Log in
Login
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  Equities  >  Nyse  >  Biglari Holdings Inc    BH

Delayed Quote. Delayed  - 04/29 10:02:04 pm
373.94 USD   -0.79%
02/20 BIGLARI : News Release
02/20 BIGLARI : 2015 Annual Report
2015 BIGLARI : Cracker Barrel holds shareholders meeting
SummaryQuotesChartsNewsCalendarCompanyFinancialsConsensus 
News SummaryMost relevantAll newsSector news 
The feature you requested does not exist. However, we suggest the following feature:

BIGLARI : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

share with twitter share with LinkedIn share with facebook
share via e-mail
0
02/22/2016 | 02:28pm CEST

(dollars in thousands except per share data)


Biglari Holdings Inc. is a holding company owning subsidiaries engaged in a
number of diverse business activities, including media, property and casualty
insurance, and restaurants. The Company's largest operating subsidiaries are
involved in the franchising and operating of restaurants. Biglari Holdings is
founded and led by Sardar Biglari, Chairman and Chief Executive Officer of
Biglari Holdings and its major operating subsidiaries. The Company's long-term
objective is to maximize per-share intrinsic value. All major operating,
investment, and capital allocation decisions are made for the Company and its
subsidiaries by Mr. Biglari.

We are comparing calendar year 2015 to calendar 2014, the 2014 transition period
to the 2013 transition period, and fiscal year 2014 to fiscal year
2013.  Calendar year 2014 and the 2013 transition period are unaudited. Calendar
year 2014 is not included in the consolidated financial statements, but is
included herein for comparison purposes to calendar year 2015.

Net earnings attributable to Biglari Holdings shareholders are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.


                                                       Transition Period               Fiscal Year
                          2015          2014           2014          2013          2014          2013
Operating businesses:
Restaurant              $  26,985     $  18,285     $    6,857     $   6,537     $  17,965     $  21,361
Insurance                   2,313         1,559            595             -           964             -
Media                     (11,459 )     (13,404 )       (3,455 )           -        (9,949 )           -
Other                         197         1,068            (58 )         (27 )       1,099         5,382
Total operating
businesses                 18,036         7,508          3,939         6,510        10,079        26,743
Corporate                  (8,309 )      (5,502 )       (2,051 )      (2,060 )      (5,511 )     (12,515 )
Investment gains                -        18,305              -             -        18,305       115,568
Investment
partnership gains
(losses)                  (18,168 )      87,991         91,191        15,516        12,316        14,537
Interest expense on
notes payable              (7,402 )      (7,397 )       (2,029 )      (1,017 )      (6,385 )      (4,062 )
                        $ (15,843 )   $ 100,905     $   91,050     $  18,949     $  28,804     $ 140,271



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. 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.


                                       15

--------------------------------------------------------------------------------

Table of Contents

Restaurants

Our restaurant businesses, which include Steak n Shake and Western, comprise 631 company-operated and franchised restaurants as of December 31, 2015.


                                              Steak n Shake                 

Western Sizzlin

                                   Company- operated        Franchised      Company-operated         Franchised        Total
Total stores as of September
25, 2013                                          415               104                     4                 82            605
Net restaurants opened (closed)                     1                20                     -                (11 )           10
Total stores as of September
24, 2014                                          416               124                     4                 71            615
Net restaurants opened (closed)                     1                 4                     -                 (3 )            2
Total stores as of December 31,
2014                                              417               128                     4                 68            617
Net restaurants opened (closed)                     -                16                     -                 (2 )           14
Total stores as of December 31,
2015                                              417               144                     4                 66            631



The term "same-store sales" refers to the sales of company-operated units open
at least 18 months at the beginning of the current period and have remained open
through the end of the period. Same-store traffic measures the number of patrons
who walk through the same units.

Restaurant operations 2015 compared to 2014

Restaurant operations for 2015 and 2014 are summarized below.



                                                        2015                                   2014
Revenue
  Net sales                                          $   799,660                             $ 769,738
  Franchise royalties and fees                            16,428                                15,931
  Other revenue                                            3,650                                 3,692
Total revenue                                            819,738                               789,361

Restaurant cost of sales
  Cost of food                                           232,271                  29.0 %       232,224       30.2 %
  Restaurant operating costs                             379,632                  47.5 %       363,669       47.2 %
  Rent                                                    17,384                   2.2 %        17,048        2.2 %
Total cost of sales                                      629,287                               612,941

Selling, general and administrative

  General and administrative                              62,055                   7.6 %        65,022        8.2 %
  Marketing                                               46,050                   5.6 %        42,361        5.4 %
  Other expenses                                           7,590                   0.9 %         6,226        0.8 %
Total selling, general and administrative                115,695            

14.1 % 113,609 14.4 %


Depreciation and amortization                             23,736            

2.9 % 24,091 3.1 %


Interest on obligations under leases                       9,422                                 9,685

Earnings before income taxes                              41,598                                29,035

Income tax expense                                        14,613                                10,750

Net earnings                                         $    26,985                             $  18,285

Cost of food, restaurant operating costs and rent expense are expressed as a percentage of net sales.
General and administrative, marketing, other expenses and depreciation and amortization are expressed as a
percentage of total revenue.




                                       16

--------------------------------------------------------------------------------

Table of Contents


Net sales during 2015 were $799,660 representing an increase of $29,922 when
compared to 2014. The increased performance of our restaurant operations was
largely driven by Steak n Shake's same-store sales. Steak n Shake's same-store
sales during 2015 increased 3.6% whereas customer traffic increased by 1.8%
during 2015.

