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Note 5. Investment Partnerships

12 Months Ended

Dec. 31, 2015

The fair value and adjustment for Company common stock held by the investment partnerships to determine carrying value of our partnership interest is presented below.

	Fair Value			Company Common Stock			Carrying Value
Partnership interest at July 1, 2013	$	54,608		$	43,580		$	11,028
Investment partnership gains		23,053			2,985			20,068
Contributions of cash and securities to investment partnerships		377,636			—			377,636
Increase in proportionate share of Company stock held		—			11,033			(11,033	)
Partnership interest at September 25, 2013	$	455,297		$	57,598		$	397,699
Investment partnership gains (losses)		1,436			(12,619	)		14,055
Contributions of cash and securities (net of distributions of $10,340)		164,078			—			164,078
Increase in proportionate share of Company stock held		—			18,594			(18,594	)
Partnership interest at September 24, 2014	$	620,811		$	63,573		$	557,238
Investment partnership gains		156,088			11,386			144,702
Increase in proportionate share of Company stock held		—			3,958			(3,958	)
Partnership interest at December 31, 2014	$	776,899		$	78,917		$	697,982
Investment partnership losses		(110,956	)		(71,600	)		(39,356	)
Contributions of cash (net of distributions of $19,775)		68,725			—			68,725
Increase in proportionate share of Company stock held		—			255,662			(255,662	)
Partnership interest at December 31, 2015	$	734,668		$	262,979		$	471,689

The carrying value of the investment partnerships net of deferred taxes is presented below.

	December 31,
	2015			2014
Carrying value of investment partnerships	$	471,689		$	697,982
Deferred tax liability related to investment partnerships		(115,952	)		(141,836	)
Carrying value of investment partnerships net of deferred taxes	$	355,737		$	556,146

The Company’s proportionate share of Company stock held by investment partnerships at cost is $332,827, $77,165, $73,207 and $54,613 at December 31, 2015, December 31, 2014, September 24, 2014 and September 25, 2013, respectively, and is recorded as treasury stock.

The carrying value of the partnership interest approximates fair value adjusted by the value of held Company stock. Fair value is according to our proportional ownership interest of the fair value of investments held by the investment partnerships. The fair value measurement is classified as level 3 within the fair value hierarchy.

Gains/losses from investment partnerships recorded in the Company’s consolidated statements of earnings are presented below.

				Transition Period				Fiscal Year
	2015			2014		2013		2014		2013
						(unaudited)
Investment partnership gains (losses)	$	(39,356	)	$	144,702	$	23,493	$	14,055	$	20,068
Tax expense (benefit)		(21,188	)		53,511		7,977		1,739		6,772
Contribution to net earnings (loss)	$	(18,168	)	$	91,191	$	15,516	$	12,316	$	13,296

On December 31 of each year, the general partner of the investment partnerships, Biglari Capital, will earn an incentive reallocation fee for the Company’s investments equal to 25% of the net profits above an annual hurdle rate of 6% over the previous high-water mark. Our policy is to accrue an estimated incentive fee throughout the year. The total incentive reallocation from Biglari Holdings to Biglari Capital includes gains on the Company’s common stock. The gains on the Company’s common stock are eliminated in our financial statements and the incentive reallocations associated with gains from the Company’s common stock are also eliminated in our financial statements. Our investments in these partnerships are committed on a rolling 5-year basis.

The incentive reallocations from Biglari Holdings to Biglari Capital on December 31 are presented below.

	Calendar Years
		2015		2014		2013
Incentive reallocation on investments other than Company common stock	$	—	$	34,406	$	11,047
Incentive reallocation on gains of Company common stock		23		—		3,655
Total incentive reallocation from Biglari Holdings to Biglari Capital	$	23	$	34,406	$	14,702

Summarized financial information for The Lion Fund, L.P. and The Lion Fund II, L.P. is presented below.

		Equity in Investment Partnerships
		Lion Fund			Lion Fund II
Total assets as of December 31, 2015	$	165,996		$	819,323
Total liabilities as of December 31, 2015	$	409		$	141,274
Revenue for the year ended December 31, 2015	$	(24,101	)	$	(100,357	)
Earnings for the year ended December 31, 2015	$	(24,247	)	$	(103,096	)
Biglari Holdings’ Ownership Interest		60.9	%		93.5	%

Total assets as of December 31, 2014	$	187,078		$	719,344
Total liabilities as of December 31, 2014	$	8,658		$	44
Revenue for the three months period ended December 31, 2014	$	24,082		$	182,923
Earnings for the three months period ended December 31, 2014	$	24,037		$	182,902
Biglari Holdings’ Ownership Interest		61.6	%		92.7	%

Total assets as of September 30, 2014	$	154,561		$	548,923
Total liabilities as of September 30, 2014	$	58		$	25
Revenue for the year ended September 30, 2014	$	(12,860	)	$	19,832
Earnings for the year ended September 30, 2014	$	(12,950	)	$	19,789
Biglari Holdings’ Ownership Interest		61.6	%		95.8	%

Total assets as of September 30, 2013	$	126,121		$	408,883
Total liabilities as of September 30, 2013	$	83		$	11
Revenue for the year ended September 30, 2013	$	9,200		$	25,109
Earnings for the year ended September 30, 2013	$	9,170		$	25,098
Biglari Holdings’ Ownership Interest		52.1	%		96.3	%

Revenue in the above summarized financial information of the investment partnerships includes investment income and unrealized gains and losses on investments.

Consolidated Affiliated Partnerships
Prior to July 2013, The Lion Fund, L.P. and Western Acquisitions, L.P. were referred to as consolidated affiliated partnerships of the Company. Certain of the consolidated affiliated partnerships held the Company’s common stock as investments. Net earnings for fiscal year 2013 of the Company included 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 held in the Company’s common stock which were eliminated in consolidation. The affiliated partnerships were no longer consolidated as of July 2013.

Realized investment gains/losses in the consolidated affiliated partnerships arose when investments were sold. The net unrealized and realized gains/losses from investments held by consolidated affiliated partnerships, other than holdings of the Company’s debt and equity securities, for the fiscal year ended September 25, 2013 were as follows.

	Fiscal Year
	2013
Gross unrealized gains	$	3,746
Gross unrealized losses		(410	)
Net realized gains from sale		261
Other income		306
Total	$	3,903

The limited partners of each of the investment funds had the ability to redeem their capital upon certain occurrences; therefore, the ownership of the investment funds held by the limited partners was presented as redeemable noncontrolling interests of consolidated affiliated partnerships and measured at the greater of carrying value or fair value.

The following is a reconciliation of the redeemable noncontrolling interests in the consolidated affiliated partnerships for the fiscal year ended September 25, 2013.

Carrying value at September 26, 2012	$	52,088
Contributions from noncontrolling interests		1,076
Distributions to noncontrolling interests		(2,302	)
Incentive fee		(21	)
Income allocation		1,922
Adjustment to redeemable noncontrolling interest to reflect maximum
redemption value		4,810
Adjustment to reflect deconsolidation of affiliated partnerships		(57,573	)
Carrying value at September 25, 2013	$	—