Tableof Contents

 

 

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

 
| **(Mark One)**                                                                                                                                                                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                      |   |
| **x**                                                                                                                                                                                                                                                                                                                                     | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                                                                                                | ** ** |
| **For the quarterly period ended March 31, 2009,**                                                                                                                                                                                                                                                                                   |
| ** **                                                                                                                                                                                                                                                                                                                                |
| **or**                                                                                                                                                                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                                                                                                                                | ** ** |
| **o**                                                                                                                                                                                                                                                                                                                                     | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                                                                                                | ** ** |
| **For the transition period from                            to                         ** |

 

**Commission file number 0-25366**

 

**Western Sizzlin Corporation**

(Exact Name of Registrant as Specified in ItsCharter)

 

| **Delaware**                                                       | ** ** | **86-0723400**                        |
|--------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization)    |       | (I.R.S. Employer  Identification No.) |
|                                                               |       |                                  |
| **416 South Jefferson Street,  Suite 600, Roanoke, Virginia** | ** ** | **24011**                             |
| (Address of Principal  Executive Offices)                          |       | (Zip Code)                            |

 

**(540)345-3195**

(Registrant’sTelephone Number Including Area Code)

 

Indicate by check markwhether the registrant: (1) has filed all reports required to be filed by Section 13or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x  No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

 

| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer o                       |   | Smaller reporting company x |
| (Do not check if a smaller reporting company) |   |                             |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

 

As of May 6, 2009, there were 2,831,884 shares of common stock outstanding.

 

 

 

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Tableof Contents

 

**Western SizzlinCorporation**

 

**Form 10-QThree Months Ended March 31, 2009Table of Contents**

 
| ** **                                                                                              | ** **                                                                                                    | **Page**   |
|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **PART I. FINANCIAL INFORMATION**                                                                  |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item 1.  Financial Statements (Unaudited)**                                                           | ** **                                                                                                    | ** ** |
|                                                                                                    |                                                                                                          |       |
|                                                                                                    | Consolidated Balance Sheets — March 31, 2009 and  December 31, 2008                            |       | 3 |
|                                                                                                    |                                                                                                          |       |   |
|                                                                                                    | Consolidated Statements of Operations — Three Months  Ended March 31, 2009 and 2008                 |       | 4 |
|                                                                                                    |                                                                                                          |       |   |
|                                                                                                    | Consolidated Statement of Changes in Stockholders’  Equity — Three Months Ended March 31, 2009 |       | 5 |
|                                                                                                    |                                                                                                          |       |   |
|                                                                                                    | Consolidated Statements of Cash Flows — Three Months  Ended March 31, 2009 and 2008                 |       | 6 |
|                                                                                                    |                                                                                                          |       |   |
|                                                                                                    | Notes to Consolidated Financial Statements                                                                    |       | 7-18 |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations** |                                                                                                          | 18-25      |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item 3. Quantitative and Qualitative Disclosure about  Market Risk**                                  |                                                                                                          | 26         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item 4T. Controls and Procedures**                                                                    |                                                                                                          | 26         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **PART II.  OTHER INFORMATION**                                                                    |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item  1. Legal Proceedings**                                                                          |                                                                                                          | 27         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item  1.A. Risk Factors**                                                                             |                                                                                                          | 27         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Item 6.  Exhibits**                                                                                   |                                                                                                          | 27         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Signatures**                                                                                          |                                                                                                          | 28         |
| ** **                                                                                              | ** **                                                                                                    | ** ** |
| **Exhibit Index**                                                                                  |                                                                                                          | 29         |

 

2

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**Table ofContents**

** **

**PART I.FINANCIAL INFORMATION**

**WESTERNSIZZLIN CORPORATION**

** **

**Consolidated Balance Sheets**

**March 31, 2009 and December 31,2008**

 
| ** **                                                                                                                                                          | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **(unaudited)**          | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                          | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                     |       |                     |       |                        |       |
| Cash and cash equivalents                                                                                                                                           |       | $                        | 527,532    |                        | $          | 330,998 |   |
| Money market investments                                                                                                                                            |       | 3,467,847                |       | 3,735,821                   |       |
| Trade accounts receivable, net of allowance  for doubtful accounts of $378,752 in 2009 and $339,752 in 2008                                                         |       | 1,052,895                |       | 1,064,389                   |       |
| Current installments of notes receivable,  less allowance for impaired notes of $62,926 in 2009 and 2008                                                            |       | 223,132                  |       | 198,912                     |       |
| Other receivables                                                                                                                                                   |       | 60,599                   |       | 78,982                      |       |
| Income taxes receivable                                                                                                                                             |       | 87,093                   |       | 98,362                      |       |
| Inventories                                                                                                                                                         |       | 81,517                   |       | 59,126                      |       |
| Prepaid expenses                                                                                                                                                    |       | 182,761                  |       | 133,785                     |       |
| Deferred income taxes                                                                                                                                               |       | 459,026                  |       | 494,926                     |       |
| Total current assets                                                                                                                                                |       | 6,142,402                |       | 6,195,301                   |       |
| Notes receivable, less allowance for  impaired notes receivable of $6,980 in 2009 and 2008, excluding current  installments                                         |       | 425,768                  |       | 449,990                     |       |
| Property and equipment, net                                                                                                                                         |       | 1,407,699                |       | 1,500,149                   |       |
| Investment in real estate                                                                                                                                           |       | 3,745,152                |       | 3,745,152                   |       |
| Investments in marketable securities                                                                                                                                |       | 18,936,272               |       | 16,708,479                  |       |
| Intangible assets, net of accumulated  amortization of $101,468 in 2009 and $73,762 in 2008                                                                         |       | 1,318,532                |       | 1,346,238                   |       |
| Goodwill                                                                                                                                                            |       | 4,995,262                |       | 4,995,262                   |       |
| Financing costs, net of accumulated  amortization of $194,974 in 2009 and $194,639 in 2008                                                                          |       | 5,237                    |       | 5,572                       |       |
| Investment in unconsolidated joint venture                                                                                                                          |       | 310,859                  |       | 304,695                     |       |
| Deferred income taxes                                                                                                                                               |       | 411,441                  |       | 665,805                     |       |
| Other assets                                                                                                                                                        |       | 27,568                   |       | 36,180                      |       |
|                                                                                                                                                                |       | $                        | 37,726,192 |                        | $          | 35,952,823 |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                      | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                                                                |       |                     |       |                        |       |
| Note payable — line of credit                                                                                                                                  |       | $                        | 350,000    |                        | $          | — |   |
| Current installments of long-term debt                                                                                                                              |       | 2,489,688                |       | 373,925                     |       |
| Accounts payable                                                                                                                                                    |       | 731,708                  |       | 812,839                     |       |
| Accrued expenses and other                                                                                                                                          |       | 1,299,465                |       | 1,423,092                   |       |
| Total current liabilities                                                                                                                                           |       | 4,870,861                |       | 2,609,856                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Long-term debt, excluding current installments                                                                                                                      |       | 427,277                  |       | 2,833,587                   |       |
| Other long-term liabilities                                                                                                                                         |       | 947,127                  |       | 1,208,147                   |       |
|                                                                                                                                                                |       | 6,245,265                |       | 6,651,590                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Redeemable noncontrolling interests                                                                                                                                 |       | 10,920,880               |       | 11,288,681                  |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Commitments and contingencies                                                                                                                                       |       |                     |       |                        |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Stockholders’ Equity:                                                                                                                                          |       |                     |       |                        |       |
| Convertible preferred stock, series A, $10  par value (involuntary liquidation preference of $10 per share). Authorized  25,000 shares; none issued and outstanding |       | —                   |       | —                      |       |
| Convertible preferred stock, series B, $1  par value (involuntary liquidation preference of $1 per share). Authorized  875,000 shares; none issued and outstanding  |       | —                   |       | —                      |       |
| Common stock, $0.01 par value.   Authorized 10,000,000 shares; issued and outstanding 2,831,884 in 2009 and  2008                                              |       | 28,320                   |       | 28,320                      |       |
| Treasury stock, at cost, 9,099 shares in  2009 and 2008                                                                                                             |       | (90,583                  | )          | (90,583                     | )          |
| Additional paid-in capital                                                                                                                                          |       | 22,235,872               |       | 22,235,872                  |       |
| Retained earnings (accumulated deficit)                                                                                                                             |       | (1,082,997               | )          | (3,376,054                  | )          |
| Accumulated other comprehensive income —  unrealized holding losses                                                                                            |       | (530,565                 | )          | (785,003                    | )          |
| Total stockholders’ equity                                                                                                                                     |       | 20,560,047               |       | 18,012,552                  |       |
|                                                                                                                                                                |       | $                        | 37,726,192 |                        | $          | 35,952,823 |   |

 

See accompanying notes to consolidated financial statements.

