10-Q

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2020

or

For the transition period from ____ to ____

Commission file number 001-38477

BIGLARI HOLDINGS INC.

(Exact name of registrant as specified in its charter)

(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:

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.

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 o No x

Number of shares of common stock outstanding as of May 6, 2020:

BIGLARI HOLDINGS INC.

INDEX

PART 1 – FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSBIGLARI HOLDINGS INC.CONSOLIDATED BALANCE SHEETS(dollars in thousands)| | March 31,<br> 2020 | | | December 31,<br> 2019 | | || --- | --- | --- | --- | --- | --- | --- || | | (Unaudited) | | | | || Assets | | | | | | || Current assets: | | | | | | || Cash and cash equivalents | $ | 33,281 | | $ | 67,772 | || Investments | | 81,252 | | | 44,856 | || Receivables | | 17,440 | | | 21,640 | || Inventories | | 4,001 | | | 4,674 | || Other current assets | | 6,809 | | | 6,449 | || Total current assets | | 142,783 | | | 145,391 | || Property and equipment | | 337,625 | | | 350,627 | || Operating lease assets | | 57,209 | | | 59,719 | || Goodwill and other intangible assets | | 78,780 | | | 67,389 | || Investment partnerships | | 318,689 | | | 505,542 | || Other assets | | 12,542 | | | 10,641 | || Total assets | $ | 947,628 | | $ | 1,139,309 | || Liabilities and shareholders’ equity | | | | | | || Liabilities | | | | | | || Current liabilities: | | | | | | || Accounts payable and accrued expenses | $ | 133,840 | | $ | 121,079 | || Current portion of operating lease liabilities | | 11,738 | | | 11,635 | || Current portion of notes payable and other borrowings | | 164,632 | | | 7,103 | || Total current liabilities | | 310,210 | | | 139,817 | || Long-term notes payable and other borrowings | | 80,566 | | | 263,182 | || Operating lease liabilities | | 50,345 | | | 53,271 | || Deferred taxes | | 15,689 | | | 54,230 | || Asset retirement obligations | | 9,652 | | | 10,447 | || Other liabilities | | 1,976 | | | 2,064 | || Total liabilities | | 468,438 | | | 523,011 | || Shareholders’ equity | | | | | | || Common stock | | 1,138 | | | 1,138 | || Additional paid-in capital | | 381,788 | | | 381,788 | || Retained earnings | | 473,154 | | | 611,039 | || Accumulated other comprehensive loss | | (3,122 | ) | | (2,810 | ) || Treasury stock, at cost | | (373,768 | ) | | (374,857 | ) || Biglari Holdings Inc. shareholders’ equity | | 479,190 | | | 616,298 | || Total liabilities and shareholders’ equity | $ | 947,628 | | $ | 1,139,309 | |See accompanying Notes to Consolidated FinancialStatements. | 1 || --- | BIGLARI HOLDINGS INC.CONSOLIDATED STATEMENTS OF EARNINGS*(dollars in thousands except per share amounts)| | First Quarter | | | | | || --- | --- | --- | --- | --- | --- | --- || | 2020 | | | 2019 | | || | (Unaudited) | | | | | || Revenues | | | | | | || Restaurant operations | $ | 114,144 | | $ | 173,775 | || Insurance premiums and other | | 9,674 | | | 7,207 | || Oil and gas | | 11,374 | | | — | || Media and licensing | | 508 | | | 877 | || | | 135,700 | | | 181,859 | || Cost and expenses | | | | | | || Restaurant cost of sales | | 89,916 | | | 152,449 | || Insurance losses and underwriting expenses | | 6,312 | | | 5,625 | || Oil and gas production costs | | 3,076 | | | — | || Media and licensing costs | | 506 | | | 948 | || Selling, general and administrative | | 21,573 | | | 32,991 | || Impairments | | 10,300 | | | 1,900 | || Depreciation and amortization | | 10,062 | | | 5,471 | || | | 141,745 | | | 199,384 | || Other income (expenses) | | | | | | || Interest expense | | (2,474 | ) | | (3,058 | ) || Interest on finance leases and obligations | | (1,800 | ) | | (2,009 | ) || Gain on debt extinguishment | | 4,346 | | | — | || Investment partnership gains (losses) | | (175,742 | ) | | 34,154 | || Total other income (expenses) | | (175,670 | ) | | 29,087 | || Earnings (loss) before income taxes | | (181,715 | ) | | 11,562 | || Income tax expense (benefit) | | (43,830 | ) | | 1,744 | || Net earnings (loss) | $ | (137,885 | ) | $ | 9,818 | || Earnings per share | | | | | | || Net earnings (loss) per equivalent Class A share * | $ | (400.37 | ) | $ | 28.36 | |*Net earnings (loss) per equivalent Class Bshare outstanding are one-fifth of the equivalent Class A share or $(80.07) for the first quarter of 2020 and $5.67 for the firstquarter of 2019.CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME(dollars in thousands)| | First Quarter | | | | | || --- | --- | --- | --- | --- | --- | --- || | 2020 | | | 2019 | | || | (Unaudited) | | | | | || Net earnings (loss) | $ | (137,885 | ) | $ | 9,818 | || Other comprehensive income: | | | | | | || Foreign currency translation | | (312 | ) | | (304 | ) || Other comprehensive income (loss), net | | (312 | ) | | (304 | ) || Total comprehensive income (loss) | $ | (138,197 | ) | $ | 9,514 | |See accompanying Notes to Consolidated FinancialStatements. | 2 || --- | BIGLARI HOLDINGS INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands)| | First Quarter | | | | | || --- | --- | --- | --- | --- | --- | --- || | 2020 | | | 2019 | | || | (Unaudited) | | | | | || Operating activities | | | | | | || Net earnings (loss) | $ | (137,885 | ) | $ | 9,818 | || Adjustments to reconcile net earnings (loss) to operating cash flows: | | | | | | || Depreciation and amortization | | 10,062 | | | 5,471 | || Provision for deferred income taxes | | (38,132 | ) | | (7,415 | ) || Asset impairments and other non-cash expenses | | 10,548 | | | 2,139 | || Gains on disposal of assets | | (1,272 | ) | | (185 | ) || Gain on debt extinguishment | | (4,346 | ) | | — | || Investment partnership (gains) losses | | 175,742 | | | (34,154 | ) || Distributions from investment partnerships | | 42,300 | | | — | || Changes in receivables and inventories | | 7,465 | | | 7,842 | || Changes in other assets | | 1,891 | | | 53 | || Changes in accounts payable and accrued expenses | | (15,896 | ) | | 6,394 | || Net cash provided by (used in) operating activities | | 50,477 | | | (10,037 | ) || Investing activities | | | | | | || Capital expenditures | | (6,473 | ) | | (3,564 | ) || Proceeds from property and equipment disposals | | 1,824 | | | 320 | || Acquisition of business, net of cash acquired | | (34,240 | ) | | — | || Distributions from investment partnerships | | — | | | 40,000 | || Purchases of limited partner interests | | (30,100 | ) | | (40,000 | ) || Purchases of investments | | (105,430 | ) | | (23,510 | ) || Redemptions of fixed maturity securities | | 108,845 | | | 21,300 | || Net cash used in investing activities | | (65,574 | ) | | (5,454 | ) || Financing activities | | | | | | || Proceeds from revolving credit facility | | 50 | | | — | || Principal payments on long-term debt | | (17,933 | ) | | (550 | ) || Principal payments on direct financing lease obligations | | (1,525 | ) | | (1,418 | ) || Net cash used in financing activities | | (19,408 | ) | | (1,968 | ) || Effect of exchange rate changes on cash | | 14 | | | (5 | ) || Decrease in cash, cash equivalents and restricted cash | | (34,491 | ) | | (17,464 | ) || Cash, cash equivalents and restricted cash at beginning of year | | 70,696 | | | 55,010 | || Cash, cash equivalents and restricted cash at end of first quarter | $ | 36,205 | | $ | 37,546 | |See accompanying Notes to Consolidated FinancialStatements. | 3 || --- | BIGLARI HOLDINGS INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’EQUITY(Unaudited)(dollars in thousands)| | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | | Accumulated<br> Other Comprehensive Income (Loss) | | | Treasury Stock | | | Total | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || Balance at December 31, 2019 | $ | 1,138 | $ | 381,788 | $ | 611,039 | | $ | (2,810 | ) | $ | (374,857 | ) | $ | 616,298 | || Net earnings (loss) | | | | | | (137,885 | ) | | | | | | | | (137,885 | ) || Other comprehensive income, net | | | | | | | | | (312 | ) | | | | | (312 | ) || Adjustment to treasury stock for | | | | | | | | | | | | | | | | || holdings in investment partnerships | | | | | | | | | | | | 1,089 | | | 1,089 | || Balance at March 31, 2020 | $ | 1,138 | $ | 381,788 | $ | 473,154 | | $ | (3,122 | ) | $ | (373,768 | ) | $ | 479,190 | || | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | | Accumulated<br> Other<br> Comprehensive Income (Loss) | | | Treasury Stock | | | Total | || Balance at December 31, 2018 | $ | 1,138 | $ | 381,904 | $ | 564,160 | | $ | (2,516 | ) | $ | (374,231 | ) | $ | 570,455 | || Net earnings (loss) | | | | | | 9,818 | | | | | | | | | 9,818 | || Adoption of accounting standards | | | | | | 1,499 | | | | | | | | | 1,499 | || Other comprehensive income, net | | | | | | | | | (304 | ) | | | | | (304 | ) || Adjustment to treasury stock for | | | | | | | | | | | | | | | | || holdings in investment partnerships | | | | | | | | | | | | (114 | ) | | (114 | ) || Balance at March 31, 2019 | $ | 1,138 | $ | 381,904 | $ | 575,477 | | $ | (2,820 | ) | $ | (374,345 | ) | $ | 581,354 | |See accompanyingNotes to Consolidated Financial Statements.