(In thousands, except share and per share data)

Biglari Holdings Inc. ("Biglari Holdings" or the "Company") is a diversified holding company engaged in a number of business activities. The Company is led by Sardar Biglari, Chairman and Chief Executive Officer of Biglari Holdings, Biglari Capital Corp. ("Biglari Capital"), Steak n Shake Operations, Inc. ("Steak n Shake"), and Western Sizzlin Corporation ("Western"). The Company's long-term objective is to maximize per-share intrinsic value of the Company. The Company's strategy is to reinvest cash generated from its operating subsidiaries into any investments with the objective of achieving high risk-adjusted returns. All major operating, investment, and capital allocation decisions are made for the Company and its subsidiaries by Sardar Biglari, Chairman and Chief Executive Officer.

In the following discussion, the term "same-store sales" refers to the sales of only those units open at least 18 months as of the beginning of the current period being discussed and which remained open through the end of the period.

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.

Twelve Weeks Ended December 19, 2012
We recorded net earnings attributable to Biglari Holdings Inc. of $4,562 for the
first quarter of fiscal year 2013, as compared with net earnings attributable to
Biglari Holdings Inc. of $8,795 in the first quarter of fiscal year 2012.

As of December 19, 2012, the total number of company-operated and franchised
restaurants was 590 as follows:

                                                                    Company-operated       Franchised         Total
Steak n Shake                                                                     414               87             501
Western                                                                             5               84              89
Total                                                                             419              171             590

In the first quarter of 2013, Steak n Shake opened four franchised units. Western closed five franchised units and opened two franchised units during the first quarter of 2013.

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 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 financial statements will likely increase or decrease in the future as additional information becomes available. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended September 26, 2012.

Results of Operations
The following table sets forth the percentage relationship to total net
revenues, unless otherwise noted, of items included in the consolidated
statements of earnings for the twelve weeks ended December 19, 2012 and December
21, 2011.

                                                                             Twelve Weeks Ended

                                                                       December 19,       December 21,
                                                                           2012               2011
Net revenues
Restaurant Operations:
Net sales                                                                       98.3 %            97.1 %
Franchise royalties and
fees                                                                             1.5               1.3
Other revenue                                                                    0.3               0.3
Total                                                                          100.1              98.7
Investment Management Operations:
 Consolidated Affiliated Partnerships:
Investment
gains/losses                                                                    (0.2 )             1.3
Other income                                                                     0.1               0.0
Total                                                                           (0.1 )             1.3
Total net
revenues                                                                       100.0             100.0

Costs and expenses
Cost of sales
(1)                                                                             29.3              28.1
Restaurant operating costs
(1)                                                                             47.2              45.8
General and
administrative                                                                   8.2               8.0
Depreciation and
amortization                                                                     3.6               3.8
Marketing                                                                        6.1               5.3
Rent                                                                             2.4               2.4
Pre-opening
costs                                                                              -               0.1
Loss on disposal of
assets                                                                           0.1               0.1
Other operating (income)
expense                                                                         (0.1 )            (0.3 )

Other income (expenses)
Interest, dividend and other investment
income                                                                           1.5               0.4
Interest on obligations under
leases                                                                          (1.3 )            (1.4 )
Interest
expense                                                                         (1.0 )            (1.1 )
Realized investment
gains/losses                                                                     0.0               2.2
Total other income
(expenses)                                                                      (0.8 )             0.0

Earnings before income
taxes                                                                            3.6               8.9

Income taxes                                                                     0.9               2.9

Net earnings                                                                     2.6               6.0
Earnings attributable to redeemable noncontrolling interest:
Income
allocation                                                                       0.1              (0.7 )
Incentive fee                                                                    0.0               0.0
Total earnings/loss attributable to redeemable noncontrolling
interests                                                                        0.1              (0.7 )
Net earnings attributable to Biglari Holdings
Inc.                                                                             2.7 %             5.3 %
_____________________

Comparison of Twelve Weeks Ended December 19, 2012 to Twelve Weeks Ended December 21, 2011

Net Earnings Attributable to Biglari Holdings Inc. We recorded net earnings attributable to Biglari Holdings Inc. of $4,562, or $3.42 per diluted share, for the current quarter, as compared with net earnings attributable to Biglari Holdings Inc. of $8,795, or $6.58 per diluted share, for the first quarter of 2012.