 

3

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Table of Contents

 

**WESTERN SIZZLINCORPORATION**

** **

**ConsolidatedStatements of Operations**

**Three Months Ended March 31, 2009 and 2008**

**(Unaudited)**

** **
| ** **                                                                                    | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                    | ** ** | **March 31,**               | ** ** |
| ** **                                                                                    | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Revenues:                                                                                     |       |                             |       |   |   |
| Company-operated restaurants                                                                  |       | $                                | 3,162,427  |   | $ | 3,126,110 |   |
| Franchise operations                                                                          |       | 957,148                          |       | 1,049,141 |   |
|                                                                                          |       |                             |       |   |   |
| Total revenues                                                                                |       | 4,119,575                        |       | 4,175,251 |   |
|                                                                                          |       |                             |       |   |   |
| Costs and expenses — restaurant and  franchise operations:                               |       |                             |       |   |   |
| Company-operated restaurants — food, beverage  and labor costs                           |       | 2,380,888                        |       | 2,310,888 |   |
| Restaurant occupancy and other                                                                |       | 542,771                          |       | 559,938 |   |
| Franchise operations — direct support                                                    |       | 285,182                          |       | 304,535 |   |
| Subleased restaurant property expenses                                                        |       | —                           |       | 27,303 |   |
| Corporate expenses                                                                            |       | 488,966                          |       | 484,250 |   |
| Depreciation and amortization expense                                                         |       | 97,711                           |       | 265,002 |   |
| Claims settlement and legal fees associated  with lawsuit                                     |       | 26,420                           |       | 137,784 |   |
| Total costs and expenses — restaurant and  franchise operations                          |       | 3,821,938                        |       | 4,089,700 |   |
|                                                                                          |       |                             |       |   |   |
| Equity in income of joint venture                                                             |       | 56,164                           |       | 45,992 |   |
| Income from restaurant and franchise  operations                                              |       | 353,801                          |       | 131,543 |   |
|                                                                                          |       |                             |       |   |   |
| Investment advisory fee income                                                                |       | 101,806                          |       | — |   |
| Net realized gain (loss) on sales of  marketable securities                                   |       | 317,628                          |       | (40,606 | ) |
| Net unrealized gains (losses) on marketable  securities held by limited partnerships          |       | 1,417,678                        |       | (4,162,663 | ) |
| Amortization expense — investment  activities                                            |       | (27,706                          | )          | — |   |
| Expenses of investment activities,  including interest of $16,042 in 2009 and $23,808 in 2008 |       | (119,359                         | )          | (500,267 | ) |
| Purchase obligation adjustment                                                                |       | 200,989                          |       | — |   |
| Income (loss) from investment activities                                                      |       | 1,891,036                        |       | (4,703,536 | ) |
|                                                                                          |       |                             |       |   |   |
| Other income (expense):                                                                       |       |                             |       |   |   |
| Interest expense                                                                              |       | (15,686                          | )          | (38,447 | ) |
| Interest income                                                                               |       | 33,718                           |       | 20,864 |   |
| Other, net                                                                                    |       | 41                               |       | 602 |   |
| Total other income (expense), net                                                             |       | 18,073                           |       | (16,981 | ) |
|                                                                                          |       |                             |       |   |   |
| Income (loss) before income tax expense  (benefit)                                            |       | 2,262,910                        |       | (4,588,974 | ) |
|                                                                                          |       |                             |       |   |   |
| Income tax expense (benefit):                                                                 |       |                             |       |   |   |
| Current                                                                                       |       | 11,893                           |       | (4,194 | ) |
| Deferred                                                                                      |       | 290,266                          |       | (142,571 | ) |
| Total income tax expense (benefit)                                                            |       | 302,159                          |       | (146,765 | ) |
| Net income (loss)                                                                             |       | 1,960,751                        |       | (4,442,209 | ) |
| Losses attributable to redeemable  noncontrolling interests                                   |       | 332,306                          |       | 591,214 |   |
| Net income (loss) attributable to Western  Sizzlin Corporation                                |       | $                                | 2,293,057  |   | $ | (3,850,995 | ) |
| Earnings (loss) per share (basic and  diluted):                                               |       |                             |       |   |   |
| Net income (loss) attributable to Western  Sizzlin Corporation - basic                        |       | $                                | .81        |   | $ | (1.43 | ) |
| Net income (loss) attributable to Western  Sizzlin Corporation - diluted                      |       | $                                | .81        |   | $ | (1.43 | ) |

 

**See accompanying notes toconsolidated financial statements.**

 

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Table of Contents

 

**WESTERN SIZZLINCORPORATION**

 

**ConsolidatedStatement of Changes in Stockholders’ Equity**

**Three Months Ended March 31, 2009(Unaudited)**

 
| ** **                                              | ** ** | **Common stock** | ** ** | **Treasury stock** | ** ** | **Additional  Paid-** | ** ** | **Retained  Earnings  (Accumulated** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | ** **   | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|-----------------------|------------|--------------------------------------|------------|---------------------------------------|------------|--------------|------------|
| ** **                                              | ** ** | **Shares**            | ** ** | **Dollars**             | ** ** | **Shares**            | ** ** | **Dollars**                          | ** ** | **in Capital**                   | ** ** | **Deficit)** | ** ** | **Income (Loss)** | ** ** | **Total** | ** ** |
| Balances,  December 31, 2008                       |       | 2,831,884             |       | $                       | 28,320     |                  | 9,099      |                                 | $          | (90,583                               | )          | $            | 22,235,872 |   | $ | (3,376,054 | ) | $ | (785,003 | ) | $ | 18,012,552 |   |
|                                                    |       |                  |       |                    |       |                  |       |                                 |       |                                  |       |         |       |   |   |   |   |
| Net income  attributable to Western Sizzlin Corporation |       | —                |       | —                  |       | —                |       | —                               |       | —                                |       | 2,293,057    |       | — |   | 2,293,057 |   |
| Change in  unrealized holding gains (losses)            |       | —                |       | —                  |       | —                |       | —                               |       | —                                |       | —       |       | 254,438 |   | 254,438 |   |
| Comprehensive  income                                   |       |                  |       |                    |       |                  |       |                                 |       |                                  |       |         |       |   |   | 2,547,495 |   |
| Balances,  March 31, 2009                          |       | 2,831,884             |       | $                       | 28,320     |                  | 9,099      |                                 | $          | (90,583                               | )          | $            | 22,235,872 |   | $ | (1,082,997 | ) | $ | (530,565 | ) | $ | 20,560,047 |   |

 

See accompanying notes to consolidated financial statements.

 

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**WESTERN SIZZLIN CORPORATION**

 

**Consolidated Statements of Cash Flows**

**Three Months Ended March 31,2009 and 2008**

**(Unaudited)**

** **
| ** **                                                                                          | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                          | ** ** | **March 31**                | ** ** |
| ** **                                                                                          | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Cash flows from operating activities:                                                               |       |                             |       |   |   |
|                                                                                                |       |                             |       |   |   |
| Net income (loss)                                                                                   |       | $                                | 1,960,751  |   | $ | (4,442,209 | ) |
|                                                                                                |       |                             |       |   |   |
| Adjustments to reconcile net income (loss)  to net cash provided by (used in) operating activities: |       |                             |       |   |   |
|                                                                                                |       |                             |       |   |   |
| Restaurant and franchise activities:                                                                |       |                             |       |   |   |
| Depreciation and amortization of property  and equipment                                            |       | 97,031                           |       | 106,278 |   |
| Amortization of franchise royalty contracts  and other assets                                       |       | —                           |       | 157,574 |   |
| Amortization of finance costs                                                                       |       | 335                              |       | 805 |   |
| Provision for doubtful accounts                                                                     |       | 39,000                           |       | 30,000 |   |
| Equity in income of unconsolidated joint  venture, net of distributions of $50,000 in 2009          |       | (6,164                           | )          | (45,992 | ) |
| Provision for deferred income taxes  (benefit)                                                      |       | 282,588                          |       | (173,000 | ) |
| (Increase) decrease in current assets and  other assets                                             |       | (60,607                          | )          | 78,461 |   |
| Increase (decrease) in current liabilities  and other liabilities                                   |       | (203,293                         | )          | 110,533 |   |
|                                                                                                |       | 148,890                          |       | 264,659 |   |
| Investment activities:                                                                              |       |                             |       |   |   |
| Change in money market investments                                                                  |       | 267,974                          |       | — |   |
| Realized (gains) losses on sales of  marketable securities, net                                     |       | (317,628                         | )          | 40,606 |   |
| Unrealized gains (losses) on marketable  securities, net                                            |       | (1,417,678                       | )          | 4,162,663 |   |
| Amortization expense of investment  management customer relationships                               |       | 27,706                           |       | — |   |
| Proceeds from sales of marketable  securities                                                       |       | 2,538,502                        |       | 70,809 |   |
| Purchases of marketable securities                                                                  |       | (2,776,551                       | )          | (803,595 | ) |
| Decrease in due to broker                                                                           |       | —                           |       | (342,022 | ) |
| Change in purchase obligation                                                                       |       | (200,989                         | )          | — |   |
| Provision for deferred income taxes                                                                 |       | 7,676                            |       | 30,429 |   |
| Decrease in current liabilities                                                                     |       | —                           |       | (75,683 | ) |
|                                                                                                |       | (1,870,988                       | )          | 3,083,207 |   |
|                                                                                                |       |                             |       |   |   |
| Net cash provided by (used in) operating  activities                                                |       | 238,653                          |       | (1,094,343 | ) |
|                                                                                                |       |                             |       |   |   |
| Cash flows from investing activities:                                                               |       |                             |       |   |   |
| Additions to property and equipment                                                                 |       | (4,581                           | )          | (5,014 | ) |
| Net cash used in investing activities                                                               |       | (4,581                           | )          | (5,014 | ) |
|                                                                                                |       |                             |       |   |   |
| Cash flows from financing activities:                                                               |       |                             |       |   |   |
| Proceeds from issuance of long-term debt                                                            |       | —                           |       | 2,641,220 |   |
| Payments on long-term debt                                                                          |       | (290,547                         | )          | (43,312 | ) |
| Proceeds from (payments on) line of credit  borrowings                                              |       | 350,000                          |       | (2,000,000 | ) |
| Capital contributions from (distributions to)  noncontrolling interests in limited partnerships     |       | (96,991                          | )          | 540,000 |   |
|                                                                                                |       |                             |       |   |   |
| Net cash provided by (used in) financing  activities                                                |       | (37,538                          | )          | 1,137,908 |   |
|                                                                                                |       |                             |       |   |   |
| Net increase in cash and cash equivalents                                                           |       | 196,534                          |       | 38,551 |   |
|                                                                                                |       |                             |       |   |   |
| Cash and cash equivalents at beginning of  the period                                               |       | 330,998                          |       | 727,378 |   |
|                                                                                                |       |                             |       |   |   |
| Cash and cash equivalents at end of the  period                                                     |       | $                                | 527,532    |   | $ | 765,929 |   |
|                                                                                                |       |                             |       |   |   |
| Supplemental disclosure of cash flow  information:                                                  |       |                             |       |   |   |
| Cash payments for interest                                                                          |       | $                                | 31,640     |   | $ | 62,615 |   |
| Income taxes paid, net of refunds                                                                   |       | $                                | 624        |   | $ | 31,734 |   |
|                                                                                                |       |                             |       |   |   |
| Non-cash investing and financing  activities:                                                       |       |                             |       |   |   |
| Unrealized (gains) losses from marketable  equity securities                                        |       | $                                | (254,438   | ) | $ | 74,840 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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** **