* | 4 || --- | BIGLARI HOLDINGS INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2020*(dollars in thousands, except share and pershare data)Note 1. Summary of Significant AccountingPoliciesDescription of Business*The accompanying unaudited consolidated financialstatements of Biglari Holdings Inc. (“Biglari Holdings” or the “Company”) have been prepared in accordancewith accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financialinformation and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of theinformation and notes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessaryto present fairly the results of the interim periods have been included and consist only of normal recurring adjustments. The resultsfor the interim periods shown are not necessarily indicative of results for the entire fiscal year. The financial statements containedherein should be read in conjunction with the consolidated financial statements and notes thereto included in our annual reporton Form 10-K for the year ended December 31, 2019.Biglari Holdings is a holding company owningsubsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing,restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operatingof restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. TheCompany’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisionsare made for the Company and its subsidiaries by Mr. Biglari.As of March 31, 2020, Mr. Biglari’s beneficialownership was approximately 64.4% of the Company’s outstanding Class A common stock and 55.4% of the Company’s outstandingClass B common stock.The novel coronavirus (“COVID-19”)was declared a pandemic by the World Health Organization, which caused governments to contain its spread, thereby significantlyaffecting our operating businesses beginning in March and will likely adversely affect nearly all of our operations in the secondquarter. The risks and uncertainties resulting from the pandemic that may affect our future earnings, cash flows and financialcondition include the nature and duration of the curtailment or closure and the long-term effect on the demand for our productsand services.Business AcquisitionOn March 9, 2020, Biglari Holdingsacquired the stock of Southern Pioneer Property & Casualty Insurance Company, and its agency, Southern Pioneer InsuranceAgency, Inc. (collectively “Southern Pioneer”). Southern Pioneer underwrites specialty insurance productsincluding garage liability insurance, commercial property coverage for auto dealers as well as homeowners, dwelling fireinsurance and credit-related insurance coverages. The financial results for Southern Pioneer from the acquisition date to theend of the first quarter are included in the Company’s consolidated financial statements. The acquisition date fairvalues of assets and liabilities of Southern Pioneer are provisional and subject to revision as the related valuations arecompleted. Pro-forma financial information of Southern Pioneer is not material.On September 9, 2019, a wholly-owned subsidiaryof the Company, Southern Oil Company, acquired the stock of Southern Oil of Louisiana Inc. (collectively “Southern Oil”).Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico. Pro-formafinancial information of Southern Oil is not material.Principles of ConsolidationThe consolidated financial statements includethe accounts of the Company and its wholly-owned subsidiaries including Steak n Shake Inc. (“Steak n Shake”), WesternSizzlin Corporation (“Western Sizzlin”), Maxim Inc. (“Maxim”), Southern Oil, First Guard Insurance Company(“First Guard”), and Southern Pioneer.  Intercompany accounts and transactions have been eliminated in consolidation. | 5 || --- | Note 2. New Accounting StandardsIn June 2016, the Financial Accounting StandardsBoard issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses: Measurementof Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortizedcost basis and available for sale debt securities. For available for sale debt securities, credit losses should be measured ina manner similar to current GAAP; however, ASU 2016-13 requires that credit losses be presented as an allowance rather than asa write-down. The amendments in this update are effective for financial statements issued for fiscal years beginning after December15, 2019. The Company adopted ASU 2016-13 effective January 1, 2020. The impact of this standard is not material to the Company’sfinancial statements and related disclosures.Note 3. Earnings Per ShareEarnings per share of common stock is basedon the weighted average number of shares outstanding during the year. The shares of Company stock attributable to our limited partnerinterest in The Lion Fund, L.P. and The Lion Fund II, L.P. (collectively, the “investment partnerships”) — basedon our proportional ownership during this period — are considered treasury stock on the consolidated balance sheet and therebydeemed not to be included in the calculation of weighted average common shares outstanding. However, these shares are legallyoutstanding.The following table presents shares authorized,issued and outstanding on March 31, 2020 and December 31, 2019.| | March 31, 2020 | | | December 31, 2019 | | || --- | --- | --- | --- | --- | --- | --- || | | 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 |TheCompany has applied the “two-class method” of computing earnings per share as prescribed in ASC 260, “EarningsPer Share.”On an equivalent Class A common stock basis,there were 620,592 shares outstanding as of March 31, 2020 and December 31, 2019. There are no dilutive securities outstanding.For financial reporting purposes, the proportionalownership of the Company’s common stock owned by the investment partnerships is excluded in the earnings per share calculation.After giving effect for the investment partnerships’ proportional ownership of common stock, the equivalent Class A weightedaverage number of common shares during the first quarters of 2020 and 2019 were 344,391 and 346,223, respectively.Note 4. InvestmentsAvailable for sale investments were $76,789and $40,393 as of March 31, 2020 and December 31, 2019, respectively. Investments in equity securities and a related derivativeposition of $4,463 are also included in investments. The investments are recorded at fair value. The fair value of investmentsacquired with Southern Pioneer was $36,876.Note 5. Investment PartnershipsThe Company reports on the limited partnershipinterests in investment partnerships under the equity method of accounting. We record our proportional share of equity inthe investment partnerships but exclude Company common stock held by said partnerships. The Company’s pro-rata shareof its common stock held by the investment partnerships is recorded as treasury stock even though they are legally outstanding. The Company records gains/losses from investment partnerships (inclusive of the investment partnerships’ unrealized gainsand losses on their securities) in the consolidated statements of earnings based on our carrying value of these partnerships. Thefair value is calculated net of the general partner’s accrued incentive fees. Gains and losses on Company common stock includedin the earnings of these partnerships are eliminated because they are recorded as treasury stock.Biglari Capital Corp. (“Biglari Capital”)is the general partner of the investment partnerships and is an entity solely owned by Mr. Biglari. | 6 || --- | Note 5. Investment Partnerships *(continued)*The fair value and adjustment for Company commonstock held by the investment partnerships to determine the carrying value of our partnership interest is presented below.| | Fair Value | | | Company Common Stock | | | Carrying Value | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || Partnership interest at December 31, 2019 | $ | 666,123 | | $ | 160,581 | | $ | 505,542 | || Investment partnership gains (losses) | | (261,708 | ) | | (85,966 | ) | | (175,742 | ) || Contributions (net of distributions) to investment partnerhips | | (12,200 | ) | | | | | (12,200 | ) || Increase in proportionate share of Company stock held | | | | | (1,089 | ) | | 1,089 | || Partnership interest at March 31, 2020 | $ | 392,215 | | $ | 73,526 | | $ | 318,689 | || | | Fair Value | | | Company Common Stock | | | Carrying Value | || Partnership interest at December 31, 2018 | $ | 715,102 | | $ | 157,622 | | $ | 557,480 | || Investment partnership gains | | 73,096 | | | 38,942 | | | 34,154 | || Increase in proportionate share of Company stock held | | | | | 114 | | | (114 | ) || Partnership interest at March 31, 2019 | $ | 788,198 | | $ | 196,678 | | $ | 591,520 | |The carrying value of the investment partnershipsnet of deferred taxes is presented below.| | March 31,<br><br> <br>2020 | | | December 31,<br><br> <br>2019 | | || --- | --- | --- | --- | --- | --- | --- || Carrying value of investment partnerships | $ | 318,689 | | $ | 505,542 | || Deferred tax liability related to investment partnerships | | (17,893 | ) | | (56,518 | ) || Carrying value of investment partnerships net of deferred taxes | $ | 300,796 | | $ | 449,024 | |The Company’s proportionate share ofCompany stock held by investment partnerships at cost is $373,768 and $374,857 at March 31, 2020 and December 31, 2019, respectively,and is recorded as treasury stock.The carrying value of the partnership interestapproximates fair value adjusted by the value of held Company stock. Fair value is according to our proportional ownership interestof the fair value of investments held by the investment partnerships. The fair value measurement is classified as level 3 withinthe fair value hierarchy.Gains/losses from investment partnerships recorded in the Company’sconsolidated statements of earnings are presented below.| | | First Quarter | | | || --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 || Gains (losses) on investment partnership | $ | (175,742 | ) | $ | 34,154 || Tax expense (benefit) | | (41,383 | ) | | 7,917 || Net earnings (loss) | $ | (134,359 | ) | $ | 26,237 |On December 31 of each year, the general partnerof the investment partnerships, Biglari Capital, will earn an incentive reallocation fee for the Company’s investments equalto 25% of the net profits above an annual hurdle rate of 6% over the previous high-water mark. Our policy is to accrue anestimated incentive fee throughout the year. The total incentive reallocation from Biglari Holdings to Biglari Capital includesgains on the Company’s common stock. Gains and losses on the Company’s common stock and the related incentive reallocationsare eliminated in our financial statements. Our investments in these partnerships are committed on a rolling 5-year basis.There were no incentive reallocations from Biglari Holdings toBiglari Capital during the first quarters of 2020 and 2019. | 7 || --- | Note 5. Investment Partnerships (continued)Summarized financial information for The Lion Fund, L.P. and TheLion Fund II, L.P. is presented below.