Franchise royalties and fees increased 3.1% in 2015 as compared to those in
2014.  Steak n Shake opened 22 franchise units and closed six franchise units
during 2015.  The increases in 2015 are primarily attributable to the opening of
new Steak n Shake units.  The percentage increase over 2014 was offset by
forfeited area development fees realized in the first quarter of 2014.

Cost of food in 2015 was $232,271 or 29.0% of net sales, compared to $232,224 or
30.2% of net sales in 2014. The decrease as a percent of sales during 2015 was
primarily attributable to lower beef costs and change in menu mix.

Restaurant operating costs during 2015 were $379,632 or 47.5% of net sales,
compared to $363,669 or 47.2% of net sales in 2014. The increased costs were
mainly based on higher sales. Costs as a percent of sales increased principally
due to higher wages and benefits. Costs as a percent of sales during 2015
remained relatively constant compared to 2014.

Selling, general and administrative expenses during 2015 were $115,695 or 14.1%
of total revenues. General and administrative expenses decreased by $2,967
during 2015 primarily due to decreased personnel expenses.  Marketing increased
by $3,689 in 2015 compared to 2014 primarily related to commissions paid for
third party gift card sales.

Interest on obligations under leases was $9,422 during 2015, versus $9,685 during 2014. The total obligations under leases outstanding at December 31, 2015 were $95,965, compared to $104,561 at December 31, 2014.

                                       17

--------------------------------------------------------------------------------

Table of Contents

Restaurant operations 2014 transition period compared to 2013 transition period


Earnings of our restaurant operations for the transition periods are summarized
below.

                                                                          Transition Period
                                                        2014                                   2013
Revenue
  Net sales                                          $   210,256                             $ 200,407
  Franchise royalties and fees                             4,076                                 3,177
  Other revenue                                            1,316                                   858
Total revenue                                            215,648                               204,442

Restaurant cost of sales
  Cost of food                                            64,614                  30.7 %        58,826       29.4 %
  Restaurant operating costs                              98,939                  47.1 %        94,268       47.0 %
  Rent                                                     4,554                   2.2 %         4,579        2.3 %
Total cost of sales                                      168,107                               157,673

Selling, general and administrative

  General and administrative                              16,570                   7.7 %        16,420        8.0 %
  Marketing                                                9,844                   4.6 %        10,807        5.3 %
  Other expenses                                           1,523                   0.7 %           706        0.3 %
Total selling, general and administrative                 27,937            

13.0 % 27,933 13.7 %


Depreciation and amortization                              6,461            

3.0 % 6,434 3.1 %


Interest on obligations under leases                       2,577                                 2,612

Earnings before income taxes                              10,566                                 9,790

Income tax expense                                         3,709                                 3,253

Net earnings                                         $     6,857                             $   6,537

Cost of food, restaurant operating costs and rent expense are expressed as a percentage of net sales.
General and administrative, marketing, other expenses and depreciation and amortization are expressed as a
percentage of total revenue.



Net sales during the 2014 transition period were $210,256, an increase of $9,849
over the 2013 transition period. The increased performance of our restaurant
operations was largely driven by Steak n Shake's same-store sales. Steak n
Shake's same-store sales increased 4.8% during the 2014 transition period,
whereas customer traffic increased by 2.7%.

Franchise royalties and fees increased 28.3% during the 2014 transition
period. The franchised units numbered 196 at December 31, 2014, compared to 188
at December 31, 2013. The increase in franchise fees is primarily attributable
to newly franchised Steak n Shake stores which opened in the 2014 transition
period and 2014 fiscal year.

Cost of food in the 2014 transition period was $64,614 or 30.7% of net sales,
compared to $58,826 or 29.4% of net sales in the 2013 transition period. The
increase in costs as a percentage of net sales was primarily attributable to
higher beef costs during the 2014 transition period.

Restaurant operating costs were $98,939 or 47.1% of net sales compared to $94,268 or 47.0% in the 2013 transition period. The increased costs were mainly based on higher sales.

Selling, general and administrative expense of $27,937 or 13.0% of total revenues in the 2014 transition period remained relatively flat compared to $27,933 or 13.7% of total revenues in the 2013 transition period.

Interest on obligations under leases was $2,577 during the 2014 transition period, versus $2,612 during the 2013 transition period. The total obligations under leases outstanding at December 31, 2014 were $104,561.

                                       18

--------------------------------------------------------------------------------

Table of Contents

Restaurant operations fiscal year 2014 compared to fiscal year 2013


Earnings of our restaurant operations for fiscal years 2014 and 2013 are
summarized below.

                                                                             Fiscal Year
                                                        2014                                   2013
Revenue
  Net sales                                          $   759,889                             $ 736,968
  Franchise royalties and fees                            15,032                                11,741
  Other revenue                                            3,234                                 3,210
Total revenue                                            778,155                               751,919

Restaurant cost of sales
  Cost of food                                           226,436                  29.8 %       218,199       29.6 %
  Restaurant operating costs                             358,998                  47.2 %       348,654       47.3 %
  Rent                                                    17,073                   2.2 %        16,150        2.2 %
Total cost of sales                                      602,507                               583,003

Selling, general and administrative

  General and administrative                              64,872                   8.3 %        56,485        7.5 %
  Marketing                                               43,324                   5.6 %        44,375        5.9 %
  Other expenses                                           5,409                   0.7 %         4,458        0.6 %
Total selling, general and administrative                113,605                               105,318

Depreciation and amortization                             24,064            

3.1 % 24,882 3.3 %


Interest on obligations under leases                       9,720                                 9,829

Earnings before income taxes                              28,259                                28,887

Income tax expense                                        10,294                                 7,526

Net earnings                                         $    17,965                             $  21,361

Cost of food, restaurant operating costs and rent expense are expressed as a percentage of net sales.
General and administrative, marketing, other expenses and depreciation and amortization are expressed as a
percentage of total revenue.