**WESTERNSIZZLIN CORPORATION**

** **

Notes to ConsolidatedFinancial Statements

Three Months Ended March 31, 2009 and2008

(Unaudited)

 

**(1)****                                ****Introduction and Basis of Presentation**

 

**Western SizzlinCorporation is a holding company which owns a number of subsidiaries, with itsprimary business activities conducted through Western Sizzlin FranchiseCorporation and Western Sizzlin Stores, Inc, which franchise and operate restaurants.Financial decisions are centralized at the holding company level, andmanagement of operating businesses is decentralized at the business unit level.The Company’s prime objective centers on achieving above-average returns oncapital in pursuit of maximizing the eventual net worth of its stockholders.While the Company has historically been principally engaged, and intends atthis time to remain principally engaged, in franchising and operatingrestaurants, it has recently made selective investments in other companies. At March 31,2009, the Company had 100 franchised, 5 Company-operated and 1 joint venturerestaurant operating in 19 states.**

** **

**The consolidatedfinancial statements include the accounts of Western Sizzlin Corporation andits wholly-owned subsidiaries, Western Sizzlin Franchise Corporation, TheWestern Sizzlin Stores, Inc., Western Sizzlin Stores of Little Rock, Inc.,Austins of Omaha, Inc., Western Investments, Inc., Western Properties, Inc.,a majority-owned limited partnership, Western Acquisitions, L.P., asolely-owned limited partnership, Western Real Estate, L.P. and Western MustangHoldings, L.L.C. (collectively the Company). All significant intercompanyaccounts and transactions have been eliminated in consolidation.**

** **

The accompanying unaudited consolidated financialstatements of Western Sizzlin Corporation, (the “Company”) have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America for interim financial reporting information and theinstructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,they do not include all of the information and notes required by accountingprinciples generally accepted in the United States of America for completefinancial statements. In the opinion of management, all materialreclassifications and adjustments, consisting of normal recurring accruals,considered necessary for a fair presentation of the results of operations,financial position and cash flows for each period shown have been included. Theunaudited consolidated financial statements and notes are presented aspermitted by Form 10-Q and do not contain certain information included inthe Company’s annual consolidated financial statements and notes. For furtherinformation, refer to the consolidated financial statements and notes theretoincluded in the Company’s annual report on Form 10-K for the year ended December 31,2008.

 

**(2)****                                 Summaryof Significant Accounting Policies**

 

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157 (“SFAS 157”), *Fair ValueMeasurements*. SFAS 157 defines fair value, establishes a frameworkfor measuring fair value and expands disclosures about fair value measurements.SFAS 157 applies under other accounting pronouncements that require or permitfair value measurements, the FASB having previously concluded in thoseaccounting pronouncements that fair value is the relevant measurementattribute. Accordingly, SFAS 157 does not require any new fair valuemeasurements. Effective January 1, 2008, the Company adopted theprovisions of SFAS 157 for financial assets and liabilities. The Companyapplied the provisions of FSP FAS 157-2, *Effective Date of FASBStatement 157*, which deferred the provisions of SFAS 157 fornonfinancial assets and liabilities to the first fiscal period beginning after November 28,2008. The nonfinancial assets for which we deferred adoption include goodwilland long-lived assets. The Company has adopted SFAS 157 for nonfinancial assetsand liabilities that are not measured at fair value on a recurring basis in thefirst quarter of 2009. As of March 31, 2009, the Company does not have anysignificant non-recurring measurements of nonfinancial assets and nonfinancialliabilities.

 

In December 2007, the FASB issuedStatement of Financial Accounting Standards No. 141(R), *Business Combinations*(“SFAS 141R”), and Statement ofFinancial Accounting Standard No. 160, *Noncontrolling Interest inConsolidated Financial Statements, an amendment of ARB**No. 51* (“SFAS 160”). These new standards significantlychange the accounting for and reporting for business combinations andnoncontrolling (minority) interests in consolidated financial statements. SFAS141(R) and SFAS 160 are effective for the first fiscal period beginning onor after

 

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December 15, 2008.  Accordingly,the Company has adopted SFAS 141(R) and SFAS 160 in the first quarter of2009. SFAS 141R will impact the Company if it completes an acquisition orobtains additional minority interests after the effective date. SFAS 160 amendsARB 51 to establish accounting and reporting standards for the noncontrollinginterest in a subsidiary and for the deconsolidation of a subsidiary. Amongother requirements, this statement requires that the consolidated net income(loss) attributable to the parent and the noncontrolling interests be clearlyidentified and presented on the face of the consolidated statement ofoperations. The redeemable noncontrolling interests reported in theconsolidated balance sheet represent limited partner ownership in investmentfund subsidiaries consolidated into the Company’s financial statements. Thelimited partnership agreements of these funds contain certain redemptionfeatures that are not solely within control of the Company. As such, inaccordance with EITF Topic No. D-98, the redeemable noncontrollinginterests are classified outside of stockholders’ equity in the accompanyingconsolidated balance sheets. Certain reclassifications resulting fromthe adoption of SFAS 160 and EITF Topic No. D-98 have been made to the2008 amounts to conform to the current year’s presentation.

 

In March 2008, the FASB issued Statement ofFinancial Accounting Standards SFAS No. 161 (“SFAS 161”), *Disclosures about Derivative Instruments and HedgingActivities—An Amendment of FASB Statement No. 133*. SFAS 161applies to all derivative instruments and related hedged items accounted forunder SFAS No. 133, *Accounting forDerivative Instruments and Hedging Activities*. It requires entitiesto provide greater transparency about (a) how and why an entity usesderivative instruments, (b) how derivative instruments and related hedgeditems are accounted for under SFAS 133 and its related interpretations,and (c) how derivative instruments and related hedged items affect anentity’s financial position, results of operations, and cash flows.SFAS 161 is effective for fiscal years and interim periods beginning afterNovember 15, 2008. This standard was adopted in the first quarter of 2009and did not impact the Company’s consolidated financial statements.

 

In April 2008, the FASB issued FASB StaffPosition No. 142-3*, Determination**of the Useful Life of Intangible Assets*(“FSP 142-3”).  FSP 142-3 amends the factors that should be considered indeveloping renewal or extension assumptions used to determine the useful lifeof a recognized intangible asset under FASB Statement No. 142, *Goodwill and Other Intangible Assets* and requires enhancedrelated disclosures.  FSP 142-3 must be applied prospectively to allintangible assets acquired subsequent to fiscal years beginning after December 15,2008.  The Company has adopted FSP 142-3 in the first quarter of 2009 anddid not impact the Company’s consolidated financial statements.

 

**(3)****                                ****Investments in Marketable Securities**

 

Investment and capital allocation decisions ofWestern Sizzlin Corporation and Western Acquisitions, LP are made by Mr. SardarBiglari, the Company’s Chairman and Chief Executive Officer, under limitedauthority delegated by the Board of Directors for Western Sizzlin Corporation,and the management of Western Acquisitions, LP. The delegated authorityincludes the authority to borrow funds in connection with making investments inmarketable securities or derivative securities, subject to Board reportingrequirements and various limitations. As of the date of this filing, Mr. Biglarihas authority to manage surplus cash up to $10 million, and in addition, hasauthority to borrow a maximum of $5 million. The Company has a marginsecurities account with a brokerage firm. The margin account bears interest atthe Federal Funds Target Rate quoted by the Wall Street Journal, plus .5%, orapproximately .75% as of the date of this report, with the minimum and maximumamount of any particular loan to be determined by the brokerage firm, in itsdiscretion, from time to time. The margin loan balances at March 31, 2009and 2008 were $0. The collateral securing the margin loans are the Company’sholdings in marketable securities. The minimum and maximum amount of anyparticular margin may be established by the brokerage firm, in its discretion,regardless of the amount of collateral delivered to the brokerage firm, and thebrokerage firm may change such minimum and maximum amounts from time to time.

 

The noncontrolling interest holder in MustangCapital Advisors, LP and Mustang Capital Management, LLC, has authority tomanage the investments in these particular Funds.

 

In the normalcourse of business, substantially all of the Company’s securities transactions,money balances and security positions are transacted with a broker. The Companyis subject to credit risk to the extent any broker with whom they conductbusiness is unable to fulfill contractual obligations on their behalf. TheCompany monitors the financial conditions of such brokers and does notanticipate any losses from these counterparties.

 

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·                  ***MarketableSecurities held by Western Sizzlin Corporation (the holding company)***

 

Marketableequity securities held by Western Sizzlin Corporation (the holding company) areheld for an indefinite period and thus are classified as available-for-sale.Available-for-sale securities are recorded at fair value in Investments inMarketable Securities on the consolidated balance sheet, with the change infair value during the period excluded from earnings and recorded, net of tax,as a component of other comprehensive income (loss). Substantially all of themarketable securities held by Western Sizzlin Corporation have been in acontinuous loss position for less than nine months as of March 31, 2009.

 

Following is a summary of marketable equitysecurities held by Western Sizzlin Corporation (the holding company) as of March 31,2009 and December 31, 2008:

 
| ** **              | ** ** | **Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair Value** | ** ** |
|-------------------------|------------|----------|------------|------------------------------|------------|-------------------------------|------------|---------------------|------------|
| March 31, 2009     |       |     |       |                         |       |                          |       |                |       |
| Itex Corporation        |       | $        | 1,487,631  |                         | $          | —                        |       | $                   | (516,237   | ) | $ | 971,394 |   |
| Other                   |       | 25,093   |       | —                       |       | (14,328                       | )          | 10,765              |       |
|                    |       | $        | 1,512,724  |                         | $          | —                        |       | $                   | (530,565   | ) | $ | 982,159 |   |
| December  31, 2008 |       |     |       |                         |       |                          |       |                |       |
| Itex Corporation        |       | $        | 1,487,631  |                         | $          | —                        |       | $                   | (771,867   | ) | $ | 715,764 |   |
| Other                   |       | 25,093   |       | —                       |       | (13,136                       | )          | 11,957              |       |
|                    |       | $        | 1,512,724  |                         | $          | —                        |       | $                   | (785,003   | ) | $ | 727,721 |   |

 

There were no realized gains or losses frommarketable equity securities held by Western Sizzlin Corporation (the holdingcompany) for the three months ended March 31, 2009 or 2008.