| | Equity in Investment Partnerships | | | | | || --- | --- | --- | --- | --- | --- | --- || | | Lion Fund | | | Lion Fund II | || Total assets as of March 31, 2020 | $ | 71,735 | | $ | 393,855 | || Total liabilities as of March 31, 2020 | $ | 682 | | $ | 27,384 | || Revenue for the first quarter ended March 31, 2020 | $ | (45,894 | ) | $ | (248,460 | ) || Earnings for the first quarter ended March 31, 2020 | $ | (45,910 | ) | $ | (249,573 | ) || Biglari Holdings’ ownership interest as of March 31, 2020 | | 66.1 | % | | 93.1 | % || Total assets as of December 31, 2019 | $ | 117,135 | | $ | 758,663 | || Total liabilities as of December 31, 2019 | $ | 158 | | $ | 114,639 | || Revenue for the first quarter ended March 31, 2019 | $ | 19,764 | | $ | 67,550 | || Earnings for the first quarter ended March 31, 2019 | $ | 19,748 | | $ | 65,102 | || Biglari Holdings’ ownership interest as of March 31, 2019 | | 66.1 | % | | 92.2 | % |Revenue in the above summarized financial informationof the investment partnerships includes investment income and unrealized gains and losses on investments.Note 6. Property and EquipmentProperty and equipment is composed of the following.| | March 31,<br><br> <br>2020 | | | December 31,<br><br> <br>2019 | | || --- | --- | --- | --- | --- | --- | --- || Land | $ | 150,345 | | $ | 150,147 | || Buildings | | 140,480 | | | 144,243 | || Land and leasehold improvements | | 150,861 | | | 157,141 | || Equipment | | 196,654 | | | 196,264 | || Oil and gas properties | | 78,435 | | | 77,475 | || Construction in progress | | 3,737 | | | 3,789 | || | | 720,512 | | | 729,059 | || Less accumulated depreciation and amortization | | (382,887 | ) | | (378,432 | ) || Property and equipment, net | $ | 337,625 | | $ | 350,627 | |Depletion expense related to oil and gas propertieswas $4,737 during the first quarter of 2020 and is included in depreciation and amortization within the consolidated statementof earnings.The COVID-19 pandemic had an adverse effecton our restaurant operations, thereby resulting in the evaluation of company-operated restaurants for recoverability. Consequently,the Company recorded impairment charges of $10,300 for the first quarter of 2020 because of the decision to permanently close51 Steak n Shake restaurants as well as the expected impact of the COVID-19 pandemic on the future operating performance of othercompany-operated restaurants. The Company recorded an impairment to long-lived assets of $1,900 in the first quarter of 2019 primarilyrelated to Steak n Shake closed stores. The fair value of the long-lived assets was determined based on Level 3 inputs using adiscounted cash flow model.The COVID-19 pandemic has caused oil demandto significantly decrease, creating oversupplied markets, and resulting in lower commodity prices and margins. The Company evaluatedthe potential impact on its oil and gas properties, but concluded they were not impaired during the first quarter of 2020. However,protracted low commodity prices may require impairments in future periods.The duration and extent of the COVID-19 pandemiccannot be reasonably estimated at this time. The risks and uncertainties resulting from the pandemic may lead to future impairmentof long-lived assets including right of use assets. In addition, significant estimates and assumptions used in the evaluationof long-lived assets for impairment may be subject to significant adjustments in future periods. | 8 || --- | Note 7. Goodwill and Other Intangible AssetsGoodwillGoodwill consists of the excess of the purchaseprice over the fair value of the net assets acquired in connection with business acquisitions. The Company purchased Southern Pioneeron March 9, 2020. The preliminary purchase price allocation reflects goodwill of $11,865.A reconciliation of the change in the carryingvalue of goodwill is as follows.| | March 31, 2020 | | || --- | --- | --- | --- || Balance at beginning of year | $ | 40,040 | || Goodwill from acquisition | | 11,865 | || Change in foreign exchange rates during the first quarter of 2020 | | (11 | ) || Balance at end of period | $ | 51,894 | |We evaluate goodwill and any indefinite-livedintangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Goodwillimpairment occurs when the estimated fair value of goodwill is less than its carrying value. The valuation methodology and underlyingfinancial information included in our determination of fair value require significant management judgments. We use both marketand income approaches to derive fair value. The judgments in these two approaches include, but are not limited to, comparablemarket multiples, long-term projections of future financial performance, and the selection of appropriate discount rates usedto determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions couldproduce significantly different results. No impairment charges for goodwill were recorded in the first quarters of 2020 or 2019.Inresponse to the adverse effects of the COVID-19 pandemic, we considered whether goodwill needed to be evaluated for impairmentas of March 31, 2020, specifically related to goodwill for certain restaurant reporting units.  Making estimates of the fairvalue of reporting units at this time are significantly affected by assumptions on the severity, duration and long-term effectsof the pandemic on the reporting unit’s operations.  We considered the available facts and made qualitative assessmentsand judgments for what we believed represent reasonably possible outcomes. Although the fair values of certain of these reportingunits declined since the time that the most recent annual impairment tests were conducted, we concluded it is more likely thannot that goodwill was not impaired as of March 31, 2020.  However, COVID-19 pandemic events will continue to evolve and thenegative effects on our operations could prove to be worse than we currently estimate and lead us to record goodwill or indefinite-livedasset impairment charges prior to the next annual impairment review.Other Intangible AssetsOther intangible assets are composed of thefollowing.| | March 31, 2020 | | | | | | | December 31, 2019 | | | | | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || | Gross carrying amount | | Accumulated amortization | | | Total | | Gross carrying amount | | Accumulated amortization | | | Total | || Franchise agreement | $ | 5,310 | $ | (5,310 | ) | $ | — | $ | 5,310 | $ | (5,178 | ) | $ | 132 || Other | | 810 | | (796 | ) | | 14 | | 810 | | (792 | ) | | 18 || Total | | 6,120 | | (6,106 | ) | | 14 | | 6,120 | | (5,970 | ) | | 150 || Intangible assets with indefinite lives: | | | | | | | | | | | | | | || Trade names | | 15,876 | | — | | | 15,876 | | 15,876 | | — | | | 15,876 || Other assets with indefinite lives | | 10,996 | | — | | | 10,996 | | 11,323 | | — | | | 11,323 || Total intangible assets | $ | 32,992 | $ | (6,106 | ) | $ | 26,886 | $ | 33,319 | $ | (5,970 | ) | $ | 27,349 |Intangible assets subject to amortization consistof franchise agreements connected with the purchase of Western Sizzlin as well as rights to favorable leases related to prior acquisitions.These intangible assets are being amortized over their estimated weighted average of useful lives ranging from eight to twelveyears. Amortization expense for the first quarters of 2020 and 2019 was $136 and $137, respectively. The Company’s intangibleassets with definite lives will fully amortize in 2020. Intangible assets with indefinite lives consist of trade names, franchiserights as well as lease rights. | 9 || --- | Note 8. Restaurant Operations RevenuesRestaurant operations revenues were as follows.| | First Quarter | | | || --- | --- | --- | --- | --- || | 2020 | | 2019 | || Net sales | $ | 104,728 | $ | 165,631 || Franchise royalties and fees | | 5,211 | | 6,654 || Franchise partner fees | | 3,344 | | 258 || Other | | 861 | | 1,232 || | $ | 114,144 | $ | 173,775 |Net salesNet sales are composed of retail sales of foodthrough company-operated stores. Company-operated store revenues are recognized, net of discounts and sales taxes, when our obligationto perform is satisfied at the point of sale. Sales taxes related to these sales are collected from customers and remitted to theappropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.Franchise royalties and feesFranchise royalties and fees are composed ofroyalties and fees from Steak n Shake and Western Sizzlin franchisees. Royalties are based upon a percentage of sales of the franchiserestaurant and are recognized as earned. Franchise royalties are billed on a monthly basis. Initial franchise fees when a new restaurantopens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over theterm of the franchise agreement. Our advertising arrangements with franchisees are reported in franchise royalties and fees.Franchise partner feesSteak n Shake is in the process oftransitioning company-operated restaurants to franchisepartners. The franchise agreement stipulates that the franchisee make an upfront investment totaling ten thousanddollars. Potential franchise partners are screened based on entrepreneurial attitude and ability, but they become franchisepartners based on achievement. Each must meet the gold standard in service. Franchise partners are required to be hands-onoperators. We limit a franchisee to a single location. As the franchisor Steak n Shake assesses a fee of up to 15% of salesas well as 50% of profits.Gift card revenueRestaurant operations sells gift cards to customerswhich can be redeemed for retail food sales within our stores. Gift cards are recorded as deferred revenue when issued and aresubsequently recorded as net sales upon redemption. Restaurant operations estimates breakage related to gift cards when the likelihoodof redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cardsis recorded as other revenue in proportion to the rate of gift card redemptions by vintage.Note 9. Accounts Payable and Accrued ExpensesAccounts payable and accrued expenses includethe following.