                                       19

--------------------------------------------------------------------------------

Table of Contents


Net sales during 2014 were $759,889, an increase of $22,921 over 2013. The
increased performance of our restaurant operations was largely driven by Steak n
Shake's same-store sales. Steak n Shake's same-store sales increased 2.9% during
2014, whereas customer traffic increased by 2.0%.

Franchise royalties and fees increased 28.0% during 2014. The franchised units
numbered 195 at the end of 2014, compared to 186 at the end of 2013. The
increase in franchise fees is primarily attributable to royalties by 41 newly
franchised Steak n Shake stores which opened in 2013 and 2014. Franchise
royalties and fees increased 21.9% during 2013. However, franchise fees in
conjunction with the opening of the franchised stores by themselves accounted
for a 4.7% increase in 2013. The remaining 17.2% increase is primarily
attributable to royalties from Steak n Shake's newly franchised stores, which
opened in 2012 and 2013.

Cost of food in 2014 was $226,436 or 29.8% of net sales, compared with $218,199
or 29.6% of net sales in 2013. The higher costs were primarily imputed to higher
sales. The price of beef rose during 2014; however, the increased costs were
mostly offset by reductions in the prices of other commodities. In 2013 higher
revenues increased cost of food by approximately $5.4 million, and higher
commodity prices impacted cost of food by approximately $3.2 million.

Restaurant operating costs in 2014 were $358,998 or 47.2% of net sales compared
to $348,654 or 47.3% in 2013. The increased costs were mainly based on higher
sales.

Rent expense attributable to restaurant operations remained consistent at 2.2% of net sales, compared to those of the prior year.


General and administrative expenses increased from $56,485 or 7.5% of total
revenues in 2013 to $64,872 or 8.3% of total revenues in 2014. The increased
costs were primarily attributable to higher compensation expense of $4.1 million
and higher recruiting and legal fees of $4.2 million for Steak n Shake's
domestic and international franchise development. Increased training in 2013
created a higher expense of $2.7 million, which was largely tied to franchise
openings. Our overall efforts to franchise the Steak n Shake concept both
domestically and internationally have steadily increased general and
administrative expenses.

Marketing expense was $43,324 or 5.6% of total revenues in 2014, versus $44,375 or 5.9% of total revenues in 2013.

Depreciation and amortization expense was $24,064 or 3.1% of total revenues in 2014, versus $24,882 or 3.3% of total revenues in 2013.


Interest on obligations under leases was $9,720 during 2014, versus $9,829
during 2013. Steak n Shake's total obligations under leases have decreased as
the leases mature. The total obligations under leases outstanding at the end of
2014 and 2013 were $106,189 and $112,486, respectively.


                                       20

--------------------------------------------------------------------------------

Table of Contents

Insurance


First Guard is a direct underwriter of commercial trucking insurance, selling
physical damage and nontrucking liability insurance to truckers. Earnings of our
insurance business are summarized below.


                                 2015        2014
Premiums written               $ 16,719     $ 8,719
Insurance losses                 10,454       4,709
Underwriting expenses             2,908       2,213

Pre-tax underwriting gain         3,357       1,797
Other income and expenses
  Commissions                       360         343
  Investment income                 153         227
  Other expenses                   (341 )         -
  Total other income                172         570
Earnings before income taxes      3,529       2,367
Income tax expense                1,216         808
Contribution to net earnings   $  2,313     $ 1,559



On March 19, 2014, First Guard became a wholly-owned subsidiary of Biglari
Holdings; thus, First Guard's inclusion is from the acquisition date in the
first quarter of 2014. First Guard's insurance products are marketed primarily
through direct response methods via the Internet or by telephone.  First Guard's
cost-efficient direct response marketing methods enable it to be a low-cost
trucking insurer.

Premiums written during 2015 was $16,719, an increase of $8,000 compared to 2014. On September 1, 2014 and 2015, we substantially reduced insurance premiums ceded to our reinsurer through quota-share contracts.

Pre-tax underwriting gain was $3,357 in 2015 compared to $1,797 in 2014, an increase of 86.8%. The increase in pre-tax underwriting gain was mainly based on higher net premiums written.



                                       21

--------------------------------------------------------------------------------

Table of Contents

Media

Maxim's business lies principally in media and licensing. Earnings of our media operations are summarized below.


                                                 2015          2014
Revenue                                        $  24,482     $  15,169

Media cost of sales                               35,614        28,660
Selling, general and administrative expenses       6,677         7,626
Depreciation and amortization                        296           362
Loss before income taxes                         (18,105 )     (21,479 )
Income tax benefit                                (6,646 )      (8,075 )
Contribution to net earnings                   $ (11,459 )   $ (13,404 )


On February 27, 2014, we acquired the assets of Maxim; thus, Maxim's inclusion is from the acquisition date in the first quarter of 2014.