 

·                  ***Marketable Securities held by Western Acquisitions, LP***

 

Western Investments, Inc., a Delawarecorporation and wholly-owned subsidiary, serves as the general partner ofWestern Acquisitions, LP, a Delaware limited partnership that operates as aprivate investment fund. Through Western Investments, Inc., Mr. Biglarioperates as the portfolio manager to the fund. Cash contributions from outsideinvestors of $0 and $540,000 for the three months ended March 31, 2009 and2008, respectively, were made to the limited partnership.

 

As of March 31, 2009 and December 31,2008, Western Investments, Inc. owned 85.1% of Western Acquisitions, LP. Assuch, Western Acquisitions, LP has been consolidated into the accompanyingfinancial statements with the 14.9% ownership by noncontrolling limitedpartners presented as redeemable noncontrolling interests on the accompanyingconsolidated balance sheets as of March 31, 2009 and December 31,2008, respectively. Western Acquisitions, LP is considered, for GAAP purposes,an investment company under the AICPA Audit and Accounting Guide *Investment Companies*. The Company has retained thespecialized accounting for Western Acquisitions, LP pursuant to EITF Issue No. 85-12,*Retention of Specialized Accounting for Investmentin Consolidation*. As such, marketable equity securities held byWestern Acquisitions, LP are recorded at fair value in Investments inMarketable Securities, with unrealized gains and losses resulting from changesin fair value reflected in the Consolidated Statements of Operations.

 

As of March 31, 2009, WesternAcquisitions, LP owns a total of 1,553,545 shares of The Steak n Shake Company’scommon stock.

 

Following is a summary of marketable equitysecurities held by Western Acquisitions, LP as of March 31, 2009 and December 31,2008:

 
| ** **                          | ** ** | **As of March 31, 2009** | ** ** | **As of December 31, 2008** | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                          | ** ** | **Cost**                                     | ** ** | **Fair Value**                             | ** ** | **Cost** | ** ** | **Fair Value** | ** ** |
| The Steak n Shake Co.               |       | $                                            | 19,159,412 |                                            | $          | 11,760,336 |   | $ | 19,159,412 |   | $ | 9,243,593 |   |
| Other                               |       | 139,881                                      |       | 60,254                                          |       | 139,881 |   | 80,737 |   |
|                                |       |                                         |       |                                            |       |   |   |   |   |
| Total marketable equity  securities |       | $                                            | 19,299,293 |                                            | $          | 11,820,590 |   | $ | 19,299,293 |   | $ | 9,324,330 |   |

 

Net realized gains (losses) and net change inunrealized gains (losses) from marketable equity securities held by WesternAcquisitions, LP were as follows:

 

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| ** **                                                                               | ** ** | **Three Months  Ended  March 31,****2009** | ** ** | **Three Months  Ended****March 31,  2008** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|
| Realized gains                                                                           |       | $                                                    | —     |                                                 | $          | — |   |
| Realized losses                                                                          |       | —                                               |       | (40,606                                              | )          |
| Net realized gains (losses) on  sales of marketable securities                           |       | $                                                    | —     |                                                 | $          | (40,606 | ) |
|                                                                                     |       |                                                 |       |                                                 |       |
| Net unrealized gains (losses)  on marketable securities held by Western Acquisitions, LP |       | $                                                    | 2,496,258  |                                                 | $          | (4,162,663 | ) |

 

·                  ***Marketable Securities held byMustang Capital Advisors, LP***

 

Western Mustang Holdings, LLC owns a 50.5%controlling interest in Mustang Capital Advisors, LP and a 51% controllinginterest in its general partner, Mustang Capital Management, LLC. WesternMustang Holdings, LLC, is, for GAAP purposes, an investment company under theAICPA Audit and Accounting Guide *Investment Companies*.The Company has retained the specialized accounting for Mustang CapitalAdvisors, LP pursuant to EITF Issue No. 85-12, *Retention ofSpecialized Accounting for Investment in Consolidation*. As such,marketable equity securities held by Mustang Capital Advisors, LP are recordedat fair value in Investments in Marketable Securities, with unrealized gainsand losses resulting from changes in fair value reflected in the ConsolidatedStatements of Operations.

 

Following is a summary of marketable equitysecurities held by Western Mustang Holdings, LLC as of March 31, 2009 and December 31,2008:

 
| ** **                          | ** ** | **As of March 31, 2009** | ** ** | **As of December 31, 2008** | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                          | ** ** | **Cost**                                     | ** ** | **Fair Value**                             | ** ** | **Cost** | ** ** | **Fair Value** | ** ** |
| Total marketable equity  securities |       | $                                            | 7,270,939  |                                            | $          | 6,133,523 |   | $ | 6,621,658 |   | $ | 6,656,428 |   |
|                                     |            |                                              |            |                                                 |            |  |  |  |  |  |  |  |  |

 

Net realized gains (losses) and net change inunrealized gains (losses) for the three months ended March 31, 2009, frommarketable equity securities held by Mustang Capital Advisors, LP were asfollow:

 
| ** **                                                                            | ** ** | **Three Months  Ended  March 31,****2009** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| Realized gains                                                                        |       | $                                                    | 357,078    |   |
| Realized losses                                                                       |       | (39,450                                              | )          |
|                                                                                  |       |                                                 |       |
| Net realized gains on sales of  marketable securities                                 |       | $                                                    | 317,628    |   |
| Net unrealized losses on  marketable securities held by Mustang Capital  Advisors, LP |       | $                                                    | (1,078,580 | ) |

 

**(4)****                                ****Stock Options**

 

The Company has two stock option plans: the 2005Stock Option Plan and the 2004 Non-Employee Directors’ Stock Option Plan. The 1994Incentive and Non-qualified Stock Option Plan was terminated in 2008 with theexercise of all outstanding options under this plan during year ended December 31,2008. Under the 2005 and 2004 Plans, employees and directors may be grantedoptions to purchase shares of common stock at the fair market value on the dateof the grant.

 

Options granted under the 2005 and 2004 Plansvest at the date of the grant. The fair value of each option award is estimatedon the date of grant using the Black-Scholes option-pricing model. Assumptionsutilized in the model are evaluated and revised, as necessary, to reflectmarket conditions and experience on the respective dates of grant. Therisk-free interest rate for periods within the contractual life of the option isbased on the U.S. Treasury yield curve in effect at the time of the grant.Expected volatilities are based on the historical volatility of the Company’sstock for a period equal to the expected term of the options. The expected termof the options represents the period of time that options granted areoutstanding and is estimated using historical exercise and terminationexperience.

 

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Prior to the adoption of SFAS No. 123R,the benefit of tax deductions in excess of recognized stock compensationexpense was reported as a reduction of taxes paid within operating cash flows. SFASNo. 123R requires that such benefits be recognized as a financing cashflow. The benefits of tax deductions in excess of recognized stock compensationexpense for the three months ended March 31, 2009 and 2008 wereimmaterial.

 

There were no options granted during thethree months ended March 31, 2009 and 2008.

 

The following table summarizes stock optionsoutstanding as of March 31, 2009, as well as activity during the threemonth period then ended:

 
| ** **                      | ** ** | **Options  Outstanding** | ** ** | **Exercise Price  Per Share  Weighted  Average** | ** ** | **Contractual  Term  Weighted  Average** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|---------------------------------|------------|--------------------------|------------|------------------------------------------------------------|------------|------------------------------------------|------------|---------------------------------|------------|
| Balance, December 31, 2008 |       | 12,500                   |       | $                                                          | 7.25       |                                     | 1.83       |                            | $          | 64,284 |   |
| Granted                         |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Exercised                       |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Expired/Forfeited               |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Balance, March 31, 2009    |       | 12,500                   |       | $                                                          | 7.25       |                                     | 1.58       |                            | $          | 15,659 |   |

 

All options outstanding at March 31,2009 are fully vested and exercisable. At March 31, 2009, there were40,000 shares available for future grants under the plans, however, on April 25,2007, the Company’s Board of Directors elected to suspend future grants underall plans indefinitely.

 

**(5)****                                ****Goodwill and Other IntangibleAssets**

 

The Company conforms to theprovisions of Statement of Financial Accounting Standards No. 142 (“SFAS142”), *Goodwill and Other Intangible Assets*. UnderSFAS 142, goodwill and intangible assets deemed to have indefinite lives arereviewed for impairment and written down and charged to results of operationswhen their carrying amount exceeds their estimated fair value. The Company isrequired to perform impairment tests each year, or between yearly tests incertain circumstances, for goodwill. There can be no assurance that futureimpairment tests will not result in a charge to earnings.

 

*Amortizing IntangibleAssets*

 
| ** **                                      | ** ** | **As of March 31, 2009** | ** ** | **As of December 31, 2008** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                      | ** ** | **Gross  carrying  amount**                  | ** ** | **Weighted  average  amortization  period**     | ** ** | **Accumulated  amortization** | ** ** | **Gross  carrying  amount** | ** ** | **Weighted  average  amortization  period** | ** ** | **Accumulated  amortization** | ** ** |
| Amortizing intangible assets:                   |       |                                         |       |                                            |       |   |   |   |   |   |   |   |   |
| Investment in management customer relationships |       | $                                            | 1,420,000  |                                            | 10.5       |   | $ | 101,468 |   | $ | 1,420,000 |   | 10.5 |   | $ | 73,762 |   |
|                                            |       | $                                            | 1,420,000  |                                            | 10.5       |   | $ | 101,468 |   | $ | 1,420,000 |   | 10.5 |   | $ | 73,762 |   |

 

Inconnection with the acquisition of Mustang Capital Advisors, L.P in 2008, theCompany acquired certain customer related intangible assets. The value assignedto these intangible assets of $1,420,000 was determined based on the presentvalue of the estimated cash flows to be generated by the assets.