| | March 31,<br><br> <br>2020 | | December 31,<br><br> <br>2019 | || --- | --- | --- | --- | --- || Accounts payable | $ | 36,289 | $ | 32,626 || Gift card liability | | 17,063 | | 20,745 || Salaries, wages, and vacation | | 5,328 | | 10,667 || Taxes payable | | 20,030 | | 29,275 || Self-insurance accruals | | 21,442 | | 11,070 || Deferred revenue | | 25,395 | | 10,454 || Other | | 8,293 | | 6,242 || Accounts payable and accrued expenses | $ | 133,840 | $ | 121,079 | | 10 || --- | Note 10. Notes Payable and Other BorrowingsNotes payable and other borrowings include the following.| Current portion of notes payable and other borrowings | March 31,<br><br> <br>2020 | | | December 31,<br><br> <br>2019 | | || --- | --- | --- | --- | --- | --- | --- || Notes payable | $ | 159,219 | | $ | 2,200 | || Unamortized original issue discount and debt issuance costs | | (986 | ) | | (982 | ) || Western Sizzlin revolver | | 50 | | | — | || Finance obligations | | 4,800 | | | 4,252 | || Finance lease liabilities | | 1,549 | | | 1,633 | || Total current portion of notes payable and other borrowings | $ | 164,632 | | $ | 7,103 | || Long-term notes payable and other borrowings | | | | | | || Notes payable | $ | — | | $ | 179,298 | || Unamortized original issue discount and debt issuance costs | | — | | | (252 | ) || Finance obligations | | 73,309 | | | 74,497 | || Finance leases liabilities | | 7,257 | | | 9,639 | || Total long-term notes payable and other borrowings | $ | 80,566 | | $ | 263,182 | |Steak n Shake Credit FacilityOn March 19, 2014, Steak n Shake and its subsidiariesentered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000.The term loan is scheduled to mature on March 19, 2021. As of March 31, 2020, $159,219 was outstanding. The Company is evaluatingrefinancing options. Alternative financing may not be available on terms commensurate with its current financing arrangement. Inaddition, the duration of the pandemic could have a material adverse effect on financing options or Steak n Shake’s abilityto comply with the terms of its credit agreement. Biglari Holdings is not a guarantor under the credit facility.The term loan amortizes in equal quarterlyinstallments at an annual rate of 1.0% of the original principal amount of the term loan, subject to mandatory prepayments fromexcess cash flow, asset sales and other events described in the credit agreement. The balance will be due at maturity.Interest on the term loan is based on a Eurodollarrate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. The interest rate on the termloan was 5.36% as of March 31, 2020.The credit agreement includes customary affirmativeand negative covenants and events of default. Steak n Shake’s credit facility contains restrictions on its ability to paydividends to Biglari Holdings.The term loan is secured by first prioritysecurity interests in substantially all the assets of Steak n Shake. Disruptions in debt capital markets that restrict access tofunding when needed could adversely affect the results of operations, liquidity and capital resources of Steak n Shake.The fair value of long-term debt, excludingcapitalized lease obligations, was approximately $80,000 at March 31, 2020. The fair value of our debt was estimated based on quotedmarket prices. The fair value was determined to be a Level 3 fair value measurement.The Company retired $21,729 of debt onFebruary 18, 2020.Western Sizzlin RevolverWestern Sizzlin had $50 and $0 of debt outstandingunder its revolver as of March 31, 2020 and December 31, 2019, respectively. | 11 || --- | Note 11. Leased Assets and Lease CommitmentsA significant portion of our operating andfinance lease portfolio includes restaurant locations. The Company’s operating leases with a term of 12 months or greaterwere recognized as operating right-of-use assets and liabilities and recorded as operating lease assets and operating lease liabilities.Historical capital leases and certain historical build-to-suit leases were reclassified from obligations under leases to financelease assets and liabilities. Finance lease assets are recorded in property and equipment and finance lease liabilities are recordedin notes payable and other borrowings. Historical sale-and-leaseback transactions in which the Company is deemed to have a continuedinterest in the leased asset are recorded as property and equipment and as finance obligations. Finance obligations are recordedin notes payable and other borrowings.Operating lease expense and finance lease depreciationexpense are recognized on a straight-line basis over the lease term.Total lease cost consists of the following.| | First Quarter | | | || --- | --- | --- | --- | --- || | 2020 | | 2019 | || Finance lease costs: | | | | || Amortization of right-of-use assets | $ | 479 | $ | 492 || Interest on lease liabilities | | 178 | | 207 || Operating lease costs * | | 3,736 | | 3,857 || Total lease costs | $ | 4,393 | $ | 4,556 || *Includes short-term leases, variable lease costs and sublease income, which are immaterial | | | | |Supplemental cash flow information related to leases is as follows.| | | First Quarter | | || --- | --- | --- | --- | --- || | 2020 | | 2019 | || Cash paid for amounts included in the measurement of lease liabilities: | | | | || Financing cash flows from finance leases | $ | 413 | $ | 402 || Operating cash flows from finance leases | $ | 171 | $ | 207 || Operating cash flows from operating leases | $ | 3,993 | $ | 4,191 || Right-of-use assets obtained in exchange for lease obligations: | | | | || Finance lease liabilities | $ | — | $ | 1,097 || Operating lease liabilities | $ | 73 | $ | 5,570 |Supplemental balance sheet information related to leases is as follows.| | March 31,<br><br> <br><br><br> <br>2020 | | December 31,<br><br> <br>2019 | || --- | --- | --- | --- | --- || Finance leases: | | | | || Property and equipment, net | $ | 7,177 | $ | 10,783 || Current portion of notes payable and other borrowings | $ | 1,549 | $ | 1,633 || Long-term notes payable and other borrowings | | 7,257 | | 9,639 || Total finance lease liablities | $ | 8,806 | $ | 11,272 |Weighted-average lease terms and discount rates are as follows.| | March 31,<br><br> <br>2020 || --- | --- || Weighted-average remaining lease terms: | || Finance leases | 6.3 years || Operating leases | 6.0 years || Weighted-average discount rates: | || Finance leases | 7.1% || Operating leases | 6.9% | | 12 || --- | Note 11. Leased Assets and Lease Commitments *(continued)Maturities of lease liabilities as of March 31, 2020 are as follows.| Year | | Operating Leases | | Finance Leases | || --- | --- | --- | --- | --- | --- || | 2020 | $ | 11,664 | $ | 1,587 || | 2021 | | 14,945 | | 2,116 || | 2022 | | 12,850 | | 1,618 || | 2023 | | 11,027 | | 1,410 || | 2024 | | 8,884 | | 1,374 || | After 2024 | | 17,007 | | 2,756 || | Total lease payments | | 76,377 | | 10,861 || | Less interest | | 14,294 | | 2,055 || | Total lease liabilities | $ | 62,083 | $ | 8,806 |Note 12. Accumulated Other ComprehensiveIncomeDuring the first quarters of 2020 and 2019,accumulated other comprehensive losses decreased by $312 and $304, respectively, due to changes in foreign currency translationadjustments. As of March 31, 2020 and 2019, the balances in accumulated comprehensive loss were $3,122 and $2,820, respectively.There were no reclassifications from accumulated other comprehensive income to earnings during the first quarters of 2020 and 2019.Note 13. Income TaxesIn determining the quarterly provision forincome taxes, the Company used a discrete effective tax rate method based on statutory tax rates for the first quarters of 2020and 2019. Our periodic effective income tax rate is affected by the relative mix of pre-tax earnings or losses and underlying incometax rates applicable to the various taxing jurisdictions.Income tax benefit for the first quarter of2020 was $43,830 compared to an income tax expense of $1,744 for the first quarter of 2019.  