak n Shake Western Sizzlin Company Operated Franchise Partner Traditional Franchise Company Operated Franchise Total Domestic: Alabama 1 1 4 — 5 11 Arkansas — — 4 — 6 10 California — — 2 — — 2 Colorado 1 — — — — 1 Florida 16 60 5 — — 81 Georgia 7 11 10 — 4 32 Illinois 37 17 8 — — 62 Indiana 35 20 1 — — 56 Iowa 2 1 1 — — 4 Kansas — — 2 — — 2 Kentucky — 12 6 — — 18 Louisiana — — 1 — — 1 Maryland — — — — 1 1 Michigan 7 6 1 — — 14 Mississippi — — 6 — 1 7 Missouri 6 14 20 — — 40 Nebraska — — 1 — — 1 Nevada — — 5 — — 5 North Carolina 1 5 2 — 6 14 Ohio 27 19 1 — 1 48 Oklahoma — — 2 — 2 4 Pennsylvania 1 — 1 — — 2 South Carolina 1 — 2 — 1 4 Tennessee 1 7 9 — 3 20 Texas 1 8 10 — — 19 Virginia — — 4 2 2 8 Washington, D.C. — — 1 — — 1 West Virginia — — 2 1 — 3 International: France 2 — 17 — — 19 Monaco 1 — — — — 1 Spain 1 — — — — 1 Total 148 181 128 3 32 492 As of December 31, 2023, 17 of the 148 Steak n Shake company-operated stores were closed.
Legal Proceedings Refer to Commitments and Contingencies - Note 15 to the Consolidated Financial Statements included in Item 8 for a discussion of legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 10 Table of Contents Part II
Item 3. Legal Proceedings Refer to Commitments and Contingencies - Note 15 to the Consolidated Financial Statements included in Item 8 for a discussion of legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 10 Table of Contents Part II
Item 2. Properties Restaurant Properties As of December 31, 2022, restaurant operations included 545 company-operated and franchise locations. Restaurant operations own the land and building for 155 restaurants; they also own 9 other properties. The following table lists the locations of the restaurants, as of December 31, 2022.
Item 2. Properties Restaurant Properties As of December 31, 2023, restaurant operations included 492 company-operated and franchise locations. Restaurant operations own the land and building for 142 restaurants; they also own one other property. The following table lists the locations of the restaurants as of December 31, 2023.
The Company intends to refranchise the majority of its closed stores. 9 Table of Contents Other Properties Southern Oil primarily operates oil and natural gas wells in Louisiana. Its operations are primarily offshore in the shallow waters of the Gulf of Mexico. Abraxas Petroleum operates oil and natural gas wells in the Permian Basin.
Steak n Shake plans to sell or lease 10 of the 17 locations and refranchise the balance. 9 Table of Contents Other Properties Southern Oil primarily operates oil and natural gas wells in Louisiana. Its operations are primarily offshore in the shallow waters of the Gulf of Mexico. Abraxas Petroleum operates oil and natural gas wells in the Permian Basin.
First Guard owns the land and building of its office in Venice, Florida. Southern Pioneer owns the land and building of its office in Jonesboro, Arkansas. The Company owns Steak n Shake’s office building in Indianapolis, Indiana, along with two other undeveloped properties in other states. Item 3.
Through its subsidiaries, the Company owns Steak n Shake’s office building in Indianapolis, Indiana; First Guard’s office building in Venice, Florida; and Southern Pioneer’s office building in Jonesboro, Arkansas. In addition, the Company owns eight various locations that are being leased or are available to be leased by third parties, along with owning one undeveloped property in San Antonio, Texas.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShareholders Biglari Holdings had 1,692 beneficial shareholders of its Class A common stock and 3,506 beneficial shareholders of its Class B common stock as of February 1, 2023. Dividends Biglari Holdings has never declared a dividend. 11 Table of Contents
Biggest changeShareholders Biglari Holdings had 1,551 beneficial shareholders of its Class A common stock and 4,374 beneficial shareholders of its Class B common stock as of February 1, 2024. Dividends Biglari Holdings has never declared a dividend.
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Issuer Purchases of Equity Securities From December 1, 2023 through December 31, 2023, The Lion Fund, L.P. purchased 1,100 shares of Class A common stock and 9,813 shares of Class B common stock. The Lion Fund, L.P. may be deemed an “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended.
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The purchases were made through open market transactions.
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Total Number of Class A Shares Purchased Average Price Paid per Class A Share Total Number of Class B Shares Purchased Average Price Paid per Class B Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs October 1, 2023 - October 31, 2023 — $ — — $ — — — November 1, 2023 - November 30, 2023 — $ — — $ — — — December 1, 2023 - December 31, 2023 1,100 $ 828.69 9,813 $ 164.99 — — Total 1,100 9,813 — Item 6. [Reserved] 11 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe plan to refranchise a majority of our closed company-operated restaurants. 13 Table of Contents Management’s Discussion and Analysis (continued) Restaurant operations for 2022, 2021, and 2020 are summarized below. 2022 2021 2020 Revenue Net sales $ 149,184 $ 187,913 $ 306,577 Franchise partner fees 63,853 55,641 22,213 Franchise royalties and fees 19,678 21,736 18,794 Other revenue 8,853 6,000 3,082 Total revenue 241,568 271,290 350,666 Restaurant cost of sales Cost of food 44,461 29.8 % 55,315 29.4 % 88,698 28.9 % Restaurant operating costs 79,921 53.6 % 92,543 49.2 % 137,574 44.9 % Occupancy costs 15,882 10.6 % 19,633 10.4 % 20,383 6.6 % Total cost of sales 140,264 167,491 246,655 Selling, general and administrative General and administrative 40,206 16.6 % 39,940 14.7 % 35,922 10.2 % Marketing 13,921 5.8 % 13,923 5.1 % 21,507 6.1 % Other expenses (income) (2,294) (0.9) % 3,323 1.2 % 2,972 0.8 % Total selling, general and administrative 51,833 21.5 % 57,186 21.1 % 60,401 17.2 % Impairments 3,520 1.5 % 4,635 1.7 % 23,646 6.7 % Depreciation and amortization 27,496 11.4 % 21,484 7.9 % 19,042 5.4 % Interest on finance leases and obligations 5,493 6,039 6,274 Earnings (loss) before income taxes 12,962 14,455 (5,352) Income tax expense (benefit) 3,579 3,220 (391) Contribution to net earnings $ 9,383 $ 11,235 $ (4,961) Cost of food, restaurant operating costs, and occupancy costs are expressed as a percentage of net sales.