 

Amortizationexpense for amortizing intangible assets for the three months ended March 31,2009 and 2008 was $27,706 and $157,574, respectively. Franchise royaltycontracts, originally acquired in January 2004, were fully amortized as ofDecember 31, 2008. The estimated annual amortization expense for theremaining amortizing intangible asset is $135,240 per year through 2018.

 

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**(6)****                                ****Debt**

 

At March 31, 2009, there was $350,000 outstanding on a$2,000,000 line of credit with a bank. The line is payable on demand, subject to annual renewal by the bankwith an automatic renewal at May 31, 2009, carries an interest rate ofprime minus 0.50% (2.75% at March 31, 2009 and at December 31, 2008)and collateralized by accounts receivable and the assignment of all franchiseroyalty contracts.

 

In 2008, the Company’spurchase of the investment in real estate was refinanced through the issuanceof a note payable to a bank of $2,641,220, secured by the land held forinvestment.  Interest accrues on theunpaid principal balance at prime minus 0.5%, or 2.75% as of March 31,2009.  The Company made one payment ofprincipal of $264,122 on January 29, 2009, and all remaining principal andaccrued interest is due on January 30, 2010.  Accordingly, the outstanding balance of thisdebt is classified as a current liability at March 31, 2009.

 

The Company has various notes payable to a finance companywith interest rates ranging from 9.82% to 10.07% due in equal monthlyinstallments, including principal and interest, ranging from $6,591 to $13,487,with a final payment due on April 13, 2010.  The notes payable require pre-paymentpremiums in certain circumstances and contain certain restrictive covenants,including debt coverage ratios, periodic reporting requirements and maintenanceof operations at certain Company-operated restaurants that collateralize thenotes payable.  The notes payable arecollateralized by accounts receivable, inventory and property and equipment.

 

**(7)****                                ****Income Taxes**

 

The Company adopted the provisions of FASBInterpretation No. 48*, Accounting forUncertainty in Income Taxes*, an Interpretation of FASB Statement No. 109(“FIN 48”), on January 1, 2007.  As of March 31, 2009, theCompany has a recorded liability of $9,872, including interest of $4,556, forsuch uncertain tax positions.  Therecorded liability was increased by $2,320 during the three months ended March 31,2009.

 

Inassessing the realizability of deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income during the periods inwhich those temporary differences become deductible.

 

Managementconsiders the scheduled reversal of deferred tax liabilities, projected futuretaxable income, and tax planning strategies in making this assessment. Basedupon the level of historical taxable income and projections for future taxableincome over the periods which the deferred tax assets are deductible, managementbelieves it is more likely than not the Company will realize the benefits ofthese deductible differences, net of a valuation allowance of $1,754,000,$2,326,631 and $1,433,000 at March 31, 2009, December 31, 2008 and March 31,2008, respectively, related to the unrealized losses on marketable securities.

 

**(8)****                                ****Earnings (Loss) Per Share**

 

Basic earnings (loss) per share excludes dilutionand is computed by dividing income (loss) attributable to Western SizzlinCorporation by the weighted-average number of common shares outstanding for theperiod.  Diluted earnings per sharereflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common stockor resulted in the issuance of common stock that then shared in the earnings ofthe Company.

 

The following is a reconciliation of the numeratorsand denominators of the basic and diluted earnings (loss) per sharecomputations for the periods indicated:

 

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| ** **                                                             | ** ** | **Income (Loss)  (Numerator)** | ** ** | **Weighted  Average Shares  (Denominator)** | ** ** | **Earnings  (Loss)  Per Share  Amount** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|
| **Three months ended March 31, 2009**                             | ** ** | ** **                          | ** ** | ** **                                       | ** ** | ** **                                   | ** ** |
| Net income attributable to  Western Sizzlin Corporation — basic   |       | $                                   | 2,293,057  |                                             | 2,831,884  |                                         | $          | 0.81 |   |
| Net income attributable to  Western Sizzlin Corporation — diluted |       | $                                   | 2,293,057  |                                             | 2,833,288  |                                         | $          | 0.81 |   |
|                                                                   |       |                                |       |                                             |       |                                         |       |
| **Three months ended  March 31, 2008**                            | ** ** | ** **                          | ** ** | ** **                                       | ** ** | ** **                                   | ** ** |
| Net loss attributable to  Western Sizzlin Corporation — basic     |       | $                                   | (3,850,995 | )                                                | 2,696,625  |                                         | $          | (1.43 | ) |
| Net loss attributable to  Western Sizzlin Corporation — diluted   |       | $                                   | (3,850,995 | )                                                | 2,696,625  |                                         | $          | (1.43 | ) |

 

For the three months ended March 31,2008, the Company excluded from the loss per share calculation all common stockequivalents because the effect on loss per share was anti-dilutive.

 

**(9)****                                ****Reportable Segments**

 

TheCompany has organized segment reporting with additional information to reflecthow the Company views its business activities. The Company-operated Restaurant segment consists of the operations ofall Company-operated restaurants and derives its revenues from restaurantoperations.  The Franchising segmentconsists primarily of franchise sales and support activities and derives itsrevenues from sales of franchise and development rights and collection ofroyalties from franchisees. The Investment Activity segment consists ofinvestment activities and certain direct expenses associated with legalmatters. The Company does not allocate certain expenses to any businesssegment.  These costs include expenses ofthe following functions: legal, accounting, stockholder relations, personnelnot directly related to a segment, information systems and other headquarteractivities.  These unallocated expensesare designated as unallocated corporate expenses. Certain other expenses (suchas sublease property expense and claims settlement and legal fees associated witha lawsuit) are also not allocated to any reportable segment.

 

The following table summarizes reportable segmentinformation:

 
| ** **                                                                          | ** ** | **Three Months**         | ** ** |
|-------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                          | ** ** | **Ended March 31,** | ** ** |
| ** **                                                                          | ** ** | **2009**                      | ** ** | **2008** | ** ** |
| Revenues from reportable  segments:                                                 |       |                          |       |   |   |
| Restaurants                                                                         |       | $                             | 3,162,427  |   | $ | 3,126,110 |   |
| Franchising                                                                         |       | 957,148                       |       | 1,049,141 |   |
| Total revenues                                                                      |       | $                             | 4,119,575  |   | $ | 4,175,251 |   |
| Depreciation and amortization:                                                      |       |                          |       |   |   |
| Restaurants                                                                         |       | $                             | 89,665     |   | $ | 99,357 |   |
| Franchising                                                                         |       | 8,046                         |       | 165,645 |   |
| Total depreciation and  amortization                                                |       | $                             | 97,711     |   | $ | 265,002 |   |
| Interest expense:                                                                   |       |                          |       |   |   |
| Restaurants                                                                         |       | $                             | 15,686     |   | $ | 38,447 |   |
| Total interest expense                                                              |       | $                             | 15,686     |   | $ | 38,447 |   |
| Interest income:                                                                    |       |                          |       |   |   |
| Corporate                                                                           |       | $                             | 33,718     |   | $ | 20,864 |   |
| Total interest income                                                               |       | $                             | 33,718     |   | $ | 20,864 |   |
| Income (loss) from restaurant  and franchise operations:                            |       |                          |       |   |   |
| Restaurants and equity in joint  venture                                            |       | $                             | 205,267    |   | $ | 201,919 |   |
| Franchising                                                                         |       | 663,920                       |       | 578,961 |   |
| Unallocated expenses                                                                |       | (26,420                       | )          | (165,087 | ) |
| Corporate                                                                           |       | (488,966                      | )          | (484,250 | ) |
| Total income from restaurant  and franchise operations:                             |       | $                             | 353,801    |   | $ | 131,543 |   |
| Income (loss) from investment  activities:                                          |       |                          |       |   |   |
| Investment advisory fee income                                                      |       | $                             | 101,806    |   | $ | — |   |
| Net realized gains (losses) on  sales of marketable securities                      |       | 317,628                       |       | (40,606 | ) |
| Net unrealized gains (losses)  on marketable securities held by limited partnership |       | 1,417,678                     |       | (4,162,663 | ) |
| Expenses of investment  activities                                                  |       | (147,065                      | )          | (500,267 | ) |
| Purchase obligation adjustment                                                      |       | 200,989                       |       | — |   |
| Total income (loss) from  investment activities                                     |       | $                             | 1,891,036  |   | $ | (4,703,536 | ) |

 

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| ** **            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------|------------|--------------------|------------|-----------------------|------------|
| ** **            | ** ** | **2009**           | ** ** | **2008**              | ** ** |
| Total assets:         |       |               |       |                  |       |
| Restaurants           |       | $                  | 6,682,429  |                  | $          | 6,523,219 |   |
| Franchising           |       | 1,831,122          |       | 1,920,513             |       |
| Corporate             |       | 1,312,161          |       | 1,203,830             |       |
| Investment activities |       | 27,900,480         |       | 26,305,261            |       |
| Total assets          |       | $                  | 37,726,192 |                  | $          | 35,952,823 |   |

 
| ** **            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------|------------|--------------------|------------|-----------------------|------------|
| ** **            | ** ** | **2009**           | ** ** | **2008**              | ** ** |
| Total goodwill:       |       |               |       |                  |       |
| Restaurants           |       | $                  | 3,539,057  |                  | $          | 3,539,057 |   |
| Franchising           |       | 771,143            |       | 771,143               |       |
| Investment activities |       | 685,062            |       | 685,062               |       |
| Total goodwill        |       | $                  | 4,995,262  |                  | $          | 4,995,262 |   |

 

**(10)****                         ****Fair Value Measurement**

 

Effective January 1, 2008, the Company adoptedStatement of Financial Accounting Standards No. 159 (“SFAS 159”), *The Fair Value Option for Financial Assets and Financial Liabilities*.  SFAS 159 permits entities to choose tomeasure many financial instruments and certain other items at fair value. TheCompany did not elect the fair value reporting option for any assets andliabilities not previously recorded at fair value.