The variance in income taxesbetween 2020 and 2019 is attributable to taxes on income generated by the investment partnerships. Investment partnership pretaxlosses were $175,742 during the first quarter of 2020, compared to pretax gains of $34,154 during the first quarter of 2019.As of March 31, 2020 and December 31, 2019,we had $348 of unrecognized tax benefits, which are included in other liabilities in the consolidated balance sheets.Note 14. Commitments and ContingenciesWe are involved in various legal proceedingsand have certain unresolved claims pending. We believe, based on examination of these matters and experiences to date, that theultimate liability, if any, in excess of amounts already provided in our consolidated financial statements is not likely to havea material effect on our results of operations, financial position or cash flow.On January 29, 2018, a shareholder of the Companyfiled a purported class action complaint against the Company and the members of our Board of Directors in the Superior Court ofHamilton County, Indiana. The shareholder generally alleges claims of breach of fiduciary duty by the members of our Board of Directorsand unjust enrichment to Mr. Biglari as a result of the dual class structure.On March 26, 2018, a shareholder of theCompany filed a purported class action complaint against the Company and the members of our Board of Directors in the SuperiorCourt of Hamilton County, Indiana. This shareholder generally alleges claims of breach of fiduciary duty by the members of ourBoard of Directors. This shareholder sought to enjoin the shareholder vote on April 26, 2018 to approve the dual class structure.On April 16, 2018, the shareholder withdrew the motion to enjoin the shareholder vote on April 26, 2018.On May 17, 2018, the shareholders whofiled the January 29, 2018 complaint and the March 26, 2018 complaint filed a new, consolidated complaint against the Companyand the members of our Board of Directors in the Superior Court of Hamilton County, Indiana. The shareholders generallyallege claims of breach of fiduciary duty by the members of our Board of Directors and unjust enrichment to Mr. Biglariarising out of the dual class structure, including the ability to vote the Company’s shares that are eliminated for financial reporting purposes. The shareholders seek, for themselves and on behalf of all other shareholders asa class, a declaration that the defendants breached their duty to the shareholders and the class, and to recover unspecifieddamages, pre-judgment and post-judgment interest, and an award of their attorneys’ fees and other costs. | 13 || --- | Note 14. Commitments and Contingencies(continued)*On December 14, 2018, the judge of the SuperiorCourt of Hamilton County, Indiana issued an order granting the Company’s motion to dismiss the shareholders’ lawsuits.On January 11, 2019, the shareholders filed an appeal of the judge’s order dismissing the lawsuits. On December 4, 2019,the Indiana Court of Appeals issued a unanimous decision affirming the trial court’s decision to dismiss the shareholderlitigation. On January 20, 2020, the shareholders filed a petition to transfer with the Indiana Supreme Court seeking reviewof the decision of the Court of Appeals.  The Company opposed the petition.  On April 7, 2020, the Indiana Supreme Courtdenied the petition to transfer. All of the cases referenced above are completed and each case was concluded in the Company’sfavor.Note 15. Fair Value of Financial AssetsThe fair values of substantially all of ourfinancial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting marketdata used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of theamounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimationmethodologies may have a material effect on the estimated fair value.The hierarchy for measuring fair value consistsof Levels 1 through 3, which are described below.| · | Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged<br>in active markets. || --- | --- || · | Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs)<br>such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets<br>or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or<br>liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default<br>rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing<br>evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar<br>characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the<br>same industry sector. || --- | --- || · | Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities.<br>Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity<br>in the assets or liabilities and we may be unable to corroborate the related observable inputs. Unobservable inputs require management<br>to make certain projections and assumptions about the information that would be used by market participants in pricing assets or<br>liabilities. || --- | --- |The following methods and assumptions wereused 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 primarilyconsist of money market funds which are classified within Level 1 of the fair value hierarchy.Equity securities: The Company’sinvestments in equity securities are classified within Level 1 of the fair value hierarchy.Bonds: The Company’s investmentsin bonds are classified within Level 1 of the fair value hierarchy.Non-qualified deferred compensation planinvestments: The assets of the non-qualified plan are set up in a rabbi trust. They represent mutual funds and publicly tradedsecurities, each of which are classified within Level 1 of the fair value hierarchy.Derivative instruments: Options relatedto equity securities are marked to market each reporting period and are classified within Levels 1 and 2 of the fair value hierarchydepending on the instrument. | 14 || --- | Note 15. Fair Value of Financial Assets (continued)As of March 31, 2020 and December 31, 2019,the fair values of financial assets were as follows.| | March 31, 2020 | | | | | | | | December 31, 2019 | | | | | | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total || Assets | | | | | | | | | | | | | | | | || Cash equivalents | $ | 23,138 | $ | — | $ | — | $ | 23,138 | $ | 43,095 | $ | — | $ | — | $ | 43,095 || Equity securities | | 5,605 | | 5,714 | | — | | 11,319 | | 25 | | 6,397 | | — | | 6,422 || Bonds | | 49,518 | | 2,500 | | — | | 52,018 | | 38,911 | | — | | — | | 38,911 || Options on equity securities | | — | | 2,849 | | — | | 2,849 | | — | | 2,166 | | — | | 2,166 || Non-qualified deferred compensation plan<br> investments | | 1,541 | | — | | — | | 1,541 | | 2,175 | | — | | — | | 2,175 || Total assets at fair value | $ | 79,802 | $ | 11,063 | $ | — | $ | 90,865 | $ | 84,206 | $ | 8,563 | $ | — | $ | 92,769 |There were no changes in our valuation techniquesused to measure fair values on a recurring basis.Note 16. Related Party TransactionsServices AgreementDuring 2017, the Company entered into a servicesagreement with Biglari Enterprises LLC and Biglari Capital Corp. (collectively, the “Biglari Entities”) under whichthe Biglari Entities provide services to the Company. The services agreement has a five-year term, effective on October 1, 2017.The fixed fee of $700 per month can be adjusted annually. The monthly fee will remain at $700 during 2020. The Company paid BiglariEnterprises $2,100 in service fees during the first quarter of 2020 and 2019. The services agreement does not alter the hurdlerate connected with the incentive reallocation paid to Biglari Capital Corp. The Biglari Entities are owned by Mr. Biglari.Incentive Agreement AmendmentThe Incentive Agreement was amended on March26, 2019 to remove the annual limitation on Mr. Biglari’s incentive compensation, as well as the requirement of Mr. Biglarito use 30% of his incentive payments to purchase shares of the Company. In connection with the amendment, the change of controland severance provisions contained in the Incentive Agreement were eliminated and the License Agreement was terminated. The amendmentbecame effective in 2019.Note 17. Business Segment ReportingOur reportable business segments are organizedin a manner that reflects how management views those business activities. Our restaurant operations include Steak n Shake and WesternSizzlin. Our insurance operations include First Guard and Southern Pioneer. The Company also reports segment information for Maximand 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 operatingresults based on segment earnings as disclosed below. Segment earnings from operations are neither necessarily indicative of cashavailable to fund cash requirements, nor synonymous with cash flow from operations. The tabular information that follows showsdata of our reportable segments reconciled to amounts reflected in the consolidated financial statements. | 15 || --- | Note 17. Business Segment Reporting *(continued)A disaggregation of our consolidated data forthe first quarter of 2020 and 2019 is presented in the tables which follow.| | Revenue | | | || --- | --- | --- | --- | --- || | First Quarter | | | || | | 2020 | | 2019 || Operating Businesses: | | | | || Restaurant Operations: | | | | || Steak n Shake | $ | 111,113 | $ | 170,111 || Western Sizzlin | | 3,031 | | 3,664 || Total Restaurant Operations | | 114,144 | | 173,775 || Insurance Operations: | | | | || First Guard | | 7,884 | | 7,207 || Southern Pioneer | | 1,790 | | — || Total Insurance Operations | | 9,674 | | 7,207 || Southern Oil | | 11,374 | | — || Maxim | | 508 | | 877 || | $ | 135,700 | $ | 181,859 || | Earnings (Losses) Before Income Taxes | | | | | || --- | --- | --- | --- | --- | --- | --- || | First Quarter | | | | | || | | 2020 | | | 2019 | || Operating Businesses: | | | | | | || Restaurant Operations: | | | | | | || Steak n Shake | $ | (10,937 | ) | $ | (18,858 | ) || Western Sizzlin | | 37 | | | 383 | || Total Restaurant Operations | | (10,900 | ) | | (18,475 | ) || Insurance Operations: | | | | | | || First Guard | | 2,441 | | | 1,544 | || Southern Pioneer | | 472 | | | — | || Total Insurance Operations | | 2,913 | | | 1,544 | || Southern Oil | | 2,470 | | | — | || Maxim | | (32 | ) | | (112 | ) || Total Operating Businesses | | (5,549 | ) | | (17,043 | ) || Corporate and Investments: | | | | | | || Corporate | | (2,296 | ) | | (2,491 | ) || Investment partnership gains (losses) | | (175,742 | ) | | 34,154 | || Total Corporate and Investments | | (178,038 | ) | | 31,663 | || Interest expense on notes payable and debt extinguishment gains | | 1,872 | | | (3,058 | ) || | $ | (181,715 | ) | $ | 11,562 | | | 16 || --- | Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations(dollars in thousands except per share data)*OverviewBiglari Holdings is a holding company owningsubsidiaries engaged in a number of diverse business activities, including property and casualty insurance, media and licensing,restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operatingof restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company. TheCompany’s long-term objective is to maximize per-share intrinsic value. All major investment and capital allocation decisionsare made for the Company and its subsidiaries by Mr. Biglari.As of March 31, 2020, Mr. Biglari’s beneficialownership was approximately 64.4% of the Company’s outstanding Class A common stock and 55.4% of the Company’s outstandingClass B common stock.On March 9, 2020, Biglari Holdings acquiredthe stock of Southern Pioneer Property & Casualty Insurance Company and its agency, Southern Pioneer Insurance Agency, Inc.