Biggest changeSteak n Shake plans to sell or lease 10 of the 17 locations and refranchise the balance. 12 Table of Contents Management’s Discussion and Analysis (continued) Restaurant operations for 2023, 2022, and 2021 are summarized below. 2023 2022 2021 Revenue Net sales $ 152,545 $ 149,184 $ 187,913 Franchise partner fees 72,552 63,853 55,641 Franchise royalties and fees 16,443 19,678 21,736 Other revenue 9,317 8,853 6,000 Total revenue 250,857 241,568 271,290 Restaurant cost of sales Cost of food 44,993 29.5 % 44,461 29.8 % 55,315 29.4 % Labor costs 47,090 30.9 % 50,524 33.9 % 58,159 30.9 % Occupancy and other 45,903 30.1 % 45,279 30.4 % 54,017 28.7 % Total cost of sales 137,986 140,264 167,491 Selling, general and administrative General and administrative 44,120 17.6 % 40,206 16.6 % 39,940 14.7 % Marketing 12,631 5.0 % 13,921 5.8 % 13,923 5.1 % Other expenses (income) (7,935) (3.2) % (2,294) (0.9) % 3,323 1.2 % Total selling, general and administrative 48,816 51,833 57,186 Impairments 3,947 1.6 % 3,520 1.5 % 4,635 1.7 % Depreciation and amortization 27,031 10.8 % 27,496 11.4 % 21,484 7.9 % Interest on finance leases and obligations 5,114 5,493 6,039 Earnings before income taxes 27,963 12,962 14,455 Income tax expense 6,132 3,579 3,220 Contribution to net earnings $ 21,831 $ 9,383 $ 11,235 Cost of food, labor, and occupancy and other costs are expressed as a percentage of net sales.
The following discussion should also be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and the risks and uncertainties described in Item 1A, Risk Factors, set forth above. Our Management Discussion and Analysis generally discusses 2022 and 2021 items.
The following discussion should also be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and the risks and uncertainties described in Item 1A, Risk Factors, set forth above. Our Management Discussion and Analysis generally discusses 2023 and 2022 items.
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.
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.
The Company used working capital including its line of credit to fund the purchase of the Preferred Shares. Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. The preliminary purchase price allocation includes $70,200 of oil and gas properties, cash of $21,726, and liabilities, net of other assets, of $11,926.
The Company used working capital including its line of credit to fund the purchase of the Preferred Shares. Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. The purchase price allocation included $70,200 of oil and gas properties, cash of $21,726, and liabilities, net of other assets, of $11,926.
Investment gains and losses in 2022 and 2021 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment and derivative gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly or annual results.
Investment gains and losses in 2023 and 2022 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly or annual results.
Investment gains and losses in 2022 and 2021 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment and derivative gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly and annual results.
Investment gains and losses in 2023 and 2022 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly and annual results.
Discussions of 2020 items can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.
Discussions of 2021 items can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023.
Commissions are in other income in the above table. 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.
Commissions are in other income in the above table. 15 Table of Contents Management’s Discussion and Analysis (continued) First Guard First Guard is a direct underwriter of commercial truck insurance, primarily 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.
Determining the future cash flows expected to be generated by an asset requires significant judgment regarding future performance of the asset, fair market value if the asset were to be sold, and other financial and economic assumptions. 21 Table of Contents Management’s Discussion and Analysis (continued) Oil and Natural Gas Reserves Crude oil and natural gas reserves are estimates of future production that impact certain asset and expense accounts.
Determining the future cash flows expected to be generated by an asset requires significant judgment regarding future performance of the asset, fair market value if the asset were to be sold, and other financial and economic assumptions. Oil and Natural Gas Reserves Crude oil and natural gas reserves are estimates of future production that impact certain asset and expense accounts.
These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. 19 Table of Contents Management’s Discussion and Analysis (continued) Interest Expense The Company’s interest expense is summarized below. 2022 2021 2020 Interest expense on notes payable and other borrowings $ (399) $ (1,121) $ (9,262) Tax benefit (94) (280) (2,322) Interest expense net of tax $ (305) $ (841) $ (6,940) The Company paid Steak n Shake’s outstanding credit facility in full in February 2021.
These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. 19 Table of Contents Management’s Discussion and Analysis (continued) Interest Expense The Company’s interest expense is summarized below. 2023 2022 2021 Interest expense on notes payable and other borrowings $ (681) $ (399) $ (1,121) Tax benefit (150) (94) (280) Interest expense net of tax $ (531) $ (305) $ (841) The Company paid Steak n Shake’s outstanding credit facility in full in February 2021.
Restaurants Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 545 company-operated and franchise restaurants as of December 31, 2022.
Restaurants Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 492 company-operated and franchise restaurants as of December 31, 2023.
All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of December 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.