 

Effective January 1, 2008, the Company adoptedthe provisions of Statement of Financial Accounting Standards No. 157 (“SFAS157”), *Fair Value Measurements,*applicableto all financial assets and liabilities and for nonfinancial assets andliabilities recognized or disclosed at fair value in the consolidated financialstatements on a recurring basis (at least annually). SFAS 157 defines fairvalue as the exchange price that would be received for an asset or paid to transfera liability (an exit price) in the principal or most advantageous market forthe asset or liability in an orderly transaction between market participants onthe measurement date. The standard also establishes a fair value hierarchywhich requires an entity to maximize the use of observable inputs and minimizethe use of unobservable inputs when measuring fair value. SFAS 157describes three levels of inputs that may be used to measure fair value:

 
| **Level 1** | Quoted market prices in active markets for  identical assets or liabilities.                 |
|-------------|----------------------------------------------------------------------------------------------|
|        |                                                                                         |
| **Level 2** | Observable market-based inputs or  unobservable inputs that are corroborated by market data. |
|        |                                                                                         |
| **Level 3** | Unobservable inputs that are not  corroborated by market data.                               |

 

At March 31, 2009 and December 31, 2008, the Company’sinvestments in marketable securities are carried at fair value, based on quotedmarket prices, in the consolidated balance sheets and are classified withinLevel 1 of the fair value hierarchy, with the exception of $1.3 million thathave been valued, in the absence of observable market prices, by MustangCapital Advisors, LP.  The Fundsinvestments in Level 1 securities are freely tradable and are listed on anational securities exchange or reported on the NASDAQ national market at theirlast sales price as of the last business day of the period.

 

Approximately $1.3 million of the investments held by Mustang CapitalAdvisors, LP have been classified within Level 2 of the fair value hierarchyand have been valued, in the absence of observable market prices, by themanagement of Mustang Capital Advisors, LP. Fair value is determined using valuation methodologies after giving

 

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consideration to a range of observable factors including last knownsales price; any current bids or offers on the stock; comparisons to publiclytraded stocks with appropriate discounts for liquidity; size of position;control data research; and current market conditions. Those estimated values donot necessarily represent the amounts that may be ultimately realized due tothe occurrence of future circumstances that can not be reasonably determined.Because of the inherent uncertainty of valuation, those estimated values may bematerially higher or lower than the values that would have been used had aready market for the securities existed.

 

**(11)****                         ****Commitments and Contingencies**

 

**Commitments**

 

The limited partners of the two investment fundsmanaged by Mustang Capital Advisors, LP can redeem their investmentsannually.  The limited partners ofWestern Acquisitions. LP can redeem their investments after two years fromcontribution dates.  The earliestredemption date for a Western Acquisitions, LP limited partner is August 2009.

 

The Company has a severance provisioncontained within the Employment Agreement with its Chief Financial Officer. Theagreement provides certain termination benefits in the event that employmentwith the Company is terminated without cause and upon a change of control.Under the terms of the agreement, in the event of termination without cause theexecutive will receive termination benefits equal to six months of theexecutive’s annual base salary in effect on the termination date and thecontinuation of health and welfare benefits through the termination date of theagreement. Under a change of control, the executive will receive terminationbenefits equal to one year of the executive’s base salary in effect on the changeof control date and the continuation of health and welfare benefits through thetermination date of the agreement.

 

The Company has a severance provisioncontained within the Employment Agreement with the President of one of itssubsidiaries, Western Sizzlin Franchise Corporation. The agreement provides foran automatic renewal of one year unless the Company or the executive providesnotice of termination as specified in the agreement. Under the terms of theagreement, in the event of termination without cause, the executive willreceive termination benefits equal to one year of the executive’s annual basesalary in effect on the termination date and the continuation of health andwelfare benefits through the termination date of the agreement.

 

In connection with the acquisition of controllinginterests in Mustang Capital Advisors, LP and Mustang Capital Management, LLC,the Company is obligated to purchase the noncontrolling interest holder’sownership upon the occurrence of certain events.  The purchase obligation will ultimately besettled in cash and shares of the Company’s common stock.  The Company is accounting for this purchaseobligation pursuant to Statement of Financial Accounting Standards No. 150(As Amended) - *Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity.* The resulting liability is reported in otherlong-term liabilities on the accompanying consolidated balance sheet.  The change in the purchase obligationliability for the first quarter of 2009 is a decrease of $200,989.

 

**Contingencies**

 

The Company accrues for an obligation forcontingencies, including estimated legal costs, when a loss is probable and theamount is reasonably estimable.  As factsconcerning contingencies become known to the Company, the Company reassessesits position with respect to accrued liabilities and other expenses.  These estimates are subject to change asevents evolve and as additional information becomes available during thelitigation process.

 

Little Rock, Arkansas Lease

 

In September 2006,the Company was served with a lawsuit filed in the Circuit Court of PulaskiCounty, Arkansas, captioned *Parks Land Company, LLP,et al. v. Western Sizzlin Corporation, et al.* The plaintiffs areowners/landlords of four restaurant premises located in the Little Rock,Arkansas metropolitan area which had been leased pursuant to a single ten yearlease agreement.  The Company occupied these locations for a periodof time, but before the end of the lease, subleased each of these premises tovarious operators.  The ten year leaseagreement expired on June 30, 2006.  In the lawsuit the plaintiffs sought recovery of allegeddamages for certain repair and maintenance expenses on the premises, forthe replacement of certain equipment, for diminution of property value, and forloss of rental income, as well as interest and costs.  The case was tried to a 12 person jury inLittle Rock, starting February 12, 2008.   The jury returned a verdict for theplaintiffs on February 20, 2008, in the amount of

 

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$689,526.  On February 29, 2008, the Circuit Courtof Pulaski County, Arkansas entered judgment on the jury’s verdict in the caseagainst the Company in the amount of $689,666 plus plaintiff’s legalcosts.  The Company posted a bond tosecure the judgment and stay collection pending the appeal of theverdict.  The appeal has now been fully briefed by both sides.  A decision from the Arkansas Court of Appealsis expected by June 2009.  If theappellate court affirms the judgment against the Company, the amount due theplaintiffs would include interest accrued on the judgment from February 29,2008, through the period of the decision on appeal.  This additional amount is not expected toexceed $70,000.  If the verdict isaffirmed, the Plaintiffs will renew their efforts to have the trial court awardPlaintiffs their attorneys’ fees.   Todate, the court has declined to make any award of fees.    There has been no change in the Company’sloss contingency accrual of $900,000 since December 31, 2007.

 

Other

 

The Company is involved in various otherclaims and legal actions arising in the ordinary course of business.  In the opinion of the management, theultimate disposition of these matters will not have a material adverse effecton the Company’s financial condition, results of operations or liquidity.

 

**(12)****                         ****Investment in UnconsolidatedJoint Venture**

 

The Company is a partner in a 50/50 joint venturewith a franchisee for a restaurant in Harrisonburg, Virginia.  During October 2005, the joint ventureentered into a loan agreement for $3.05 million and the Company guaranteed 50%of the loan obligation.  The estimatedfair value of the guarantee of approximately $30,000 is recorded in otherlong-term liabilities and in investments in unconsolidated joint venture on theaccompanying consolidated balance sheets at March 31, 2009 and December 31,2008.  The term of the guarantee extendsthrough July 1, 2026 and the Company would be required to perform underthe guarantee should the joint venture not to be able to meet its scheduledprincipal and interest payments. Pursuant to the joint venture agreement, a cash contribution of $300,000from each 50/50 partner was also made at the closing of this financing.  The Company is accounting for the investmentusing the equity method and the Company’s share of the net income of the jointventure is reported in the accompanying statements of operations as equity inearnings of unconsolidated joint venture.

 

**Financial Data**

 

The following is selected financial information forthe joint venture as of and for the three months ended March 31, 2009 and2008, respectively:

 
| ** **                                                  | ** ** | **Three Months  Ended** | ** ** | **Three Months  Ended** | ** ** |
|-------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                  | ** ** | **March 31, 2009** | ** ** | **March 31, 2008** | ** ** |
| ** **                                                  | ** ** | **(unaudited)**              | ** ** | **(unaudited)**              | ** ** |
| **Statement of Operations Data:**                           | ** ** | ** **                   | ** ** | ** **                   | ** ** |
| Total revenues                                              |       | $                            | 1,268,072  |                         | $          | 1,204,942 |   |
| Cost of food                                                |       | 524,155                      |       | 489,503                      |       |
| Payroll expense                                             |       | 348,818                      |       | 353,340                      |       |
| Gross profit                                                |       | 395,099                      |       | 362,099                      |       |
| Marketing and smallware expense                             |       | 46,075                       |       | 47,768                       |       |
| General and administrative                                  |       | 135,226                      |       | 117,048                      |       |
| Depreciation and amortization                               |       | 51,210                       |       | 50,460                       |       |
| Interest                                                    |       | 50,260                       |       | 54,082                       |       |
| Other income (expense)                                      |       |                         |       |                         |       |
| Net income                                                  |       | 112,328                      |       | 92,741                       |       |
| **Balance Sheet Data:**                                     | ** ** | ** **                   | ** ** | ** **                   | ** ** |
| Cash                                                        |       | $                            | 141,845    |                         | $          | 334,166 |   |
| Current receivables                                         |       | 5,844                        |       | 605                          |       |
| Prepaid expenses                                            |       | 20,474                       |       | 18,899                       |       |
| Inventory                                                   |       | 20,601                       |       | 21,187                       |       |
| Land, leasehold improvements,  and construction in progress |       | 3,515,252                    |       | 3,702,795                    |       |
| Loan costs, net                                             |       | 10,039                       |       | 11,565                       |       |
| Other assets                                                |       | 200                          |       | 200                          |       |
| Total assets                                                |       | 3,714,255                    |       | 4,089,417                    |       |
| Loan payable                                                |       | 2,901,779                    |       | 3,092,720                    |       |
| Accounts payable and accrued  expenses                      |       | 250,756                      |       | 354,720                      |       |
| Members’ equity                                        |       | 561,717                      |       | 641,977                      |       |

 

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**(13)****                        ****Impact of Recently IssuedAccounting Standards**

 

In May 2007,the FASB issued FASB Staff Position No. FIN 46(R)-7, *Applicationof FASB Interpretation No. 46(R) to Investment Companies* (“FSPFIN 46(R)-7”) which provides clarification on the applicability of FIN 46(R),as revised, to the accounting for investments by entities that apply theaccounting guidance in the AICPA Audit and Accounting Guide, *Investment Companies*. FSP FIN 46(R)-7 amends FIN 46(R), as revised, to make permanent thetemporary deferral of the application of FIN 46(R), as revised, to entitieswithin the scope of the guide under Statement of Position (“SOP”) No. 07-1,*Clarification of the Scope of the Audit andAccounting Guide*Investment Companies *andAccounting by Parent Companies and Equity Method Investors for Investments inInvestment Companies* (“SOP 07-1”). FSP FIN 46(R)-7 is effective upon adoption of SOP 07-1.  The adoption of FSP FIN 46(R)-7 is notexpected to have a material impact on the Company.