(collectively “Southern Pioneer”). The financial results for Southern Pioneer from the acquisition date to the endof the first quarter are included in the Company’s consolidated financial statements.On September 9, 2019, a wholly-owned subsidiaryof the Company, Southern Oil Company, acquired the stock of Southern Oil of Louisiana Inc. (collectively “Southern Oil”).Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico.Net earnings (loss) attributable to BiglariHoldings shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.| | | First Quarter | | | | || --- | --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 | || Operating businesses: | | | | | | || Restaurant | $ | (7,942 | ) | $ | (13,343 | ) || Insurance | | 2,316 | | | 1,216 | || Oil and gas | | 2,201 | | | — | || Media and licensing | | (25 | ) | | (84 | ) || Total operating businesses | | (3,450 | ) | | (12,211 | ) || Corporate | | (1,490 | ) | | (1,914 | ) || Investment partnership gains (losses) | | (134,359 | ) | | 26,237 | || Interest expense on notes payable and debt extinguishment | | 1,414 | | | (2,294 | ) || | $ | (137,885 | ) | $ | 9,818 | |Restaurant businesses include Steak n ShakeInc. (“Steak n Shake”) and Western Sizzlin Corporation (“Western Sizzlin”). Steak n Shake and Western Sizzlinare engaged in the ownership, operation, and franchising of restaurants.Insurance businesses are composed of FirstGuard Insurance Company (“First Guard”) and Southern Pioneer. First Guard is a direct underwriter of commercial truckinginsurance, selling physical damage and nontrucking liability insurance to truckers. Southern Pioneer underwrites specialty insuranceproducts including garage liability insurance, commercial property coverage for auto dealers as well as homeowners, dwelling fireinsurance and credit-related insurance coverages.Media and licensing business is composed ofMaxim Inc. (“Maxim”).Oil and gas business is composed of SouthernOil. Southern Oil primarily operates oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico. | 17 || --- | Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations *(continued)*RestaurantsSteak n Shake and Western Sizzlin comprise605 company-operated and franchise restaurants as of March 31, 2020.| | Steak n Shake | | | | | | | | Western Sizzlin | | | | | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || | Company- operated | | | Franchise<br> Partner | | Traditional<br> Franchise | | | Company-operated | | Franchise | | Total | | || Total stores as of December 31, 2019 | | 368 | | | 29 | | 213 | | | 4 | | 48 | | 662 | || Corporate stores transitioned | | (11 | ) | | 10 | | 1 | | | — | | — | | — | || Net restaurants opened (closed) | | (51 | ) | | — | | (6 | ) | | — | | — | | (57 | ) || Total stores as of March 31, 2020 | | 306 | | | 39 | | 208 | | | 4 | | 48 | | 605 | || Total stores as of December 31, 2018 | | 411 | | | 2 | | 213 | | | 4 | | 55 | | 685 | || Corporate stores transitioned | | (1 | ) | | 1 | | — | | | — | | — | | — | || Net restaurants opened (closed) | | (2 | ) | | — | | — | | | — | | — | | (2 | ) || Total stores as of March 31, 2019 | | 408 | | | 3 | | 213 | | | 4 | | 55 | | 683 | |Most of our restaurant dining rooms wereclosed by March 17, 2020 with the remainder closing before the end of the first quarter because of the COVID-19 pandemic. Inaddition, as of March 31, 2020, 62 of the 306 company-operated stores were temporarily closed. As of March 31, 2019, 44of the 408 company-operated stores were temporarily closed.Earnings of our restaurant operations are summarizedbelow.| | | First Quarter | | | | | | | | || --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- || | | 2020 | | | | | 2019 | | | || Revenue | | | | | | | | | | || Net sales | $ | 104,728 | | | | $ | 165,631 | | | || Franchise royalties and fees | | 5,211 | | | | | 6,654 | | | || Franchise partner fees | | 3,344 | | | | | 258 | | | || Other revenue | | 861 | | | | | 1,232 | | | || Total revenue | | 114,144 | | | | | 173,775 | | | || Restaurant cost of sales | | | | | | | | | | || Cost of food | | 31,443 | | 30.0 | % | | 54,977 | | 33.2 | % || Restaurant operating costs | | 53,497 | | 51.1 | % | | 90,795 | | 54.8 | % || Occupancy costs | | 4,976 | | 4.8 | % | | 6,677 | | 4.0 | % || Total cost of sales | | 89,916 | | | | | 152,449 | | | || Selling, general and administrative | | | | | | | | | | || General and administrative | | 8,898 | | 7.8 | % | | 17,101 | | 9.8 | % || Marketing | | 8,820 | | 7.7 | % | | 13,129 | | 7.6 | % || Other expenses | | 284 | | 0.2 | % | | 293 | | 0.2 | % || Total selling, general and administrative | | 18,002 | | 15.8 | % | | 30,523 | | 17.6 | % || Impairments | | 10,300 | | 9.0 | % | | 1,900 | | 1.1 | % || Depreciation and amortization | | 5,026 | | 4.4 | % | | 5,369 | | 3.1 | % || Interest on finance leases and obligations | | 1,800 | | | | | 2,009 | | | || Earnings (loss) before income taxes | | (10,900 | ) | | | | (18,475 | ) | | || Income tax expense (benefit) | | (2,958 | ) | | | | (5,132 | ) | | || Contribution to net earnings | $ | (7,942 | ) | | | $ | (13,343 | ) | | |*Cost of food, restaurant operating costsand rent expense are expressed as a percentage of net sales.*General and administrative, marketing, otherexpenses, impairments and depreciation and amortization are expressed as a percentage of total revenue. | 18 || --- | Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations *(continued)*The COVID-19 pandemic has adverselyaffected our operations and financial results. During the first quarter, we closed the dining rooms in all our restaurants.However, most of our restaurants remained open with limited operations such as takeout, drive-through, and delivery. However,the COVID-19 pandemic could cause disruptions to our supply chain. Moreover, we cannot predict how the outbreak of COVID-19will alter the future demand of our products.Net sales decreased by $60,903 or 36.8% duringfirst quarter 2020 compared to 2019. Franchise royalties and fees decreased by $1,443 or 21.7% during 2020 compared to 2019.Franchise partner fees were $3,344 during firstquarter 2020 compared to $258 during 2019. As of March 31, 2020, there were 39 franchise partner units as compared to three franchisepartner units as of March 31, 2019.Cost of food decreased as a percentage of netsales by 3.2% during the first quarter of 2020 compared to 2019. The decrease is primarily attributable to fewer promotional items.Restaurant operating costs decreased as a percentageof net sales by 3.7% during the first quarter of 2020 compared to 2019. The decrease is primarily because of reduced labor costs.General and administrative costs decreasedby $8,203 during the first quarter of 2020 compared to 2019. The lower expenses were primarily because of non-recurring settlementexpenses during 2019.Marketing expense decreased by $4,309 in thefirst quarter of 2020 compared to 2019 primarily driven by a reduction in television and print advertising.Steak n Shake recorded an impairment to long-livedassets of $10,300 and $1,900 in the first quarters of 2020 and 2019, respectively. The impairments are primarily attributable tothe closure of Steak n Shake stores. | 19 || --- | Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations *(continued)*InsuranceWe view our insurance businesses aspossessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unitmanagers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Business units areoperated under separate local management.Biglari Holdings’ insuranceoperations consist of First Guard and Southern Pioneer. First Guard is a direct underwriter of commercial trucking insurance,selling physical damage and nontrucking liability insurance to truckers. First Guard’s insurance products are marketedprimarily through direct response methods via the Internet or by telephone.  First Guard’s cost-efficient directresponse marketing methods enable it to be a low-cost trucking insurer. Southern Pioneer underwrites specialty insuranceproducts including garage liability insurance, commercial property coverage for auto dealers as well as homeowners, dwellingfire insurance and credit-related insurance coverages. The financial results for Southern Pioneer are from the acquisitiondate (March 9, 2020) to the end of the quarter.Premiums earned by the insurance groupduring the first quarter of 2020 were $8,842 and pre-tax underwriting gain during the first quarter of 2020 was $2,530.Premiums earned by First Guard during the first quarter of 2020 were $7,415, an increase of $554 or 8.1% compared to 2019.Pre-tax underwriting gain for First Guard during the first quarter of 2020 was $2,323, an increase of $1,122 or 93.4%compared to 2019.Southern Pioneer’s operating resultssince the date of acquisition were not significant to Biglari Holdings for the quarter. However, we expect Southern Pioneer tohave a major impact on our insurance results in future periods.Earnings of our insurance operations are summarizedbelow.