All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari. As of December 31, 2023, Mr. Biglari beneficially owns shares of the Company that represent approximately 66.8% of the economic interest and approximately 71.0% of the voting interest.
Earnings from our investments in partnerships are summarized below. 2022 2021 2020 Investment partnership gains (losses) $ (75,953) $ 10,953 $ (43,032) Tax expense (benefit) (18,992) 2,054 (10,526) Contribution to net earnings $ (56,961) $ 8,899 $ (32,506) Investment partnership gains include gains/losses from changes in the market values of underlying investments and dividends earned by the partnerships.
Earnings from our investments in partnerships are summarized below. 2023 2022 2021 Investment partnership gains (losses) $ 19,440 $ (75,953) $ 10,953 Tax expense (benefit) 4,794 (18,992) 2,054 Contribution to net earnings $ 14,646 $ (56,961) $ 8,899 Investment partnership gains include gains/losses from changes in the market values of underlying investments and dividends earned by the partnerships.
A summary of Southern Pioneer’s underwriting results follows. 2022 2021 2020 Amount % Amount % Amount % Premiums earned $ 24,035 100.0 % $ 21,890 100.0 % $ 19,010 100.0 % Insurance losses 14,888 61.9 % 11,311 51.7 % 10,797 56.8 % Underwriting expenses 10,424 43.4 % 8,835 40.4 % 7,593 39.9 % Total losses and expenses 25,312 105.3 % 20,146 92.1 % 18,390 96.7 % Pre-tax underwriting gain (loss) $ (1,277) $ 1,744 $ 620 Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 61.9% during 2022 as compared to 51.7% during 2021.
A summary of Southern Pioneer’s underwriting results follows. 2023 2022 2021 Amount % Amount % Amount % Premiums earned $ 24,308 100.0 % $ 24,035 100.0 % $ 21,890 100.0 % Insurance losses 14,807 60.9 % 14,888 61.9 % 11,311 51.7 % Underwriting expenses 10,539 43.4 % 10,424 43.4 % 8,835 40.4 % Total losses and expenses 25,346 104.3 % 25,312 105.3 % 20,146 92.1 % Pre-tax underwriting gain (loss) $ (1,038) $ (1,277) $ 1,744 Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 60.9% during 2023 as compared to 61.9% during 2022.
Discussion of Operations Net earnings attributable to Biglari Holdings Inc. shareholders are disaggregated in the table that follows. 2022 2021 2020 Operating businesses: Restaurant $ 9,383 $ 11,235 $ (4,961) Insurance 7,662 11,290 9,840 Oil and gas 19,091 7,528 1,890 Brand licensing 1,313 2,364 1,374 Interest expense (305) (841) (6,940) Corporate and other (9,806) (9,829) (9,563) Total operating businesses 27,338 21,747 (8,360) Investment partnership gains (losses) (56,961) 8,899 (32,506) Investment gains (losses) (2,682) 4,832 2,877 Net earnings (loss) (32,305) 35,478 (37,989) Earnings (loss) attributable to noncontrolling interest (287) — — Net earnings (loss) attributable to Biglari Holdings Inc. shareholders $ (32,018) $ 35,478 $ (37,989) The following discussion should be read in conjunction with Item 1, Business and our Consolidated Financial Statements and the notes thereto included in this Form 10-K.
Discussion of Operations Net earnings attributable to Biglari Holdings Inc. shareholders are disaggregated in the table that follows. 2023 2022 2021 Operating businesses: Restaurant $ 21,831 $ 9,383 $ 11,235 Insurance 10,262 7,662 11,290 Oil and gas 25,406 19,091 7,528 Brand licensing 8 1,313 2,364 Interest expense (531) (305) (841) Corporate and other (17,814) (9,806) (9,829) Total operating businesses 39,162 27,338 21,747 Investment partnership gains (losses) 14,646 (56,961) 8,899 Investment gains (losses) 1,731 (2,682) 4,832 Net earnings (loss) 55,539 (32,305) 35,478 Earnings (loss) attributable to noncontrolling interest 591 (287) — Net earnings (loss) attributable to Biglari Holdings Inc. shareholders $ 54,948 $ (32,018) $ 35,478 The following discussion should be read in conjunction with Item 1, Business and our Consolidated Financial Statements and the notes thereto included in this Form 10-K.
We test for impairment by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total estimated future cash flows are less than the carrying amount of the asset, the carrying value is written down to the estimated fair value, and a loss is recognized in earnings.
If the total estimated future cash flows are less than the carrying amount of the asset, the carrying value is written down to the estimated fair value, and a loss is recognized in earnings.
A summary of First Guard’s underwriting results follows. 2022 2021 2020 Amount % Amount % Amount % Premiums earned $ 35,914 100.0 % $ 33,521 100.0 % $ 30,210 100.0 % Insurance losses 22,299 62.1 % 16,338 48.7 % 14,031 46.5 % Underwriting expenses 7,037 19.6 % 6,610 19.7 % 6,800 22.5 % Total losses and expenses 29,336 81.7 % 22,948 68.4 % 20,831 69.0 % Pre-tax underwriting gain $ 6,578 $ 10,573 $ 9,379 First Guard’s ratio of losses and loss adjustment expenses to premiums earned was 62.1% during 2022 as compared to 48.7% during 2021.
A summary of First Guard’s underwriting results follows. 2023 2022 2021 Amount % Amount % Amount % Premiums earned $ 36,917 100.0 % $ 35,914 100.0 % $ 33,521 100.0 % Insurance losses 20,861 56.5 % 22,299 62.1 % 16,338 48.7 % Underwriting expenses 6,564 17.8 % 7,037 19.6 % 6,610 19.7 % Total losses and expenses 27,425 74.3 % 29,336 81.7 % 22,948 68.4 % Pre-tax underwriting gain $ 9,492 $ 6,578 $ 10,573 First Guard’s ratio of losses and loss adjustment expenses to premiums earned was 56.5% during 2023 as compared to 62.1% during 2022.