 

SOP 07-1, issued in June 2007,addresses whether the accounting principles of the AICPA Audit and AccountingGuide *Investment Companies* may be applied toan entity by clarifying the definition of an investment company and whetherthose accounting principles may be retained by a parent company inconsolidation or by an investor in the application of the equity method ofaccounting.  SOP 07-1, as originallyissued, was to be effective for fiscal years beginning on or after December 15, 2007with earlier adoption encouraged.  In February 2008,the FASB issued FSP SOP 07-1-1, *Effective Date of AICPAStatement of Position 07-01*, to indefinitely defer the effectivedate of SOP 07-01.

 

The Company’smajority-owned subsidiaries, Western Acquisitions, LP and Mustang CapitalAdvisors, LP, are investment companies as currently defined in the AICPA Auditand Accounting Guide, *Investment Companies*.  The Company has retained the specializedaccounting for Western Acquisitions, LP and Mustang Capital Advisors, LPpursuant to EITF 85-12, *Retention of SpecializedAccounting for Investments in Consolidation*.  As such, marketable equity securities held byWestern Acquisitions, LP and Mustang Capital Advisors, LP are recorded at fairvalue in Investments in Marketable Securities in the consolidated financialstatements, with unrealized gains and losses resulting from the change in fairvalue reflected in the Consolidated Statement of Operations. The Company intendsto monitor future developments associated with this Statement in order toassess the impact, if any, which may result.

 

In April 2009, theFASB issued FSP FAS 157-4, “*Determining Fair ValueWhen the Volume and Level of Activity for the Asset or Liability HaveSignificantly Decreased and Identifying Transactions That Are Not Orderly*”(FSP FAS 157-4). FSP FAS 157-4 amends SFAS 157 and provides additional guidancefor estimating fair value in accordance with SFAS 157 when the volume and levelof activity for the asset or liability have significantly decreased and alsoincludes guidance on identifying circumstances that indicate a transaction isnot orderly for fair value measurements. This FSP shall be appliedprospectively with retrospective application not permitted. This FSP shall beeffective for interim and annual periods ending after June 15, 2009.  The Company is currently evaluating this newFSP but does not believe that it will have a significant impact on thedetermination of fair value or reporting of its financial results.

 

In April 2009, theFASB issued FSP FAS 115-2 and FAS 124-2, “*Recognition andPresentation of Other-Than-Temporary Impairments.”* This FSP amends SFAS 115, “*Accounting for Certain Investments in Debt and Equity Securities*,”SFAS 124, “*Accounting for Certain Investments Held byNot-for-Profit Organizations*,” and EITF Issue No. 99-20, “*Recognition of Interest Income and Impairment on Purchased BeneficialInterests and Beneficial Interests That Continue to Be Held by a Transferor inSecuritized Financial Assets*,” to make the other-than-temporaryimpairments guidance more operational and to improve the presentation ofother-than-temporary impairments in the financial statements. This FSP willreplace the existing requirement that the entity’s management assert it hasboth the intent and ability to hold an impaired debt security until recoverywith a requirement that management assert it does not have the intent to sellthe security, and it is more likely than not it will not have to sell thesecurity before recovery of its cost basis. This FSP provides increaseddisclosure about the credit and noncredit components of impaired debtsecurities that are not expected to be sold and also requires increased andmore frequent disclosures regarding expected cash flows, credit losses, and anaging of securities with unrealized losses. Although this FSP does not resultin a change in the carrying amount of debt securities, it does require that theportion of an other-than-temporary impairment not related to a credit loss fora held-to-maturity security be recognized in a new category of othercomprehensive income and be amortized over the remaining life of the debt

 

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security as an increasein the carrying value of the security. This FSP shall be effective for interimand annual periods ending after June 15, 2009.  The Company is currently evaluating this newFSP but does not believe that it will have a significant impact on thedetermination or reporting of its financial results.

 

In April 2009,the FASB issued FSP FAS 107-1 and APB 28-1, *Interim Disclosures aboutFair Value of Financial Instruments,*to require an entity to provideinterim disclosure about the fair value of all financial instruments within thescope of SFAS 107 and to include disclosures related to the methods andsignificant assumptions used in estimating those instruments.  This FSP is effective for interim and annualperiods ending after June 15, 2009. The Company is currently evaluating the impact the adoption of this FSPwill have on the Company’s consolidated financials statements and relateddisclosures.

 

**Item 2.****         ****Management’s Discussionand Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

The following discussionmay include forward-looking statements including anticipated financialperformance, business prospects, the future opening of Company-operated andfranchised restaurants, anticipated capital expenditures, and othermatters.  All statements other thanstatements of historical fact are forward-looking statements.  Section 27A of the Securities Act of1933 (as amended) and Section 21E of the Securities Exchange Act of 1934(as amended) provide safe harbors for forward-looking statements.  In order to comply with the terms of thesesafe harbors, the Company notes that a variety of factors, individually or inthe aggregate, could cause the Company’s actual results and experience todiffer materially from the anticipated results or other expectations expressedin the Company’s forward-looking statements including, without limitation, thefollowing: the ability of the Company or its franchises to obtain suitable locationsfor restaurant development; consumer spending trends and habits; competition inthe restaurant segment with respect to price, service, location, food qualityand personnel resources; weather conditions in the Company’s operating regions;laws and government regulations; general business and economic conditions;availability of capital; success of operating initiatives and marketing andpromotional efforts; and changes in accounting policies.  In addition, the Company disclaims any intentor obligation to update those forward-looking statements.

 

Western SizzlinCorporation is a holding company owning subsidiaries engaged in a number ofdiverse business activities.  The Company’sprimary business activities are conducted through Western Sizzlin FranchiseCorporation and Western Sizzlin Stores, Inc., which franchise and operate106 restaurants in 19 states, including five Company-owned, 100 franchiserestaurants, and one joint venture restaurant. The Company currently operates and/or franchises the followingconcepts:  Western Sizzlin, WesternSizzlin Wood Grill, Great American Steak & Buffet, and QuincySteakhouses.

 

Financial decisions arecentralized at the holding company level, and management of operatingbusinesses is decentralized at the business unit level.  Investment and all other capital allocationdecisions are made for the Company and its subsidiaries by Mr. SardarBiglari, Chairman and Chief Executive Officer. The Company’s primary objective centers on achieving above averagereturns on capital in pursuit of maximizing the eventual net worth of itsstockholders.

 

While the Company hashistorically been principally engaged, and intends at this time to remainprincipally engaged, in franchising and operating restaurants, its recentinvestment activities could bring it within the definition of an “investmentcompany” and require it to register as an investment company under theInvestment Company Act of 1940.  TheBoard of Directors has adopted a policy requiring management to restrict theCompany’s operations and investment activities to avoid becoming an investmentcompany, until and unless the Board approves otherwise.  Although the Company does not presentlyintend to change its principal business, and the Board has not approved anysuch change, the Company has expanded its investment activities, and may decidein the future to register as an investment company under the Investment CompanyAct.  Under certain circumstances, if itis successful in investment activities, then the Company may inadvertently fallwithin the definition of an investment company, in which event it may berequired to register as an investment company. If the Company decides or is required to

 

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register as an investmentcompany, then it would become subject to various provisions of the InvestmentCompany Act and the regulations adopted under such Act, which are veryextensive and could adversely affect its operations.

 

The Company seeks toinvest, at the holding company and through subsidiaries, including WesternAcquisitions, L.P., in stocks of businesses at prices below their intrinsicbusiness value.  The Company’s preferredstrategy is to allocate a meaningful amount of capital in each investee,resulting in concentration.  The carryingvalues of these investments are exposed to market price fluctuations, which maybe accentuated by a concentrated equity portfolio.  A significant decline in the price of majorinvestments may produce a large decrease in the Company’s net earnings and itsstockholders’ equity (See Note 3 to the consolidated financial statements).

 

**The consolidated financialstatements include the accounts of Western Sizzlin Corporation and itswholly-owned subsidiaries, Western Sizzlin Franchise Corporation, The WesternSizzlin Stores, Inc., Western Sizzlin Stores of Little Rock, Inc.,Austins of Omaha, Inc., Western Investments, Inc., Western Properties, Inc.,a majority-owned limited partnership, Western Acquisitions, L.P., asolely-owned limited partnership, Western Real Estate, L.P. and Western MustangHoldings, L.L.C. (collectively the Company). All significant intercompanyaccounts and transactions have been eliminated in consolidation.**

** **

**Resultsof Operations**

 

Net income attributable to Western Sizzlin Corporationfor the three months ended March 31, 2009 was $2,293,057 compared to netloss attributable to Western Sizzlin Corporation of ($3,850,995) for the threemonths ended March 31, 2008.  Income(loss) from investment activities that impacted net income (loss) attributableto Western Sizzlin Corporation, excluding losses attributable to noncontrollinginterests,  for the three months ended March 31,2009 and 2008 were $2,223,342 and, ($4,112,322), respectively.