| | | First Quarter | | | | || --- | --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 | || Premiums written | $ | 8,842 | | $ | 6,861 | || Insurance losses | | 4,174 | | | 4,175 | || Underwriting expenses | | 2,138 | | | 1,485 | || Pre-tax underwriting gain | | 2,530 | | | 1,201 | || Other income and expenses | | | | | | || Investment income and commissions | | 832 | | | 346 | || Other income (expenses) | | (449 | ) | | (3 | ) || Total other income | | 383 | | | 343 | || Earnings before income taxes | | 2,913 | | | 1,544 | || Income tax expense | | 597 | | | 328 | || Contribution to net earnings | $ | 2,316 | | $ | 1,216 | || | First Quarter | | | | | || | | 2020 | | | 2019 | || Underwriting gain: | | | | | | || First Guard | $ | 2,323 | | $ | 1,201 | || Southern Pioneer | | 207 | | | — | || Pre-tax underwriting gain | $ | 2,530 | | $ | 1,201 | |Insurance premiums and other on the consolidatedstatement of earnings includes premiums earned, investment income and commissions. In the table above, investment income and commissionsare included in other income. | 20 || --- | Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations *(continued)*Oil and GasSouthern Oil primarily operates oil and natural gas properties offshorein the shallow waters of the Gulf of Mexico. Southern Oil was acquired on September 9, 2019. Earnings for Southern Oil are summarizedbelow.| | First Quarter | || --- | --- | --- || | 2020 | || Oil and gas revenue | $ | 11,374 || Oil and gas production costs | | 3,076 || Depreciation, depletion and accretion | | 4,868 || General and administrative expenses | | 960 || Earnings before income taxes | | 2,470 || Income tax expense | | 269 || Contribution to net earnings | $ | 2,201 |The COVID-19 pandemic has caused oil demandto significantly decrease, creating oversupplied markets, and resulting in lower commodity prices and margins. In response, theCompany has significantly cut production and expenses. Southern Oil is a debt-free company.Media and LicensingEarnings of our media and licensing operationsare summarized below.| | | First Quarter | | | | || --- | --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 | || Media and licensing revenue | $ | 508 | | $ | 877 | || Media and licensing costs | | 506 | | | 948 | || General and administrative expenses | | 34 | | | 41 | || Earnings (loss) before income taxes | | (32 | ) | | (112 | ) || Income tax benefit | | (7 | ) | | (28 | ) || Contribution to net earnings | $ | (25 | ) | $ | (84 | ) |We acquired Maxim with the idea of transformingits business model. The magazine developed the Maxim brand, a franchise we are utilizing to generate nonmagazine revenue, notablythrough licensing, a cash-generating business related to consumer products, services, and events. | 21 || --- | Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations *(continued)*Investment Partnership Gains (Losses)Earnings (loss) from our investments in partnershipsare summarized below.| | | First Quarter | | | || --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 || Investment partnership gains (losses) | $ | (175,742 | ) | $ | 34,154 || Tax expense (benefit) | | (41,383 | ) | | 7,917 || Contribution to net earnings | $ | (134,359 | ) | $ | 26,237 |Investment partnership gains include gains/lossesfrom changes in market values of underlying investments and dividends earned by the partnerships. Dividend income has a lower effectivetax rate than income from capital gains. Changes in the market values of investments can be highly volatile.The investment partnerships hold the Company’scommon stock as investments. The Company’s pro-rata share of its common stock held by the investment partnerships is recordedas treasury stock even though these shares are legally outstanding. Gains and losses on Company common stock included in the earningsof the partnerships are eliminated.Interest Expense and Debt ExtinguishmentThe Company’s interest expense is summarizedbelow.| | | First Quarter | | || --- | --- | --- | --- | --- || | | 2020 | | 2019 || Interest expense on notes payable and other borrowings | $ | 2,474 | $ | 3,058 || Tax benefit | | 628 | | 764 || Interest expense net of tax | $ | 1,846 | $ | 2,294 |The Company recorded a gain on debtextinguishment of $4,346 ($3,260 net of tax) during the first quarter of 2020 in connection with Steak n Shake’s debtretirement of $21,729.The outstanding balance on Steak n Shake’scredit facility on March 31, 2020 was $159,219 compared to $183,148 on March 31, 2019. The interest rate was 5.36% as of March31, 2020 and 6.25% as of March 31, 2019.CorporateCorporate expenses exclude the activities inthe restaurant, media and licensing, insurance, and oil and gas businesses. Corporate net losses during the first quarterof 2020 were relatively flat compared to the same period during 2019.Income TaxesIncome tax benefit for the first quarter of2020 was $43,830 compared to an income tax expense of $1,744 for the first quarter of 2019.  The variance in income taxesbetween 2020 and 2019 is attributable to taxes on income generated by the investment partnerships. Investment partnership pretaxlosses were $175,742 during the first quarter of 2020, compared to pretax gains of $34,154 during the first quarter of 2019. | 22 || --- | Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations (continued)Financial ConditionConsolidated cash and investments are summarizedbelow.| | March 31, 2020 | | | December 31, 2019 | | || --- | --- | --- | --- | --- | --- | --- || Cash and cash equivalents | $ | 33,281 | | $ | 67,772 | || Investments | | 81,252 | | | 44,856 | || Fair value of interest in investment partnerships | | 392,215 | | | 666,123 | || Total cash and investments | | 506,748 | | | 778,751 | || Less: portion of Company stock held by investment partnerships | | (73,526 | ) | | (160,581 | ) || Carrying value of cash and investments on balance sheet | $ | 433,222 | | $ | 618,170 | |LiquidityOur balance sheet continues to maintain significantliquidity. Consolidated cash flow activities are summarized below.| | | First Quarter | | | | || --- | --- | --- | --- | --- | --- | --- || | | 2020 | | | 2019 | || Net cash provided by (used in) operating activities | $ | 50,477 | | $ | (10,037 | ) || Net cash used in investing activities | | (65,574 | ) | | (5,454 | ) || Net cash used in financing activities | | (19,408 | ) | | (1,968 | ) || Effect of exchange rate changes on cash | | 14 | | | (5 | ) || Decrease in cash, cash equivalents and restricted cash | $ | (34,491 | ) | $ | (17,464 | ) |Cash provided by operating activities was$50,477 during the first quarter of 2020 compared to cash used in operating activities of $10,037 during the first quarter of2019. The increase in cash provided by operations during 2020 compared to 2019 was primarily due to distributions frominvestment partnerships.Cash used in investing activities duringthe first quarter of 2020 was $65,574 compared to $5,454 during the first quarter of 2019. Cash used in investing activitiesduring the first quarter of 2020 included capital expenditures of $6,473, purchases of investments net of redemptions offixed maturity securities of $26,685 and acquisition of business for $34,240 (net of cash acquired). Cash used in investingactivities during the first quarter of 2019 included capital expenditures of $3,564 and purchases of investments net ofredemptions of fixed maturity securities of $2,210.During the first quarter of 2020 and 2019we incurred debt payments of $19,458 and $1,968, respectively. On February 18, 2020, the Company retired $21,729 of term loanunder Steak n Shake’s credit facility.We intend to meet the working capital needsof our operating subsidiaries principally through anticipated cash flows generated from operations, cash on hand, existing creditfacilities, and the sale of excess properties and investments. We continually review available financing alternatives.Steak n Shake Credit FacilityOn March 19, 2014, Steak n Shake and its subsidiariesentered into a credit agreement which provided for a senior secured term loan facility in an aggregate principal amount of $220,000.The term loan is scheduled to mature on March 19, 2021. As of March 31, 2020, $159,219 was outstanding. The Company is evaluatingrefinancing options. Alternative financing may not be available on terms commensurate with its current financing arrangement. Inaddition, the duration of the pandemic could have a material adverse effect on financing options or Steak n Shake’s abilityto comply with the terms of its credit agreement. Biglari Holdings is not a guarantor under the credit facility.The term loan amortizes in equal quarterlyinstallments at an annual rate of 1.0% of the original principal amount of the term loan, subject to mandatory prepayments fromexcess cash flow, asset sales and other events described in the credit agreement. The balance will be due at maturity.Interest on the term loan is based on a Eurodollarrate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. The interest rate on the termloan was 5.36% as of March 31, 2020.The credit agreement includes customary affirmativeand negative covenants and events of default. As of March 31, 2020, we were in compliance with all covenants. Steak n Shake’scredit facility contains restrictions on its ability to pay dividends to Biglari Holdings. | 23 || --- | The term loan is secured by first prioritysecurity interests in substantially all the assets of Steak n Shake.The Company retired $21,729 of debt on February18, 2020.Western Sizzlin RevolverWestern Sizzlin had $50 and $0 of debt outstandingunder its revolver as of March 31, 2020 and December 31, 2019, respectively.Critical Accounting PoliciesManagement’s discussion and analysisof financial condition and results of operations is based upon our consolidated financial statements, which have been preparedin accordance with accounting principles generally accepted in the United States. Certain accounting policies require managementto make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized inour consolidated financial statements from such estimates