Steak n Shake Western Sizzlin Company- operated Franchise Partner Traditional Franchise Company- operated Franchise Total Stores open on December 31, 2019 368 29 213 4 48 662 Corporate stores transitioned (58) 57 1 — — — Net restaurants opened (closed) (34) — (20) (1) (9) (64) Stores open on December 31, 2020 276 86 194 3 39 598 Corporate stores transitioned (73) 73 — — — — Net restaurants opened (closed) (4) — (16) — (1) (21) Stores open on December 31, 2021 199 159 178 3 38 577 Corporate stores transitioned (16) 16 — — — — Net restaurants opened (closed) (6) — (24) — (2) (32) Stores open on December 31, 2022 177 175 154 3 36 545 As of December 31, 2022, 39 of the 177 company-operated Steak n Shake stores were closed.
Steak n Shake Western Sizzlin Company- operated Franchise Partner Traditional Franchise Company- operated Franchise Total Stores on December 31, 2020 276 86 194 3 39 598 Corporate stores transitioned (73) 73 — — — — Net restaurants opened (closed) (4) — (16) — (1) (21) Stores on December 31, 2021 199 159 178 3 38 577 Corporate stores transitioned (16) 16 — — — — Net restaurants opened (closed) (6) — (24) — (2) (32) Stores on December 31, 2022 177 175 154 3 36 545 Corporate stores transitioned (6) 7 (1) — — — Net restaurants opened (closed) (23) (1) (25) — (4) (53) Stores on December 31, 2023 148 181 128 3 32 492 As of December 31, 2023, 17 of the 148 company-operated Steak n Shake stores were closed.
Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer. 15 Table of Contents Management’s Discussion and Analysis (continued) Underwriting results of our insurance operations are summarized below. 2022 2021 2020 Underwriting gain (loss) attributable to: First Guard $ 6,578 $ 10,573 $ 9,379 Southern Pioneer (1,277) 1,744 620 Pre-tax underwriting gain 5,301 12,317 9,999 Income tax expense 1,113 2,587 2,100 Net underwriting gain $ 4,188 $ 9,730 $ 7,899 Earnings of our insurance operations are summarized below. 2022 2021 2020 Premiums earned $ 59,949 $ 55,411 $ 49,220 Insurance losses 37,187 27,649 24,828 Underwriting expenses 17,461 15,445 14,393 Pre-tax underwriting gain 5,301 12,317 9,999 Other income and expenses Investment income 1,380 704 1,212 Other income 3,223 1,414 1,220 Total other income 4,603 2,118 2,432 Earnings before income taxes 9,904 14,435 12,431 Income tax expense 2,242 3,145 2,591 Contribution to net earnings $ 7,662 $ 11,290 $ 9,840 Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.
Underwriting results of our insurance operations are summarized below. 2023 2022 2021 Underwriting gain (loss) attributable to: First Guard $ 9,492 $ 6,578 $ 10,573 Southern Pioneer (1,038) (1,277) 1,744 Pre-tax underwriting gain 8,454 5,301 12,317 Income tax expense 1,775 1,113 2,587 Net underwriting gain $ 6,679 $ 4,188 $ 9,730 Earnings of our insurance operations are summarized below. 2023 2022 2021 Premiums earned $ 61,225 $ 59,949 $ 55,411 Insurance losses 35,668 37,187 27,649 Underwriting expenses 17,103 17,461 15,445 Pre-tax underwriting gain 8,454 5,301 12,317 Other income and expenses Investment income 3,074 1,380 704 Other income 1,555 3,223 1,414 Total other income 4,629 4,603 2,118 Earnings before income taxes 13,083 9,904 14,435 Income tax expense 2,821 2,242 3,145 Contribution to net earnings $ 10,262 $ 7,662 $ 11,290 Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The balance on the line of credit was $10,000 on December 31, 2022. Income Taxes The consolidated income tax benefit was $10,722 in 2022 versus an expense of $6,789 in 2021.
On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. There was no balance on the line of credit on December 31, 2023. The balance on the line of credit was $10,000 on December 31, 2022.
First Guard’s underwriting results in 2022 were in line with its historical performance despite cost inflation in property and physical damage claims, which began to accelerate in 2022.
First Guard’s underwriting results in 2023 were in line with its historical performance despite cost inflation in property and physical damage claims, which began to accelerate in 2022. Southern Pioneer Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance.
Business Acquisitions On September 14, 2022, the Company purchased 685,505 shares of Series A Preferred Stock (the “Preferred Shares”) of Abraxas Petroleum Corporation (“Abraxas Petroleum”) for a purchase price of $80,000. On October 26, 2022, the Company converted the Preferred Shares to 90% of the outstanding common stock of Abraxas Petroleum.
Business Acquisitions On September 14, 2022, the Company purchased Preferred Shares of Abraxas Petroleum Corporation (“Abraxas Petroleum”) for $80,000. On October 26, 2022, the Company converted the Preferred Shares to 90% of the outstanding common stock of Abraxas Petroleum. On June 14, 2023, the remaining 10% of the outstanding common stock of Abraxas Petroleum was acquired for $5,387.
The Company’s financial results include the results of Abraxas Petroleum from the acquisition date to the end of the calendar year. The revenues and operating results for Abraxas Petroleum were not significant to the Company.
The Company’s financial results include the results of Abraxas Petroleum from the initial acquisition date to the end of the calendar year.