We acquired Maxim with the idea of transforming the brand. We continue to make
investments into the brand, many of which are reflected in the reported
expenses. We have been rebuilding Maxim's media business, both in print and in
digital, as well as developing a licensing business. We have been making
adjustments in operations to reduce dramatically the high fixed costs inherent
in the media business. The magazine developed the Maxim brand, a franchise we
are utilizing to build cash-generating businesses, namely licensing royalties
related to consumer products, services, and events.

We have taken the risk on the belief that the probability for gain in value more than justifies the risk of loss.

                                       22

--------------------------------------------------------------------------------

Table of Contents

Investment Gains

Earnings from our investments are summarized below.


                                                            Transition Period                  Fiscal Year
                           2015          2014           2014                2013           2014          2013
Gain on contributions
to partnerships         $        -     $  29,524     $         -         $         -     $  29,524     $ 182,746
Gain on sale of
Biglari Capital Corp.            -             -               -                   -             -         1,597
Realized investment
gains                            -             -               -                   -             -             1
Other than temporary
impairment                       -             -               -                   -             -          (570 )
Total gain before tax
expense                          -        29,524               -                   -        29,524       183,774
Tax expense                      -        11,219               -                   -        11,219        68,206
Contribution to net
earnings                $        -     $  18,305     $         -         $         -     $  18,305     $ 115,568



Investment gains/losses in any given period will vary; therefore, for analytical
purposes, management measures operating performance by analyzing earnings before
realized and unrealized investment gains/losses.

On July 1, 2013, Biglari Holdings sold all of the outstanding shares of Biglari
Capital Corp. to Mr. Biglari, Chairman and CEO of Biglari Holdings, and recorded
a gain of $1,597. Biglari Capital Corp. is the general partner of The Lion Fund,
L.P. and The Lion Fund II, L.P. (collectively "investment partnerships"). The
investment partnerships are limited partnerships operating as private investment
funds. The Company has a limited interest in each of the partnerships.

Biglari Holdings recognized non-cash pre-tax gains of $29,524 ($18,305 net of
tax) during 2014 and $182,746 ($114,931 net of tax) during fiscal year 2013 on
the contribution of securities to investment partnerships. Biglari Holdings'
management does not regard the gains that were recorded, as required by
generally accepted accounting principles, as meaningful. The gains recognized
for financial reporting purposes are deferred for income tax purposes. These
transactions essentially had no effect on our consolidated shareholders' equity
because the gains included in earnings were accompanied by a corresponding
reduction of unrealized investment gains included in accumulated other
comprehensive income.

Investment Partnership Gains (Losses)

Earnings from our investments in partnerships are summarized below.


                                                       Transition Period    

Fiscal Year

                          2015          2014          2014          2013          2014          2013
Investment
partnership gains
(losses)                $ (39,356 )   $ 135,264     $ 144,702     $  23,493     $  14,055     $  20,068
Gains from
consolidated
affiliated
partnerships                    -             -             -             -             -         3,903
Earnings attributable
to noncontrolling
interests                       -             -             -             -             -        (1,901 )
Total partnership
gains before tax
expense                   (39,356 )     135,264       144,702        23,493        14,055        22,070
Tax (benefit) expense     (21,188 )      47,273        53,511         7,977         1,739         7,533
Contribution to net
earnings                $ (18,168 )   $  87,991     $  91,191     $  15,516     $  12,316     $  14,537


The investment partnerships concentrate investments, which expose them to more market price fluctuations than might be the case were investments more diversified.


The investment partnerships hold the Company's common stock as investments. The
Company's pro-rata share of its common stock held by the investment partnerships
is recorded as treasury stock even though these shares are legally
outstanding. Gains and losses on Company common stock included in the earnings
of the partnerships are eliminated.

Prior to the sale of Biglari Capital Corp., the Company held a controlling
interest in The Lion Fund, L.P. and Western Acquisitions, L.P. (the
"consolidated affiliated partnerships"), and we accounted for the partnerships'
gains and losses in our consolidated financial statements. As a result of the
sale of Biglari Capital Corp., the Company no longer has a controlling interest
in the consolidated affiliated partnerships. Because we ceased to have a
controlling interest in the consolidated affiliated partnerships, these entities
were no longer consolidated in the Company's financial statements. From July 1,
2013, we record gains/losses from investment partnerships (inclusive of the
investment partnerships' unrealized gains and losses on the securities) in the
consolidated statements of earnings based on the carrying value of our
proportional ownership interests in the investment partnerships.


                                       23

--------------------------------------------------------------------------------

Table of Contents

Interest Expense

The Company's interest expense is summarized below.


                                                       Transition Period               Fiscal Year
                          2015          2014           2014          2013          2014          2013
Interest expense on
notes payable           $ (11,939 )   $ (10,797 )   $   (3,272 )   $  (1,641 )   $  (9,166 )   $  (6,551 )
Loss on debt
extinguishment                  -        (1,133 )            -             -        (1,133 )           -
Total interest
expense                   (11,939 )     (11,930 )       (3,272 )      (1,641 )     (10,299 )      (6,551 )
Tax expense (benefit)      (4,537 )      (4,533 )       (1,243 )        (624 )      (3,914 )      (2,489 )
Contribution to net
earnings                $  (7,402 )   $  (7,397 )   $   (2,029 )   $  (1,017 )   $  (6,385 )   $  (4,062 )



Interest expense during 2015 was $11,939 compared to $10,797 during 2014. The
outstanding balance on Steak n Shake's credit facility on December 31, 2015 was
$212,375 compared to $218,350 on December 31, 2014. The decrease in the
outstanding balance was primarily due to debt payments of $4,325 in December
2015. Steak n Shake entered into a new credit facility on March 19, 2014, which
increased the outstanding balance by $107,850. The interest rate was 4.75% on
December 31, 2015 and December 31, 2014.