Net Sales
In the first quarter of 2013, net sales increased 1.4% from $161,516 to $163,739 primarily because of the performance of our Restaurant Operations, mainly through the increase in Steak n Shake's same-store sales. Steak n Shake's same-store sales increased 1.3% during the first quarter of 2013. The increase in same-store sales resulted from an increment in customer traffic of 1.6%.

Franchise royalties and fees increased 15.4% during the first quarter of 2013. The number of franchised units was 171 on December 19, 2012 as compared to 165 on December 21, 2011. The increase in franchise royalties and fees is primarily attributable to revenue earned for units opened in 2012 and in the first quarter of 2013.

Costs and Expenses
Cost of sales was $47,954 or 29.3% of net sales, compared with $45,424 or 28.1% of net sales in the first quarter of 2012. The increase in expenses was created primarily by inflationary pressures on commodities.

Restaurant operating costs were $77,360 or 47.2% of net sales compared to $73,963 or 45.8% of net sales in the first quarter of 2012. Restaurant operating costs were higher because of higher staffing in our stores, unfavorable development of prior-year cases in workers' compensation and higher frequency of general liability claims.

General and administrative expenses increased from $13,258 or 8.0% of total net revenues in the first quarter of 2012 to $13,577 or 8.2% of total net revenues.

Marketing expense was $10,233 or 6.1% of total net revenues versus $8,887 or 5.3% of total net revenues in the first quarter of 2012. The increase was primarily attributable to an increase in marketing efforts and higher production costs associated with our television commercials.

Other operating income decreased to $105 compared to $519 for the first quarter of 2012. The decrease primarily related to the recognition of sales tax refunds in the first quarter of 2012.

Other Income (Expenses)
We recorded interest, dividend and other investment income of $2,544 primarily through accruing dividends pertinent to one investment versus $626 recorded in the first quarter of 2012.

Interest expense decreased from $1,855 for the first quarter of 2012 to $1,737 for the current quarter. The decrease primarily pertained to lower interest rates on Steak n Shake's current credit facility. The interest rate on Steak n Shake's current credit facility was 3.7%, which decreased from 5.5% on the former credit facility at December 21, 2011. The outstanding debt on Steak n Shake's credit facility on December 19, 2012 was $145,000, which included the revolver, compared to $125,000 on December 21, 2011.

Income Taxes
Income tax expense decreased from $4,760 in the first quarter of 2012 to $1,543 for the current quarter. The decrease in the tax expense is primarily attributable to dividends received from equity investments, which are taxed at lower rates than is the income derived from wholly owned businesses.

Biglari Holdings Investment Gains
We recorded net realized investment gains of $1 for the current quarter related to dispositions of marketable equity securities compared to $3,595 in the first quarter of 2012. We directly hold these investments, not our consolidated affiliated partnerships.

Consolidated Affiliated Partnerships Investment Gains In the first quarter of 2013, investment gains of consolidated affiliated partnerships decreased from $2,124 to investment losses of $348. We recorded a net realized gain of $87 for the current quarter related to dispositions of investments held by our consolidated affiliated partnerships, plus an unrealized net investment loss of $435 for a total of $348. These totals were offset by $154 connected to losses attributable to redeemable noncontrolling interests. During the first quarter of 2012, we recorded a net realized gain of $1,426 related to dispositions of investments held by our consolidated affiliated partnerships as well as an unrealized net investment gain of $698 for a total of $2,124. However, these amounts were offset by $1,234 related to earnings attributable to redeemable noncontrolling interests.

Consolidated Affiliated Partnerships
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 consolidated financial statements, we classify this common stock as treasury stock despite the shares being legally outstanding. As of December 19, 2012 and September 26, 2012, the consolidated affiliated partnerships held 205,743 shares of the Company's common stock ($69,221 at cost).

