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Consolidated Affiliated Partnerships

9 Months Ended

Jul. 06, 2011

Consolidated Affiliated Partnerships Disclosure [Abstract]

8. Consolidated Affiliated Partnerships

Collectively, The Lion Fund L.P., Western Acquisitions, L.P., Mustang Capital Partners I, L.P. and Mustang Capital Partners II, L.P. are referred to as consolidated affiliated partnerships of the Company. Investments held directly by the consolidated affiliated partnerships usually consist of domestic equity securities. Certain of the consolidated affiliated partnerships hold the Company’s common stock as investments. In our condensed consolidated financial statements, the Company classifies this common stock as Treasury stock despite the shares being legally outstanding. As stated in Note 2, certain of the consolidated affiliated partnerships held the Company’s Debentures as investments. These Debentures were redeemed by the Company on March 30, 2011. Refer to Note 14 for further information. As of July 6, 2011 and September 29, 2010, the consolidated affiliated partnerships held 205,743 shares of the Company’s common stock ($69,221 at cost) and $0 and $7,540 of Debentures, respectively.

Consolidated net earnings of the Company include the realized and unrealized appreciation and depreciation of the investments held by consolidated affiliated partnerships, other than realized and unrealized appreciation and depreciation of investments the consolidated affiliated partnerships hold in the Company’s debt and equity securities which has been eliminated in consolidation.

Throughout fiscal year 2010, Biglari Holdings invested a total of $35,697 in the Lion Fund, both in the form of the acquisition of the general partner and as a direct limited partner investment. The fair value of these investments in the Lion Fund totaled $48,414 at July 6, 2011. These investments in the Lion Fund do not appear explicitly in the Company’s condensed consolidated Balance Sheet because of the requirement to consolidate fully the Lion Fund (inclusive of third party interests) in the Company’s financial statements. Further, the Lion Fund’s portfolio holds significant interests in Biglari Holdings’ common stock, which as described above is classified on the Company’s condensed consolidated Balance Sheet as a reduction to Shareholders’ equity. Biglari Holdings’ pro-rata ownership of its Company common stock through the Lion Fund was 100,374 shares of stock (with a fair value of $39,251) based on Biglari Holdings’ ownership interest in the Lion Fund on July 6, 2011.

The following table summarizes the cost and fair value of the investments held by the consolidated affiliated partnerships, other than holdings of the Company’s debt and equity securities:

	July 6, 2011		September 29, 2010
Equity securities:
Cost	$	18,174	$	14,725
Fair value	$	19,483	$	15,627

Investments held by consolidated affiliated partnerships on the condensed consolidated Balance Sheet includes $2,754 and $7,870 of cash and cash equivalents that are only available for use by the consolidated affiliated partnerships at July 6, 2011 and September 29, 2010, respectively.

Realized investment gains/losses arise when investments are sold (as determined on a specific identification basis). The gross unrealized gains/losses and net realized gains/losses from investments held by consolidated affiliated partnerships, other than holdings of the Company’s debt and equity securities, were as follows:

	Twelve Weeks Ended				Forty Weeks Ended

	July 6, 2011		July 7, 2010		July 6, 2011		July 7, 2010
Gross unrealized gains	$ 1,064		$ 137		$ 1,504		$ 137
Gross unrealized losses	$ (582	)	$ (2,021	)	$ (643	)	$ (2,021	)
Net realized gains/losses from sale	$ 749		$ 209		$ 3,316		$ 209

The limited partners of each of the investment funds have the ability to redeem their capital upon certain occurrences; therefore, the ownership of the investment funds held by the limited partners is presented as Redeemable noncontrolling interests of consolidated affiliated partnerships and measured at the greater of carrying value or fair value on the accompanying condensed consolidated Balance Sheet. The maximum redemption amount of the redeemable noncontrolling interests as of July 6, 2011 is $50,309.

The following is a reconciliation of the redeemable noncontrolling interests in the consolidated affiliated partnerships.

Carrying value at September 29, 2010	$	62,245
Contributions from noncontrolling interests		1,018
Distributions to noncontrolling interests		(17,274	)
Incentive fee reallocation	(2,510		)
Income / loss allocation	2,559
Adjustment to noncontrolling interests to reflect maximum redemption value	4,271
Carrying value at July 6, 2011	$ 50,309

The Company, through its ownership of Biglari Capital and Western Investments, is entitled to an incentive fee reallocation to the extent investment performance of the consolidated affiliated partnerships exceeds specified hurdle rates. Any such reallocation is included in net earnings attributable to the Company in the period the reallocation is earned.

Biglari Capital, the general partner of the Lion Fund, earned a $5,199 incentive allocation fee; however, $2,689 is eliminated, for that amount represents the Company’s fee as a limited partner, which is uncharged because the Company owns the general partner. The remaining $2,510 is an incentive fee that is charged and reallocated from outside limited partners of the Lion Fund. The incentive fee is assessed only once a year in the calendar year end quarter, and no predictability of such earnings exists because the Lion Fund annual performance is unpredictable.

Net earnings attributable to the Company only includes the Company’s share of earnings and losses related to our investments in the consolidated affiliated partnerships; all other earnings or losses from the consolidated affiliated partnerships are allocated to the redeemable noncontrolling interests.

During the first quarter of fiscal year 2011, Mustang Capital Partners I, L.P. and Mustang Capital Partners II, L.P. were liquidated, and their funds were distributed to the partners. The distribution of $15,660, including $1,421 of noncash distributions, is noted in the Distributions to noncontrolling interests line in the above reconciliation.