Consolidated cash flow activities are summarized below. 2022 2021 2020 Net cash provided by operating activities $ 127,825 $ 228,767 $ 117,556 Net cash used in investing activities (136,605) (58,525) (129,487) Net cash provided by (used in) financing activities 3,860 (156,157) (29,109) Effect of exchange rate changes on cash 38 (64) 10 Increase (decrease) in cash, cash equivalents, and restricted cash $ (4,882) $ 14,021 $ (41,030) 20 Table of Contents Management’s Discussion and Analysis (continued) In 2022, cash from operating activities decreased by $100,942 as compared to 2021.
Consolidated cash flow activities are summarized below. 2023 2022 2021 Net cash provided by operating activities $ 73,002 $ 127,825 $ 228,767 Net cash used in investing activities (66,080) (136,605) (58,525) Net cash provided by (used in) financing activities (16,132) 3,860 (156,157) Effect of exchange rate changes on cash 59 38 (64) Increase (decrease) in cash, cash equivalents, and restricted cash $ (9,151) $ (4,882) $ 14,021 In 2023, cash from operating activities decreased by $54,823 as compared to 2022.
Consolidation The consolidated financial statements include the accounts of Biglari Holdings Inc. and the wholly owned subsidiaries of Biglari Holdings Inc. The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. All intercompany accounts and transactions are eliminated in consolidation.
A discussion of our principal accounting policies that required the application of significant judgments as of December 31, 2023, follows. Consolidation The consolidated financial statements include the accounts of Biglari Holdings Inc. and the wholly owned subsidiaries of Biglari Holdings Inc. The analysis as to whether to consolidate an entity is subject to a significant amount of judgment.
Insurance – Investment Income A summary of net investment income attributable to our insurance operations follows. 2022 2021 2020 Interest, dividends, and other investment income: First Guard $ 751 $ 133 $ 285 Southern Pioneer 629 571 927 Pre-tax investment income 1,380 704 1,212 Income tax expense 289 148 255 Net investment income $ 1,091 $ 556 $ 957 We consider investment income as a component of our aggregate insurance operating results.
Southern Pioneer’s performance in both years was primarily attributable to weather-related losses. 16 Table of Contents Management’s Discussion and Analysis (continued) Insurance – Investment Income A summary of net investment income attributable to our insurance operations follows. 2023 2022 2021 Interest, dividends, and other investment income: First Guard $ 1,873 $ 751 $ 133 Southern Pioneer 1,201 629 571 Pre-tax investment income 3,074 1,380 704 Income tax expense 646 289 148 Net investment income $ 2,428 $ 1,091 $ 556 We consider investment income as a component of our aggregate insurance operating results.
Earnings for Southern Oil are summarized below. 2022 2021 2020 Oil and gas revenue $ 46,091 $ 33,004 $ 26,255 Oil and gas production costs 13,355 10,470 8,700 Depreciation, depletion, and accretion 5,503 8,073 12,527 General and administrative expenses 2,694 4,748 3,010 Earnings before income taxes 24,539 9,713 2,018 Income tax expense 5,946 2,185 128 Contribution to net earnings $ 18,593 $ 7,528 $ 1,890 Our oil and gas business is highly dependent on oil and natural gas prices.
Earnings for Southern Oil are summarized below. 2023 2022 2021 Oil and gas revenue $ 17,495 $ 46,091 $ 33,004 Oil and gas production costs 7,760 13,355 10,470 Depreciation, depletion, and accretion 3,980 5,503 8,073 General and administrative expenses 2,399 2,694 4,748 Earnings before income taxes 3,356 24,539 9,713 Income tax expense 744 5,946 2,185 Contribution to net earnings $ 2,612 $ 18,593 $ 7,528 18 Table of Contents Management’s Discussion and Analysis (continued) Brand Licensing Maxim’s business lies principally in licensing and media.
As of December 31, 2022, there were 175 franchise partner units as compared to 159 franchise partner units as of December 31, 2021. Included in franchise partner fees were $20,426 and $15,483 of rental income during 2022 and 2021, respectively. Franchise partners rent buildings and equipment from Steak n Shake.
As of December 31, 2023, there were 181 franchise partner units as compared to 175 franchise partner units as of December 31, 2022. Included in the franchise partner fees were $22,687 and $20,426 of rental income during 2023 and 2022, respectively.
The cost of food expressed as a percentage of net sales remained consistent with 2021. The operating costs at company-operated restaurants during 2022 were $79,921, or 53.6% of net sales as compared to $92,543, or 49.2% of net sales in 2021.
The cost of food expressed as a percentage of net sales in 2023 remained consistent with 2022. The labor costs at company-operated restaurants during 2023 were $47,090, or 30.9% of net sales as compared to $50,524, or 33.9% of net sales in 2022.
December 31, 2022 2021 Cash and cash equivalents $ 37,467 $ 42,349 Investments 69,466 83,061 Fair value of interest in investment partnerships 383,004 474,201 Total cash and investments 489,937 599,611 Less: portion of Company stock held by investment partnerships (227,210) (223,802) Carrying value of cash and investments on balance sheet $ 262,727 $ 375,809 Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results.
December 31, 2023 2022 Cash and cash equivalents $ 28,066 $ 37,467 Investments 91,879 69,466 Fair value of interest in investment partnerships 472,772 383,004 Total cash and investments 592,717 489,937 Less: portion of Company stock held by investment partnerships (273,669) (227,210) Carrying value of cash and investments on balance sheet $ 319,048 $ 262,727 Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results. 20 Table of Contents Management’s Discussion and Analysis (continued) Liquidity Our balance sheet continues to maintain significant liquidity.
Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. A discussion of our principal accounting policies that required the application of significant judgments as of December 31, 2022, follows.
Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances.
