10-K/A: Biglari Holdings Files Amended 10-K to Include Lion Fund II Financials

Biglari Holdings has filed an amendment to its annual report to include the audited financial statements of The Lion Fund II, L.P.

Summary

• Biglari Holdings has amended its original 10-K filing for the fiscal year ended December 31, 2023, to include the audited financial statements of The Lion Fund II, L.P.
• The Lion Fund II's financial statements were not available at the time of the original filing and are being included as an amendment within 90 days of the fund's fiscal year end, as required by SEC rules.
• The amendment includes updated certifications from the company's CEO and Controller.
• The Lion Fund II's total assets were $373,302,411 as of December 31, 2023, compared to $330,832,429 in 2022.
• The fund's net increase in partners' capital resulting from operations was $21,135,260 in 2023, a significant improvement from a loss of $82,534,045 in 2022.
• The fund's investment portfolio includes significant holdings in Ferrari N.V., Cracker Barrel Old Country Store, Inc., El Pollo Loco, and Jack in the Box Inc.

Sentiment

Score: 7

Explanation: The document shows a positive turnaround in the fund's performance, but the high level of margin debt and the previous year's losses temper the overall sentiment. The inclusion of the financials is a positive step for transparency.

Positives

• The Lion Fund II saw a significant turnaround in its net increase in partners' capital from operations, moving from a loss of $82.5 million in 2022 to a gain of $21.1 million in 2023.
• The fund's total assets increased by over $42 million year-over-year.
• The fund's investment portfolio includes well-known consumer and restaurant brands.

Negatives

• The fund has a substantial margin debt balance of $184.7 million.
• The fund experienced a significant loss in 2022, highlighting potential volatility.
• The fund did not earn a performance reallocation during 2023, 2022 or 2021.

Risks

• The fund's reliance on margin debt exposes it to interest rate risk and potential margin calls.
• The fund's performance is subject to market fluctuations and the performance of its specific investments.
• The concentration of investments in a few key sectors could increase risk.

Future Outlook

This Form 10-K/A does not attempt to modify or update any other disclosures set forth in the Original Filing, except as required to reflect the additional information included in Part IV, Item 15 of this Form 10-K/A. Additionally, this Form 10-K/A, except for the additional information included in Part IV, speaks as of the filing date of the Original Filing and does not update or discuss any other Company developments subsequent to the date of the Original Filing.

Management Comments

• Sardar Biglari, Chairman and CEO, certified that the report does not contain any untrue statements and fairly presents the financial condition of the company.
• Bruce Lewis, Controller, also certified the accuracy and fairness of the financial statements.

Industry Context

The inclusion of The Lion Fund II's financials provides greater transparency into Biglari Holdings' investment activities, which is relevant for investors tracking the performance of investment funds and holding companies.

Comparison to Industry Standards

• The Lion Fund II's performance can be compared to other investment partnerships and hedge funds, particularly those with similar investment strategies.
• The fund's holdings in consumer and restaurant stocks are common among value-oriented investment funds.
• The use of margin debt is a common practice in the investment industry, but the level of debt should be compared to industry benchmarks to assess risk.
• The fund's total return of 12.67% in 2023 is a key metric to compare against industry averages and benchmarks such as the S&P 500.

Related Party Transactions

• The General Partner is entitled to a performance reallocation of 25% of the increase in net assets annually, subject to a 6% performance hurdle rate and a high-water mark provision.
• Sardar Biglari is the Chairman, Chief Executive Officer and sole owner of the General Partner, and also the Chairman and Chief Executive Officer of Biglari Holdings Inc.
• Biglari Holdings is a limited partner in the Fund and is subject to a performance reallocation.
• The General Partner of the Fund also serves as the General Partner of The Lion Fund, L.P., which is a limited partner in the Fund and is not subject to a performance reallocation.

Stakeholder Impact

• Shareholders of Biglari Holdings will have more complete information about the company's investment activities.
• Limited partners in The Lion Fund II will be able to assess the fund's performance based on the audited financial statements.
• The inclusion of the financials increases transparency for all stakeholders.

Next Steps

• Biglari Holdings will continue to file reports with the SEC.
• The Lion Fund II will continue to manage its investment portfolio.

Key Dates

Keywords

Biglari Holdings, Lion Fund II, Financial Statements, Amendment, Investment Fund, Audited Financials, Partners Capital, Ferrari, Cracker Barrel, Restaurant Stocks