Interest expense increased from $1,641 in the 2013 transition period to $3,272
in the 2014 transition period due to higher balances and interest during the
2014 transition period.

Interest expense increased from $6,551 in fiscal year 2013 to $9,166 during
fiscal year 2014. These increases primarily pertained to higher balances and
interest on Steak n Shake's current credit facility, entered into on March 19,
2014, compared to Steak n Shake's former credit facility. The outstanding
balance on September 24, 2014 was $219,450 with a 4.75% interest rate, as
compared to $120,250 with a 3.94% interest rate on September 25, 2013.

The loss on extinguishment of debt for 2014 of $1,133 related to the write-off
of deferred loan costs associated with Steak n Shake's then outstanding credit
facilities.

Corporate

Corporate expenses exclude the activities in the restaurant, insurance, media
and other companies. Corporate net losses during 2015 were $8,309 versus net
losses of $5,502 during 2014. The increase in net losses during 2015 was
primarily attributable to proxy costs and legal expenses.

Corporate net losses during the 2014 transition period were $2,051 versus net losses of $2,060 during the 2013 transition period.

Corporate net losses during fiscal year 2014 were $5,511 versus a net loss of $12,515 during fiscal year 2013. The after-tax loss decreased in 2014 as compared to 2013 primarily because of a decrease in incentive compensation.

Income Tax Expense


Consolidated income tax was a benefit of $21,588 or 57.7% of pretax income in
2015 versus an expense of $55,312 or 35.4% in 2014. The tax benefit recorded
during 2015 included a deferred tax benefit of $26,476, primarily due to
non-cash, pretax losses from investment partnerships. The tax expense recorded
during 2014 included a deferred tax expense of $55,450, primarily due to
non-cash, pretax gains from investment partnerships.

Consolidated income tax expense was 37.5% of pretax income in the 2014
transition period, versus 33.3% in the 2013 transition period. The increase in
the Company's tax rate in the 2014 transition period as compared to the 2013
transition period was primarily attributable to increased income from investment
partnerships.

Consolidated income tax expense was 26.2% of pretax income during 2014, versus
34.3% in 2013.  The decrease in the Company's tax rate in 2014 as compared to
2013 was primarily attributable to reduced contributions of securities to
investment partnerships.  The Company recognized gains of $29,524 during 2014
and $182,746 during 2013 on the contribution of securities to investment
partnerships. In 2014 and 2013, gains on contributions to investment
partnerships were taxed at 38.0% and 37.1%, respectively.


                                       24

--------------------------------------------------------------------------------

Table of Contents

Financial Condition


Our balance sheet continues to maintain significant liquidity. Our consolidated
shareholders' equity on December 31, 2015 was $451,372, a decrease of $274,179
compared to the December 31, 2014 balance. The decrease during 2015 was
primarily attributable to an increase in treasury stock. In 2015, The Lion Fund
II, L.P. completed a tender offer for 616,312 shares of Biglari Holdings common
stock. The shares purchased in the tender offer are legally outstanding but
under accounting convention the Company's proportional ownership of the shares
is reflected as treasury shares in the consolidated financial statements.

Consolidated cash and investments are summarized below.

                                                                       December 31,
                                                                    2015          2014
Cash and cash equivalents                                        $   56,523     $ 129,669
Investments                                                          23,750        10,800
Fair value of interest in investment partnerships                   734,668 

776,899

Total cash and investments                                          814,941 

917,368

Less: portion of Company stock held by investment partnerships (262,979 ) (78,917 ) Carrying value of cash and investments on balance sheet $ 551,962

$ 838,451




The Company owns interests in investment partnerships that hold the Company's
common stock for investment purposes. However, the Company's pro-rata share of
its common stock held by the investment partnerships is recorded as treasury
stock. Unrealized gains/losses of Biglari Holdings' stock held by the investment
partnerships are eliminated in the Company's results.

Liquidity

                                                         Transition Period              Fiscal Year
                           2015           2014          2014          2013           2014          2013
Net cash provided by
operating activities    $   52,497     $   27,872     $   5,643     $   5,346     $   27,575     $  38,792
Net cash (used in)
provided by investing
activities                (113,300 )     (163,512 )       2,484        (4,764 )     (170,760 )     (60,765 )
Net cash (used in)
provided by financing
activities                 (12,307 )      180,140        (2,745 )     (10,020 )      172,865        56,343
Effect of exchange
rate changes on cash           (36 )         (308 )          (3 )         289            (16 )        (103 )
Increase (decrease)
in cash and cash
equivalents             $  (73,146 )   $   44,192     $   5,379     $  

(9,149 ) $ 29,664 $ 34,267




Cash provided by operating activities increased by $24,625 during 2015 compared
to 2014. The increase during 2015 was primarily due to an increase in
distributions from investment partnerships of $10,904 and an increase in the net
earnings of the Company's restaurant operations of $8,700. Cash provided by
operating activities during the 2014 transition period was $5,643 compared to
$5,346 during the 2013 transition period. During fiscal year 2014 cash flows
from operations primarily consisted of $23,470 of cash flows from earnings
(excluding gains) and $10,340 of cash dividends from investment partnerships.
During fiscal year 2013 cash flows from earnings (excluding gains) was $40,234.