Impairment of Restaurant Long-lived Assets We review company-operated restaurants for impairment on a restaurant-by-restaurant basis when events or circumstances indicate a possible impairment. Assets included in the impairment assessment generally consist of property, equipment, and leasehold improvements directly associated with an individual restaurant as well as any related finance or operating lease assets.
Assets included in the impairment assessment generally consist of property, equipment, and leasehold improvements directly associated with an individual restaurant as well as any related finance or operating lease assets. We test for impairment by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset.
Earnings of operations are summarized below. 2022 2021 2020 Licensing and media revenue $ 4,577 $ 3,203 $ 4,083 Licensing and media cost 2,695 2,275 2,156 General and administrative expenses 122 114 143 Earnings before income taxes 1,760 814 1,784 Income tax expense 447 (1,550) 410 Contribution to net earnings $ 1,313 $ 2,364 $ 1,374 We acquired Maxim with the idea of transforming its business model.
Earnings of operations are summarized below. 2023 2022 2021 Licensing and media revenue $ 2,118 $ 4,577 $ 3,203 Licensing and media cost 1,840 2,695 2,275 General and administrative expenses 267 122 114 Earnings before income taxes 11 1,760 814 Income tax expense 3 447 (1,550) Contribution to net earnings $ 8 $ 1,313 $ 2,364 Licensing and media revenue decreased $2,459 in 2023 compared to 2022 primarily because an important licensing transaction shifted from 2023 to 2024.
Earnings for Abraxas Petroleum from the date of acquisition, September 14, 2022, are summarized below. 2022 Oil and gas revenue $ 11,455 Oil and gas production costs 4,487 Depreciation, depletion, and accretion 2,510 General and administrative expenses 3,806 Earnings before income taxes 652 Income tax expense 154 Contribution to net earnings $ 498 18 Table of Contents Management’s Discussion and Analysis (continued) Brand Licensing Maxim’s business lies principally in licensing and media.
Earnings for Abraxas Petroleum from the date of acquisition, September 14, 2022, are summarized below. 2023 2022 Oil and gas revenue $ 27,576 $ 11,455 Oil and gas production costs 9,605 4,487 Depreciation, depletion, and accretion 6,359 2,510 Gain on sale of properties (13,563) — General and administrative expenses 2,765 3,806 Earnings before income taxes 22,410 652 Income tax expense (benefit) (384) 154 Contribution to net earnings $ 22,794 $ 498 Southern Oil Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.
We intend to meet the working capital needs of our operating subsidiaries, principally through cash flows generated from operations and cash on hand. We continually review available financing alternatives. Biglari Holdings Line of Credit On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000.
Cash provided by financing activities of $3,860 during 2022 was primarily due to net borrowings on the Company’s line of credit. We intend to meet the working capital needs of our operating subsidiaries, principally through cash flows generated from operations and cash on hand. We continually review available financing alternatives.
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, set forth above.
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, set forth above. We undertake no obligation to publicly update or revise them, except as may be required by law. Item 7A.
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.
Figures are shown for information purposes only. 14 Table of Contents Management’s Discussion and Analysis (continued) 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.
The line of credit will be available on a revolving basis until September 12, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants. As of December 31, 2022, we were in compliance with all covenants. The balance of the line of credit on December 31, 2022, was $10,000.
Biglari Holdings Line of Credit On September 13, 2022, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $30,000. The line of credit will be available on a revolving basis until September 13, 2024. The line of credit includes customary covenants, as well as financial maintenance covenants.
The magazine developed the Maxim brand, a franchise we are utilizing to generate nonmagazine revenue, notably through licensing, a cash-generating business related to consumer products, services, and events. Investment Gains and Investment Partnership Gains Investment losses were $3,393 ($2,682 net of tax) in 2022 as compared to investment gains of $6,401 ($4,832 net of tax) in 2021.
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.
Demand for petroleum grew in 2022, with our financial results benefiting from stronger prices and margins. The average West Texas Intermediate price per barrel for the year ended December 31, 2022, was approximately $94.53 as compared to approximately $68.17 for the year ended December 31, 2021.
The average West Texas Intermediate price per barrel for the year ended December 31, 2023, was approximately $77.64 as compared to approximately $94.53 for the year ended December 31, 2022. It is expected that the prices of oil and gas commodities will remain volatile, which will be reflected in our financial results.
Investment gains in 2021 included a gain from the sale of real estate of $5,047 ($3,785 net of tax). 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 and Investment Partnership Gains Investment gains were $2,211 ($1,731 net of tax) in 2023 as compared to investment losses of $3,393 ($2,682 net of tax) in 2022. Dividends and interest 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.
The franchise royalties and fees generated by the traditional franchising business were $19,678 during 2022 as compared to $21,736 during 2021. The decrease in franchise royalties and fees was primarily due to the closing of certain traditional franchise stores. There were 190 traditional units open on December 31, 2022, as compared to 216 units open on December 31, 2021.
Franchise partners rent buildings and equipment from Steak n Shake. 13 Table of Contents Management’s Discussion and Analysis (continued) The franchise royalties and fees generated by the traditional franchising business were $16,443 during 2023 as compared to $19,678 during 2022. The decrease in franchise royalties and fees was primarily due to the closing of certain traditional franchise stores.
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.
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.
The change in income tax expense was primarily due to a tax benefit of $18,992 for investment partnership losses in 2022. Corporate and Other Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Corporate and other net losses for 2022 remained consistent with the preceding year.
Corporate and Other Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Corporate and other net losses increased in 2023 compared to 2022 primarily due to an incentive fee of $7,271.
Our interests in the investment partnerships are accounted for as equity method investments because of our retained limited partner interest in the investment partnerships. The Company records gains from the investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses on their securities) in the consolidated statement of earnings based on our proportional ownership interest in the investment partnerships.