In 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 $50,677 as of the end of the fiscal 2013 first quarter. These investments in the Lion Fund do not appear explicitly in our consolidated balance sheet because of the requirement to consolidate fully the Lion Fund (inclusive of third party interests) in our financial statements. Further, the Lion Fund's portfolio holds a significant interest in Biglari Holdings' common stock, which is classified on our consolidated balance sheet as a reduction to shareholders' equity. Biglari Holdings' pro-rata ownership of its Company common stock through the Lion Fund was 99,726 shares of stock (with a fair value of $38,895) based on Biglari Holdings' ownership interest in the Lion Fund as of the end of the fiscal 2013 first quarter.

Liquidity and Capital Resources
We generated $6,992 in cash flows from operations during the current year-to-date period as compared to $6,449 during the same period last year. The cash flows from operations in the current quarter were primarily a result of earnings from restaurant operations offset by incentive compensation payments. The cash flows from operations generated last year were primarily from earnings from restaurant operations offset by changes in working capital.

Net cash used in investing activities during the current year-to-date period was $45,199 compared to net cash provided by investing activities of $9,925 during the same period last year. The decline primarily resulted from an increase in purchases of investments during the current year and increased sales of investments in the prior year.

Net cash provided by financing activities during the current year-to-date period was $9,978 compared to $60 during the same period last year. The increase in net cash provided by financing activities primarily related to an increase in borrowings from Steak n Shake's revolving credit facility partially offset by the extinguishment of Western's long term debt.

Our balance sheet continues to maintain significant liquidity. We intend to meet the working capital needs of our operating subsidiaries principally through anticipated cash flows generated from operations, existing credit facilities and the sale of excess properties and investments. We continually review available financing alternatives.

Steak n Shake Credit Facility
Steak n Shake's Credit Facility includes affirmative and negative covenants and events of default as well as financial covenants relating to a maximum total leverage ratio and a minimum consolidated fixed charge coverage ratio.

Steak n Shake was in compliance with all financial covenants under the Credit Facility as of December 19, 2012.

New Accounting Standards
Refer to Note 2 in our Notes to Consolidated Financial Statements within Item 1 of Part I of this Quarterly Report on Form 10-Q.

Effects of Governmental Regulations and Inflation Most employees are paid hourly rates related to federal and state minimum wage laws. Any increase in the legal minimum wage would directly increase the Company's operating costs. The Company is also subject to various federal, state and local laws related to zoning, land use, safety standards, working conditions, and accessibility standards. Any changes in these laws that require improvements to its restaurants would increase operating costs. In addition, the Company is subject to franchise registration requirements and certain related federal and state laws regarding franchise operations. Any changes in these laws could affect its ability to attract and retain franchisees.

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

Risks Associated with 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 ability of the restaurant operations to increase store traffic on a profitable basis;

· competition in the restaurant industry for customers, staff, locations, and new products;

· disruptions in the overall economy and the financial markets;

· the Company's ability to comply with the restrictions and covenants to its debt agreements;

· declines in the market price of our common stock, which could adversely affect our goodwill impairment analysis;

· the potential to recognize additional impairment charges on our long-lived assets;

· fluctuations in food commodity and energy prices and the availability of food commodities;

· the ability of our franchisees to operate profitable restaurants;

· the poor performance or closing of even a small number of restaurants;

· changes in customer preferences, tastes, and dietary habits;

· changes in minimum wage rates and the availability and cost of qualified personnel;

· harsh weather conditions or losses due to casualties;

· unfavorable publicity relating to food safety or food-borne illness;

· exposure to liabilities related to the ownership and leasing of significant amounts of real estate;

· our ability to comply with existing and future governmental regulations;

· our ability to adequately protect our trademarks, service marks, and other components of our brand;

· changes in market prices of our investments; and

· other risks identified in the periodic reports we file with the Securities and Exchange Commission.

Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and may not be realized. Additional risks and uncertainties not currently known to us or that are currently deemed immaterial may also become important factors that may harm our business, financial condition, results of operations or cash flows. We assume no obligation to update forward-looking statements except as required in our periodic reports.