Net cash used in investing activities during 2015 of $113,300 was primarily due
to $88,500 in contributions to investment partnerships and capital expenditures
of $11,083. Net cash used in investing activities during 2014 of $163,512 was
primarily due to $100,000 in contributions to investment partnerships, $40,143
for the acquisitions of businesses and capital expenditures of $39,345. Net cash
provided by investing activities during the 2014 transition period of $2,484 was
primarily because of maturities of bonds of $11,748 offset by capital
expenditures of $8,816. Net cash used in investing activities of $4,764 during
the 2013 transition period primarily consisted of capital expenditures of
$5,283. Net cash used in investing activities during fiscal year 2014 was
primarily because of contributions to investment partnerships of $100,000,
acquisitions of businesses of $40,143 and capital expenditures of $35,812. Net
cash used in investing activities of $60,765 during fiscal year 2013 primarily
consisted of purchases of investments of $45,277 and capital expenditures of
$14,167.


                                       25

--------------------------------------------------------------------------------

Table of Contents


During 2015 and the 2014 transition period we incurred debt payments of $12,529
and $2,748, respectively. During the 2013 transition period we incurred debt
payments of $17,020 and received $7,000 from a revolving credit facility. During
calendar year 2014 and fiscal year 2014 we generated cash from financing
activities which primarily resulted from an increase in Steak n Shake borrowings
of $101,411 and proceeds from an equity offering of $85,873. $50,000 of Steak n
Shake's increased borrowings were used to pay a cash dividend to Biglari
Holdings and the remaining loan proceeds will be used by Steak n Shake for
working capital and general corporate purposes. During fiscal year 2013 we
generated $75,595 of cash from financing activities from an equity offering.

We intend to meet the working capital needs of our operating subsidiaries principally through anticipated cash flows generated from operations, cash on hand, existing credit facilities, and the sale of excess properties and investments. We continually review available financing alternatives.


Steak n Shake Credit Facility
On March 19, 2014, Steak n Shake and its subsidiaries entered into a new credit
agreement. This credit agreement provides for a senior secured term loan
facility in an aggregate principal amount of $220,000 and a senior secured
revolving credit facility in an aggregate principal amount of up to $30,000.

The term loan is scheduled to mature on March 19, 2021. It amortizes at an
annual rate of 1.0% in equal quarterly installments, beginning June 30, 2014, at
0.25% of the original principal amount of the term loan, subject to mandatory
prepayments from excess cash flow, asset sales and other events described in the
credit agreement. The balance will be due at maturity. The revolver will be
available on a revolving basis until March 19, 2019.

Steak n Shake has the right to request an incremental term loan facility from
participating lenders and/or eligible assignees at any time, up to an aggregate
total principal amount not to exceed $70,000 if certain customary conditions
within the credit agreement are met.

Borrowings bear interest at a rate per annum equal to a base rate or a
Eurodollar rate (minimum of 1%) plus an applicable margin. Interest on the term
loan is based on a Eurodollar rate plus an applicable margin of 3.75% or on the
prime rate plus an applicable margin of 2.75%. Interest on loans under the
revolver is based on a Eurodollar rate plus an applicable margin ranging from
2.75% to 4.25% or on the prime rate plus an applicable margin ranging from 1.75%
to 3.25%. The applicable margins on revolver loans are contingent on Steak n
Shake's total leverage ratio. The revolver also carries a commitment fee ranging
from 0.40% to 0.50% per annum, according to Steak n Shake's total leverage
ratio, on the unused portion of the revolver.

As of December 31, 2015, the interest rate on the term loan was 4.75%.


The credit agreement includes customary affirmative and negative covenants and
events of default, as well as a financial maintenance covenant, solely with
respect to the revolver, relating to the maximum total leverage ratio. As of
December 31, 2015, we were in compliance with all covenants. Steak n Shake's
credit facility contains restrictions on its ability to pay dividends to Biglari
Holdings.

Both the term loan and the revolver have been secured by first priority security
interests on substantially all the assets of Steak n Shake. Biglari Holdings is
not a guarantor under the credit facility. Approximately $118,589 of the
proceeds of the term loan were used to repay all outstanding amounts under Steak
n Shake's former credit facility and to pay related fees and expenses, $50,000
of such proceeds were used to pay a cash dividend to Biglari Holdings, and the
remaining term loan proceeds of approximately $51,411 are being used by Steak n
Shake for working capital and general corporate purposes. At December 31, 2015,
$212,375 was outstanding under the term loan, and no amount is outstanding under
the revolver.

Steak n Shake had $10,188 in standby letters of credit outstanding as of December 31, 2015 and December 31, 2014.


Western Revolver
As of December 31, 2015, Western has $786 due June 13, 2016.

Interest Rate Swap
During 2013, Steak n Shake entered into an interest rate swap for a notional
amount of $65,000, which terminated on September 30, 2015. During fiscal year
2011, Steak n Shake entered into an interest rate swap agreement for a notional
amount of $20,000. The notional amount decreases $1,000 quarterly through its
maturity on February 15, 2016. The notional amount of the interest rate swap was
$1,000 on December 31, 2015.


                                       26

--------------------------------------------------------------------------------

Table of Contents


Critical Accounting Policies
Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. Certain accounting policies require management to make estimates
and judgments concerning transactions that will be settled several years in the
future. Amounts recognized in our consolidated financial statements from such
estimates are necessarily based on numerous assumptions involving varying and
potentially significant degrees of judgment and uncertainty. Accordingly, the
amounts currently reflected in our consolidated financial statements will likely
increase or decrease in the future as additional information becomes available.