All intercompany accounts and transactions are eliminated in consolidation. Our interests in the investment partnerships are accounted for as equity method investments because of our retained limited partner interest in the investment partnerships.
The change was primarily attributable to a decrease in distributions from investment partnerships from $180,170 in 2021 to $70,700 in 2022. The distributions during 2022 were primarily used to acquire Abraxas Petroleum, and the distributions during 2021 were primarily used to repay Steak n Shake’s term loan.
The change was primarily attributable to distributions from investment partnerships of $14,500 in 2023 compared to $70,700 in 2022. The distributions during 2022 were primarily used to acquire Abraxas Petroleum. Net cash used in investing activities was $70,525 lower during 2023 as compared to 2022.
The cost of food at company-operated units in 2022 was $44,461, or 29.8% of net sales as compared to $55,315, or 29.4% of net sales in 2021. The decreases in the cost of food and operating costs are mainly attributable to the transitioning of company-operated units to franchise partner units.
There were 160 traditional units open on December 31, 2023, as compared to 190 units open on December 31, 2022. The cost of food at company-operated units in 2023 was $44,993, or 29.5% of net sales as compared to $44,461, or 29.8% of net sales in 2022.
The 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. Western Sizzlin Revolver Western Sizzlin’s available line of credit is $500. As of December 31, 2022 and 2021, Western Sizzlin had no debt outstanding under its revolver.
Western Sizzlin Revolver Western Sizzlin’s available line of credit is $500. As of December 31, 2023 and 2022, Western Sizzlin had no debt outstanding under its revolver. Critical Accounting Policies Certain accounting policies require us to make estimates and judgments in determining the amounts reflected in the consolidated financial statements.
Financial Condition Our consolidated shareholders’ equity on December 31, 2022, was $546,966, a decrease of $40,730 as compared to the December 31, 2021 balance. The decrease in shareholders’ equity was primarily due to a net loss of $32,018 and an increase in treasury stock of $7,829. Consolidated cash and investments are summarized below.
Financial Condition Our consolidated shareholders’ equity on December 31, 2023, was $599,330, an increase of $52,364 as compared to the December 31, 2022 balance. The increase in shareholders’ equity was primarily due to net income of $54,948 and an increase in additional paid-in capital for purchases of noncontrolling interest of $3,806, offset by a change in treasury stock of $6,662.
General and administrative, marketing, other expenses, impairments, and depreciation and amortization are expressed as a percentage of total revenue. The COVID-19 pandemic adversely affected our restaurant operations and financial results. Our restaurants were required to close their dining rooms during the first quarter of 2020.
General and administrative, marketing, other expenses, impairments, and depreciation and amortization are expressed as a percentage of total revenue. Net sales during 2023 were $152,545 as compared to $149,184 during 2022.
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.
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.
It is expected that the prices of oil and gas commodities will remain volatile, which will be reflected in our financial results. Depreciation, depletion, and accretion expense during 2022 decreased $2,570 as compared to 2021, primarily due to temporarily shutting in producing wells. Abraxas Petroleum Abraxas Petroleum operates oil and natural gas properties in the Permian Basin.
Depreciation, depletion, and accretion expense during 2023 increased $2,326 as compared to 2022, primarily due to the acquisition of Abraxas Petroleum in the third quarter of 2022, offset by temporarily shutting producing wells.
We undertake no obligation to publicly update or revise them, except as may be required by law. 22 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 23 Table of Contents
Quantitative and Qualitative Disclosures About Market Risk Not applicable. 23 Table of Contents
The year-over-year increase is primarily attributable to higher capital expenditures in 2021. Interest on obligations under leases was $5,493 during 2022 versus $6,039 during 2021. The year-over-year decrease in interest expense is primarily attributable to the maturity and retirement of lease obligations. Insurance We view our insurance businesses as possessing two activities: underwriting and investing.
Interest on obligations under leases was $5,114 during 2023 versus $5,493 during 2022. The year-over-year decrease in interest expense was primarily attributable to the maturity and retirement of lease obligations. To better convey the performance of the franchise partnership model, the table below shows the underlying sales, cost of food, labor costs, and other restaurant costs of the franchise partners.
Because we derive most of our revenue from our share of the profits, revenue will continue to decline as we transition from company-operated units to franchise partner units. 14 Table of Contents Management’s Discussion and Analysis (continued) To better convey the underlying economics of the franchise partnership model, the table below shows the average unit sales, the cost of food, and the labor costs of franchise partners.
Because we derive most of our revenue from our share of the profits, revenue will decline as we transition from company-operated units to franchise partner units. Fees generated by our franchise partners were $72,552 during 2023 as compared to $63,853 during 2022.
Net cash used in investing activities increased during 2022 by $78,080 as compared to 2021. The change was primarily due to the acquisition of Abraxas Petroleum of $58,274, net of cash acquired, as well as purchases of limited partner interests of $48,570 during 2022.
During 2022, the Company acquired 90% of Abraxas Petroleum for $58,274, net of cash acquired. In 2023, the Company acquired the remaining 10% of Abraxas Petroleum for $5,387. Cash used by financing activities of $16,132 during 2023 was primarily due to net repayments on the Company’s line of credit.
For finance leases, we recognize amortization expense on the right-of-use asset and interest expense on the lease liability over the lease term. Cautionary Note Regarding Forward-Looking Statements This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
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.
However, we consider investment gains and losses, whether realized or unrealized, as non-operating. 17 Table of Contents Management’s Discussion and Analysis (continued) Oil and Gas Biglari Holdings’ oil and gas operations consist of Southern Oil and Abraxas Petroleum. Southern Oil Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.