are necessarily based on numerous assumptions involving varying and potentiallysignificant degrees of judgment and uncertainty. Accordingly, the amounts currently reflected in our consolidated financial statementswill likely increase or decrease in the future as additional information becomes available. There have been no material changesto critical accounting policies previously disclosed in our annual report on Form 10-K for the year ended December 31, 2019.Recently Issued Accounting PronouncementsFor detailed information regarding recentlyissued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2, “NewAccounting Standards” in the accompanying notes to consolidated financial statements included in Part I, Item 1 of this QuarterlyReport on Form 10-Q.Cautionary Note Regarding Forward-LookingStatementsThis report includes forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995. In general, forward-looking statements include estimatesof 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 neithera prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Investorsshould not place undue reliance on the forward-looking statements, which speak only as of the date of this report. These forward-lookingstatements are all based on currently available operating, financial, and competitive information and are subject to various risksand uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, many beyond ourcontrol, including, but not limited to, the risks and uncertainties described in Item 1A, Risk Factors of our annual report onForm 10-K and Item 1A of this report. We undertake no obligation to publicly update or revise them, except as may be required bylaw. | 24 || --- | | ITEM 3. | Quantitative and Qualitative Disclosures<br> About Market Risk || --- | --- |The majority of our investments are conductedthrough investment partnerships which generally hold common stocks. We also hold marketable securities directly. A significantdecline in the general stock market or in the prices of major investments may produce a large net loss and decrease in our consolidatedshareholders’ equity. Decreases in values of equity investments can have a materially adverse effect on our earnings andon consolidated shareholders’ equity.We prefer to hold equity investments for verylong periods of time so we are not troubled by short-term price volatility with respect to our investments. Our interests in theinvestment partnerships are committed on a rolling 5-year basis, and any distributions upon our withdrawal of funds will be paidout over two years (and may be paid in kind rather than in cash). 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 decreasein the carrying value of our investments of $39,994 along with a corresponding change in shareholders’ equity of approximately6%.Interest on the term loan is based on a Eurodollarrate plus an applicable margin of 3.75% or on the prime rate plus an applicable margin of 2.75%. At March 31, 2020, a hypothetical100 basis point increase in short-term interest rates would have an impact of approximately $1,200 on our net earnings.We have had minimal exposure to foreign currencyexchange rate fluctuations in the first quarters of 2020 and 2019.| ITEM 4. | Controls and Procedures || --- | --- |Based on an evaluation of our disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), our Chief Executive Officer and Controller have concludedthat our disclosure controls and procedures were effective as of March 31, 2020.There have been no changes in our internalcontrol over financial reporting that occurred during the quarter ended March 31, 2020 that have materially affected, or thatare reasonably likely to materially affect, our internal control over financial reporting. | 25 || --- | PartII Other Information| Item 1. | lEGAL PROCEEDINGS || --- | --- |Information in response to this Item is includedin Note 14 to the Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q and is incorporated herein byreference.| Item 1A. | Risk Factors || --- | --- |Our significant business risks are describedin Item 1A to Form 10-K for the year ended December 31, 2019 to which reference is made herein. These risk factors are supplementedfor the items described below. The risks and uncertainties we describe are not the only ones facing us. Additional risks and uncertaintiesnot presently known to us or that we currently deem immaterial may also impair our business or operations. Any adverse effect onour business, financial condition or operating results could result in a decline in the value of our securities and the loss ofall or part of your investment.Epidemics, pandemics or other outbreaks,including COVID-19, could hurt our operating businesses.The outbreak of COVID-19 has adversely affected,and in the future it or other epidemics, pandemics or outbreaks may adversely affect, our operations, including our investments.This is or may be due to closures or restrictions requested or mandated by governmental authorities, disruption to supply chainsand workforce, reduction of demand for our products and services, credit losses when customers and other counterparties fail tosatisfy their obligations to us, and volatility in global equity securities markets, among other factors.Unfavorable general economic conditionsmay significantly reduce our operating earnings and impair our ability to access capital markets at a reasonable cost.Our operating businesses are subject to economicconditions affecting the general economy or the specific industries in which they operate. To the extent that economic conditionsin the U.S. and worldwide are depressed by the effects of COVID-19 or otherwise, one or more of our significant operations couldbe materially harmed. In addition, our restaurant operations utilize debt as a component of their capital structures, and dependon access to borrowed funds through the capital markets at reasonable rates. To the extent that access to the capital marketsis restricted or the cost of funding increases, these operations could be adversely affected.| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds || --- | --- |None.| Item 3. | Defaults Upon Senior Securities || --- | --- |None.| Item 4. | Mine Safety Disclosures || --- | --- |Not applicable.| Item 5. | Other Information || --- | --- |None.| Item 6. | Exhibits || --- | --- || Exhibit Number | Description || --- | --- || 31.01 | Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. || 31.02 | Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. || 32.01* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. || 101 | Interactive Data Files. |_________________| * | Furnished herewith. || --- | --- | | 26 || --- | SIGNATURESPursuant 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.| Date:  May 8, 2020 | | || --- | --- | --- || | Biglari Holdings inc. | || | By: | /s/ Bruce Lewis || | | Bruce Lewis<br><br>Controller | | 27 || --- | Exhibit 31.01CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Sardar Biglari, certify that:1. I have reviewed this quarterly report onForm 10-Q of Biglari Holdings Inc.;2. Based on my knowledge, this report doesnot contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements,and other financial information included in this report, fairly present in all material respects the financial condition, resultsof operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifyingofficer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:| (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; || --- || (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; || --- || (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and || --- || (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and || --- |5. The registrant’s other certifyingofficer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):| (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and || --- || (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. || --- || Date: May 8, 2020 | || --- | --- || | /s/ Sardar Biglari || | Sardar Biglari || | Chairman and Chief Executive Officer | Exhibit 31.02CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Bruce Lewis, certify that:1. I have reviewed this quarterly report onForm 10-Q of Biglari Holdings Inc.;2. Based on my knowledge, this report doesnot contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements,and other financial information included in this report, fairly present in all material respects the financial condition, resultsof operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifyingofficer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:| (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; || --- || (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; || --- || (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and || --- || (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and || --- |5. The registrant’s other certifyingofficer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):| (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and || --- || (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. || --- || Date: May 8, 2020 | || --- | --- || | /s/ Bruce Lewis || | Bruce Lewis || | Controller | Exhibit 32.01CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF2002In connection with the Quarterly Report ofBiglari Holdings Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C.Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complieswith the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained inthe Report fairly presents, in all material respects, the financial condition and results of operations of the Company.| /s/ Sardar Biglari || --- || Sardar Biglari || Chairman and Chief Executive Officer<br><br>May 8, 2020 || /s/ Bruce Lewis || Bruce Lewis || Controller<br><br> <br>May 8, 2020 |