We believe the following critical accounting policies represent our more significant judgments and estimates used in preparation of our consolidated financial statements. Given the current composition of our business, we do not believe that any accounting policies related to our insurance or media businesses were critical to the preparation of our consolidated financial statements as of and for the year ended December 31, 2015.

Consolidation

The consolidated financial statements include the accounts of (i) Biglari
Holdings Inc., (ii) the wholly-and majority-owned subsidiaries of Biglari
Holdings Inc. in which control can be exercised and (iii) limited partnership
investment entities in which we have a controlling interest as the general
partner. In evaluating whether we have a controlling interest in entities in
which we would consolidate, we consider the following: (1) for voting interest
entities, we consolidate those entities in which we own a majority of the voting
interests; and (2) for limited partnership entities, we consolidate those
entities if we are the general partner of such entities and for which no
substantive removal rights exist. The analysis as to whether to consolidate an
entity is subject to a significant amount of judgment. Some of the criteria
considered include the determination as to the degree of control over an entity
by its various equity holders and the design of the entity.

Before the sale of Biglari Capital and liquidation of Western Acquisitions,
L.P., the Company consolidated its affiliated partnerships in its consolidated
financial statements, which included the accounts of (i) the Company, (ii) its
wholly-owned subsidiaries Biglari Capital, Steak n Shake, and Western, and (iii)
The Lion Fund, L.P. and Western Acquisitions, L.P. (the "consolidated affiliated
partnerships"), in which the Company had a substantive controlling interest. As
a result of the sale of Biglari Capital and the related liquidation of Western
Acquisitions, L.P., the Company has ceased to have a controlling interest in the
consolidated affiliated partnerships, which, accordingly, are no longer
consolidated in the Company's financial statements. Beginning July 1, 2013, the
consolidated financial statements only include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany accounts and transactions are
eliminated in consolidation.

Prior to July 1, 2013 the consolidated affiliated partnerships' assets and liabilities were consolidated on the consolidated balance sheet even though outside limited partners had majority ownership in the consolidated affiliated partnerships. The Company did not guarantee any of the liabilities of its subsidiaries that were serving as general partners to these consolidated affiliated partnerships.


Beginning July 1, 2013, 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
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.

Impairment of Long-lived Assets
We review company-operated restaurants for impairment on a
restaurant-by-restaurant basis when events or circumstances indicate a possible
impairment. 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. 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.


                                       27

--------------------------------------------------------------------------------

Table of Contents


Insurance Reserves
We currently self-insure a significant portion of expected losses under our
workers' compensation, general liability, directors' and officers' liability,
and auto liability insurance programs. For certain programs, we purchase
reinsurance for individual and aggregate claims that exceed predetermined
limits. We record a liability for all unresolved claims and our estimates of
incurred but not reported ("IBNR") claims at the anticipated cost to us. The
liability estimate is based on information received from insurance companies,
combined with management's judgments regarding frequency and severity of claims,
claims development history, and settlement practices. Significant judgment is
required to estimate IBNR claims as parties have yet to assert a claim, and
therefore the degree to which injuries have been incurred and the related costs
have not yet been determined. Additionally, estimates about future costs involve
significant judgment regarding legislation, case jurisdictions, and other
matters.

We self-insure our group health insurance risk. We record a liability for our
group health insurance for all applied claims and our estimate of claims
incurred but not yet reported. Our estimate is based on information received
from our insurance company and claims processing practices.

Our reserves for self-insured liabilities at December 31, 2015 and December 31, 2014 were $8,485 and $9,787, respectively.


Income Taxes
We record deferred tax assets or liabilities based on differences between
financial reporting and tax basis of assets and liabilities using currently
enacted rates and laws that will be in effect when the differences are expected
to reverse. We record deferred tax assets to the extent we believe there will be
sufficient future taxable income to utilize those assets prior to their
expiration. To the extent deferred tax assets would be unable to be utilized, we
would record a valuation allowance against the unrealizable amount and record
that amount as a charge against earnings. Due to changing tax laws and state
income tax rates, significant judgment is required to estimate the effective tax
rate expected to apply to tax differences that are expected to reverse in the
future. We must also make estimates about the sufficiency of taxable income in
future periods to offset any deductions related to deferred tax assets currently
recorded. Based on 2015 results, a change of one percentage point in the annual
effective tax rate would have an impact of $374 on net earnings.

We recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate resolution.

Goodwill and Other Intangible Assets
We are required to assess goodwill and any indefinite-lived intangible assets
for impairment annually, or more frequently if circumstances indicate impairment
may have occurred.  When evaluating goodwill for impairment, we may first
perform a qualitative assessment to determine whether it is more likely than not
that a reporting unit is impaired. If we do not perform a qualitative
assessment, or if we determine that it is not more likely than not that the fair
value of the reporting unit exceeds its carrying amount, we test for potential
impairment using a two-step approach.  The first step is the estimation of fair
value of each reporting unit. If step one indicates that impairment potentially
exists, the second step is performed to measure the amount of impairment, if
any. Goodwill impairment exists when the estimated fair value of goodwill is
less than its carrying value. The valuation methodology and underlying financial
information included in our determination of fair value require significant
management judgments. We use both market and income approaches to derive fair
value. The judgments in these two approaches include, but are not limited to,
comparable market multiples, long-term projections of future financial
performance, and the selection of appropriate discount rates used to determine
the present value of future cash flows. Changes in such estimates or the
application of alternative assumptions could produce significantly different
results.