As a result of the transaction, a gain of $13,563 was recorded in 2023. 17 Table of Contents Management’s Discussion and Analysis (continued) Abraxas Petroleum Abraxas Petroleum operates oil and natural gas properties in the Permian Basin.
Removed
On March 9, 2020, Biglari Holdings acquired the stock of Southern Pioneer Property & Casualty Insurance Company and its affiliated agency, Southern Pioneer Insurance Agency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites garage liability and commercial property as well as homeowners and dwelling fire insurance coverage.
Added
The 3-percentage-point decrease in costs was primarily attributable to a 2.7-percentage-point decrease in Steak n Shake’s labor costs as a result of a gain in productivity. General and administrative expenses during 2023 were $44,120, or 17.6% of total revenue as compared to $40,206, or 16.6% of total revenue during 2022.
Removed
The Company’s financial results include the results of Southern Pioneer from the date of acquisition.
Added
General and administrative expenses increased during 2023 as compared to 2022 primarily because of higher salaries and wages. An increase in overall personnel and additional franchise partner training accounted for much of the increase in general and administrative expenses. Other income increased during 2023 compared to 2022 primarily because of gains on the sale of real estate.
Removed
The majority of Steak n Shake’s dining rooms remained closed through the end of 2020 but reopened during 2021, and in doing so implemented a self-service model. Net sales during 2022 were $149,184 as compared to $187,913 during 2021. The decrease in revenue of company-owned restaurants is primarily due to the shift of company units to franchise partner units.
Added
We believe the franchise partner information is useful to readers, as they have a direct effect on Steak n Shake’s profitability. 2023 2022 Revenue Net sales and other $ 324,281 $ 296,045 Restaurant cost of sales Cost of food $ 91,317 28.2 % $ 81,952 27.7 % Labor costs 86,286 26.6 % 84,191 28.4 % Occupancy and other 66,135 20.4 % 59,647 20.1 % Total cost of sales $ 243,738 $ 225,790 The Company’s consolidated financial statements do not include data in the table above.
Removed
The average was based on 137 comparable franchise partner units, out of a total of 175.
Added
Biglari Holdings’ insurance operations consist of First Guard and Southern Pioneer.
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To be included as a comparable franchise partner unit, a unit had to be operated by a franchise partner for all of 2022, and had to be open in 2021 as either a company-operated or a franchise partner unit. 2022 2021 Net sales $ 1,819 $ 1,595 Cost of food 502 27.6 % 448 28.1 % Labor costs 500 27.5 % 435 27.3 % Our franchise partner fees were $63,853 during 2022 as compared to $55,641 during 2021.
Added
However, we consider investment gains and losses, whether realized or unrealized, as non-operating.
Removed
Other revenue in 2022 was $8,853 as compared to $6,000 in 2021. The increase was primarily a result of gift card breakage, as our restaurants have seen fewer gift card redemptions since the onset of the pandemic.
Added
Oil and Gas A summary of revenue and earnings of oil and gas operations follows. 2023 2022 2021 Oil and gas revenue $ 45,071 $ 57,546 $ 33,004 Oil and gas production costs 17,365 17,842 10,470 Depreciation, depletion, and accretion 10,339 8,013 8,073 Gain on sale of properties (13,563) — — General and administrative expenses 5,164 6,500 4,748 Earnings before income taxes 25,766 25,191 9,713 Income tax expense (benefit) 360 6,100 2,185 Contribution to net earnings $ 25,406 $ 19,091 $ 7,528 Our oil and gas business is highly dependent on oil and natural gas prices.
Removed
As we transition to franchise partner units, the remaining company-operated units generate lower average unit volumes and correspondingly higher operating costs (including higher wages) as a percentage of net sales. Selling, general and administrative expenses during 2022 were $51,833, or 21.5% of total revenue as compared to $57,186, or 21.1% of total revenue during 2021.
Added
Oil and gas production costs have remained constant despite a decrease in revenue primarily because of the acquisition of Abraxas Petroleum and costs to repair nonperforming wells at Southern Oil.
Removed
Selling, general and administrative expenses decreased during 2022 as compared to 2021 primarily because of lower professional costs. Asset impairments decreased $1,115 during 2022 as compared to 2021. Higher asset impairments were recorded in 2021 primarily because a large number of underperforming stores were affected by the pandemic. Depreciation and amortization expense increased $6,012 during 2022 as compared to 2021.
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During the third quarter of 2023, Abraxas Petroleum entered into a royalty-based arrangement with an unaffiliated party to conduct development activities that will establish proved undeveloped reserves on its proportional share; however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties.
Removed
However, 2021 was an abnormally favorable year with low claim frequency despite a return to pre-pandemic traffic patterns. 16 Table of Contents Management’s Discussion and Analysis (continued) Southern Pioneer Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance.
Added
However, we consider investment gains and losses, whether realized or unrealized, as non-operating.
Removed
The financial results for Southern Pioneer are from the date of acquisition, March 9, 2020.
Added
Income Taxes The consolidated income tax expense was $9,308 in 2023 versus a benefit of $10,722 in 2022. During 2023, the Company recognized tax benefits of $5,660 associated with the tax attributes of Abraxas Petroleum’s oil and gas properties offset by an increase in tax expense of $23,786 for investment partnership gains in 2023.
Removed
Southern Pioneer’s 2022 performance was primarily attributable to higher claim frequency and severity (mainly related to adverse weather) in several niche lines.
Added
Capital expenditures were $6,341 higher in 2022 primarily due to Steak n Shake’s implementation of a self-service model. Proceeds from sales of property and equipment were $19,309 higher in 2023 primarily due to the sale of oil and gas properties for $13,563 and the sale of restaurant properties for $10,883.

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