Leases

Restaurant operations lease certain properties under operating leases. Many of
these lease agreements contain rent holidays, rent escalation clauses and/or
contingent rent provisions. Rent expense is recognized on a straight-line basis
over the expected lease term, including cancelable option periods when failure
to exercise such options would result in an economic penalty. We use a time
period for straight-line rent expense calculation that equals or exceeds the
time period used for depreciation. In addition, the rent commencement date of
the lease term is the earlier of the date when they become legally obligated for
the rent payments or the date when they take access to the grounds for build
out. Accounting for leases involves significant management judgment.


                                       28

--------------------------------------------------------------------------------

Table of Contents


Effects of Governmental Regulations and Inflation
Most restaurant operations employees are paid hourly rates related to minimum
wage laws. Any increase in the legal minimum wage would directly increase our
operating costs. We are also subject to various laws related to zoning, land
use, health and safety standards, working conditions, and accessibility
standards. Any changes in these laws that require improvements to our
restaurants would increase our operating costs.

Inflation in food, labor, fringe benefits, energy costs, transportation costs and other operating costs directly affect our operations.


The federal healthcare reform legislation that became law in March 2010 (known
as the Patient Protection and Affordable Care Act ["PPACA"]) mandates menu
labeling of certain nutritional aspects of restaurant menu items such as
caloric, sugar, sodium, and fat content. Altering our recipes in response to
such legislation could increase our costs and/or change the flavor profile of
our menu offerings which could have an adverse impact on our results of
operations. Additionally, if our customers perceive our menu items to contain
unhealthy caloric, sugar, sodium, or fat content, our results of operations
could be further adversely affected.

Additionally, minimum employee health care coverage mandated by state or federal
legislation, such as the PPACA, could significantly increase our employee health
benefit costs or require us to alter the benefits we provide to our employees.
While we are assessing the potential impact the PPACA will have on our business,
certain of the mandates in the legislation are not yet effective. If our
employee health benefit costs increase, we cannot provide assurance that we will
be able to offset these costs through increased revenue or reductions in other
costs, which could have an adverse effect on our results of operations and
financial condition.

Contractual Obligations
Our significant contractual obligations and commitments as of December 31, 2015
are shown in the following table.

                                                              Payments due by period
                                   Less than                                          More than
Contractual Obligations             1 year         1 - 3 years       3 - 5 years       5 years         Total
Long-term debt (1) (2)            $    13,982     $      26,179     $      25,908     $  204,045       270,114
Capital leases and finance
obligations (1)                        14,843            23,657            13,321          6,832        58,653
Operating leases (3)                   16,993            30,212            25,860         57,940       131,005
Purchase commitments (4)                4,973             2,623                 -              -         7,596
Other long-term liabilities (5)             -                 -                 -          2,184         2,184
Total                             $    50,791     $      82,671     $      65,089     $  271,001     $ 469,552


(1) Includes principal and interest and assumes payoff of indebtedness at maturity date. (2) Includes outstanding borrowings under Steak n Shake's and Western's credit

facilities.

(3) Excludes amounts to be paid for contingent rents. Includes amounts to be paid for

subleased properties. (4) Includes agreements to purchase goods or services that are enforceable and legally

binding on us and that specify all significant terms. Excludes agreements that are

cancelable without penalty. (5) Includes liabilities for Non-Qualified Deferred Compensation Plan. Excludes our

unrecognized tax benefits of $413 as of December 31, 2015 because we cannot make a

reliable estimate of the timing of cash payments.




Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements other than operating leases entered
into in the normal course of business.

Recently Issued Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and
the expected impact on our consolidated financial statements, see Note 1,
"Summary of Significant Accounting Policies" in the accompanying notes to
consolidated financial statements included in Part II, Item 8 of this report on
form 10-K.


                                       29

--------------------------------------------------------------------------------

Table of Contents


Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In general, forward-looking
statements include estimates of future revenues, cash flows, capital
expenditures, or other financial items, and assumptions underlying any of the
foregoing. Forward-looking statements reflect management's current expectations
regarding future events and use words such as "anticipate," "believe," "expect,"
"may," and other similar terminology. A forward-looking statement is neither a
prediction nor a guarantee of future events or circumstances, and those future
events or circumstances may not occur. Investors should not place undue reliance
on the forward-looking statements, which speak only as of the date of this
report. These forward-looking statements are all based on currently available
operating, financial, and competitive information and are subject to various
risks and uncertainties. Our actual future results and trends may differ
materially depending on a variety of factors, many beyond our control,
including, but not limited to, the risks and uncertainties described in Item 1A,
Risk Factors set forth above. We undertake no obligation to publicly update or
revise them, except as may be required by law.

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
share via e-mail
0
React to this article
Latest news on BIGLARI HOLDINGS INC
02/22 BIGLARI : Regulation FD Disclosure (form 8-K)
02/22 BIGLARI : Management's Discussion and Analysis of Financial Condition and Result..
02/20 BIGLARI : News Release
02/20 BIGLARI : 2015 Annual Report
2015 BIGLARI : Other Events, Financial Statements and Exhibits (form 8-K)
2015 BIGLARI : Cracker Barrel holds shareholders meeting
2015 BIGLARI : Management's Discussion and Analysis of Financial Condition and Result..
2015 BIGLARI : posts 3Q profit
2015 BIGLARI : Results of Operations and Financial Condition, Financial Statements an..
2015 BIGLARI : News Release
Advertisement
News chart
Full-screen chart