 

The following table setsforth for the periods presented the percentage relationship to total revenuesof certain items included in the consolidated statements of income and certainrestaurant data for the periods presented:

 
| ** **                                                                           | ** ** | **Three Months**         | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                           | ** ** | **Ended March 31,** | ** ** |
| ** **                                                                           | ** ** | **2009**                      | ** ** | **2008** | ** ** |
| Revenues:                                                                            |       |                          |       |   |   |
| Company-operated restaurants                                                         |       | 76.8                          | %          | 74.9 | % |
| Franchise operations                                                                 |       | 23.2                          |       | 25.1 |   |
|                                                                                 |       | 100.0                         |       | 100.0 |   |
| Total revenues                                                                       |       |                          |       |   |   |
| Costs and expenses — restaurant and franchise operations:                       |       |                          |       |   |   |
| Company-operated restaurants — food, beverage and labor costs                   |       | 57.8                          |       | 55.4 |   |
| Restaurant occupancy and other                                                       |       | 13.2                          |       | 13.4 |   |
| Franchise operations — direct support                                           |       | 6.9                           |       | 7.3 |   |
| Subleased restaurant property expenses                                               |       | —                        |       | .7 |   |
| Corporate expenses                                                                   |       | 11.9                          |       | 12.5 |   |
| Depreciation and amortization expense                                                |       | 2.4                           |       | 6.3 |   |
| Claims settlement and legal fees associated with lawsuit                             |       | .6                            |       | 3.3 |   |
| Total costs and expenses — restaurant and franchise operations                  |       | 92.8                          |       | 98.9 |   |
|                                                                                 |       |                          |       |   |   |
| Equity in income of joint venture                                                    |       | 1.4                           |       | 1.1 |   |
| Income from restaurant and franchise operations                                      |       | 8.6                           |       | 2.2 |   |
|                                                                                 |       |                          |       |   |   |
| Investment advisory fee income                                                       |       | 2.5                           |       | — |   |
| Net realized gain (loss) on sales of marketable securities                           |       | 7.7                           |       | (.9 | ) |
| Net unrealized gains (losses) on marketable securities held by limited  partnerships |       | 34.5                          |       | (99.7 | ) |
| Amortization expense                                                                 |       | (.7                           | )          | — |   |
| Expense of investment activities                                                     |       | (2.9                          | )          | (11.6 | ) |
| Purchase obligation adjustment                                                       |       | 4.8                           |       | — |   |
| Income (loss) from investment activities                                             |       | 45.9                          |       | (112.2 | ) |
|                                                                                 |       |                          |       |   |   |
| Other income (expense):                                                              |       |                          |       |   |   |
| Interest expense                                                                     |       | (.4                           | )          | (.4 | ) |
| Interest income                                                                      |       | .8                            |       | .5 |   |
| Other, net                                                                           |       | —                        |       | — |   |
| Total other income (expense), net                                                    |       | .4                            |       | .1 |   |
|                                                                                 |       |                          |       |   |   |
| Income (loss) before income tax expense                                              |       | 54.9                          |       | (109.9 | ) |
| Income tax expense (benefit)                                                         |       |                          |       |   |   |
| Current                                                                              |       | .3                            |       | (.1 | ) |
| Deferred                                                                             |       | 7.0                           |       | (3.4 | ) |
| Total income tax expense (benefit)                                                   |       | 7.3                           |       | (3.5 | ) |
| Net income (loss)                                                                    |       | 47.6                          |       | (106.40 | ) |
| Losses attributable to noncontrolling interests                                      |       | 8.1                           |       | 14.2 |   |
| Net income (loss) attributable to Western Sizzlin Corporation                        |       | 55.7                          | %          | (92.2 | )% |

 

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| ** **                              | ** ** | **Three Months**         | ** ** |
|-----------------------------------------|------------|-------------------------------|------------|
| ** **                              | ** ** | **Ended March 31,** | ** ** |
| ** **                              | ** ** | **2009**                      | ** ** | **2008** | ** ** |
| **Restaurant Data**                     | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Number of Company-Operated Restaurants: |       |                          |       |   |   |
| Beginning of period                     |       | 5                             |       | 5 |   |
| Opened                                  |       | —                        |       | — |   |
| Closed                                  |       | —                        |       | — |   |
| Franchised                              |       | —                        |       | — |   |
| End of period                           |       | 5                             |       | 5 |   |
| Number of U.S. Franchised Restaurants:  |       |                          |       |   |   |
| Beginning of period                     |       | 104                           |       | 116 |   |
| Opened                                  |       | —                        |       | — |   |
| Closed                                  |       | (4                            | )          | (1 | ) |
| End of period                           |       | 100                           |       | 115 |   |
| Number of Joint Venture Restaurants:    |       |                          |       |   |   |
| Beginning of period                     |       | 1                             |       | 1 |   |
| Opened                                  |       | —                        |       | — |   |
| Closed                                  |       | —                        |       | — |   |
| End of period                           |       | 1                             |       | 1 |   |

** **

**Revenues**

** **

Total revenues decreased 1.3% to $4.12 million for thethree months ended March 31, 2009 from $4.18 million for the comparablethree months ended March 31, 2008. Company-operated restaurant revenuesincreased 1.2% to $3.16 million for the three months ended March 31, 2009as compared to $3.13 million for the comparable three months ended March 31,2008.  Same store sales for the threemonths ended March 31, 2009 experienced an overall increase of 1.2% forCompany-operated restaurants.  Franchiserevenues decreased 8.8% to $957,000 for the three months ended March 31,2009 as compared to $1.05 million for the comparable three months ended March 31,2008.  The decrease is attributable tofewer franchised units in the system at March 31, 2009 as compared to March 31,2008.  Same store sales for franchisedunits for the three months ended March 31, 2009 experienced an overalldecrease of 3.3%.

 

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**Costsand Expenses —restaurant and franchise operations**

** **

Cost of Company-operated restaurants, consistingprimarily of food, beverage, and labor costs increased $70,000 (3.0%) to $2.38million for the three months ended March 31, 2009 from $2.31 million forthe three months ended March 31, 2008. These costs for the three month period as a percentage ofCompany-operated restaurants revenue were 75.3% and 73.9% for the three monthsended March 31, 2009 and 2008, respectively.  The increase in the costs was largelyattributable to increased costs in commodities during the first quarter of2009.

 

Restaurant occupancy and other, which include utilities,insurance, maintenance, rent and other such costs of the Company-operatedrestaurants, decreased by $17,000 (3.0%) for the three months ended March 31,2009 versus the prior year’s comparable period. These costs for the three monthperiod decreased as a percentage of Company-operated restaurant revenues from17.9% in 2008 to 17.2% in 2009.  Thedecrease for the three months ended March 31, 2009 was largelyattributable to control of certain expense items to combat the increase incommodities.

 

Cost of franchise operations direct support expenseincreased by $5,000 (6.4%) for the three months ended March 31, 2009versus the prior year’s comparable period. The decrease was largely attributable to targeted expense reductions for2009.

 

Subleased properties include net costs associated withsubleasing former Company-operated restaurants and maintenance of vacantpremises.  These expenses increased by$27,000 (100%) for the three months ended March 31, 2009 versus the prioryear’s comparable period.  All subleasearrangements expired during the fourth quarter of 2008 and no further subleaseexpenses are anticipated.

 

Unallocated corporate expenses consist of certainexpenses not allocated to any business segment. These expenses include legal, accounting, stockholder relations,personnel not directly related to a segment, information systems, and otherheadquarters activities.  These expensesincreased by $5,000 (0.5%) for the three months ended March 31, 2009versus the prior year’s comparable period. A one time legal expense of $25,000 was incurred during 2009 for asettlement and release of a company store lease termination and subsequentrenegotiation of lease terms.  Taken thatinto consideration, unallocated corporate expenses actually were running belowthe previous period due to targeted expense reductions for 2009.

 

Depreciation and amortization expense for 2009 was$98,000 compared to $265,000 for 2008. The variance of $167,000 is largely attributable to franchise royaltycontracts being fully amortized as of December 31, 2008.

 

Legal fees associated with lawsuit decreased by$111,000 for the three months ended March 31, 2009 versus the prior year’scomparable period due to decreased legal fees associated with the trial andappeal of the Company’s lawsuit in Little Rock, Arkansas.  (See Note 11 to the consolidated financialstatements).

 

**Equity in income of Joint Venture**

 

Equity in income of joint venture increased $10,200for the three months ended March 31, 2009, versus the prior year’scomparable period, due to better operating performance of the restaurant during2009.  (See Note 12)

 

**Income (Loss) from Investment Activities**

 

Investmentactivities include investment advisory fee income of $102,000 for the threemonths ended March 31, 2009 and $0 for 2008; net realized gains (losses)on sales of marketable securities of $318,000 and ($41,000) for the threemonths ended March 31, 2009 and 2008, respectively, and net unrealizedgains (losses) on marketable securities held by the limited partnerships,Western Acquisitions, L.P. and Mustang Capital Advisors, L.P., of $1.42 millionand ($4.2) million for the three months ended March 31, 2009 and 2008,respectively.  Amortization expenseassociated with investment activities of $28,000, and a purchase obligationadjustment of $201,000 were recorded in the three months ended March 31,2009, with no such adjustments in the same period of 2008. Expenses associatedwith investment activities were $119,000 and $500,000 for the three monthsended March 31, 2009 and 2008, respectively.  The decrease in expenses for 2009 versus theprior year’s comparable period is attributable to expenses in 2008 associatedwith the Steak n Shake proxy contest, the ITEX tender offer, and otherinvestment related activities.  Therewere no management fees charged or collected from outside investors by WesternAcquisitions LP in 2009 or 2008.  Futuremanagement fees for Western Acquisitions LP will depend on portfolioperformance.

 

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**OtherIncome (Expense)**

 

Interest expensedecreased $22,800 for the three months ended March 31, 2009 over thecomparable period in 2008 due to lower debt outstanding.  Interest income fluctuates according to thelevels of available cash balances.

 

Other income decreased by$600 for the three months ended March 31, 2009 over the comparable periodin 2008.

 

Incometax expense (benefit) is directly affected by the levels of pretax income(loss) and the valuation allowance established on deferred tax assets. TheCompany’s effective tax rate was 13.2% and (3.8%) % for the three months ended March 31,2009 and 2008, respectively.  Theprovision for deferred income taxes for the three months ended March 31,2009 and 2008 includes an increase (decrease) for the valuation allowance of ($573,000) and $1,313,000, respectively,which impacted the Company’s effective tax rate for the quarters.

 

**Cash andCash Equivalents**

 

As of March 31,2009, the Company had $528,000 of cash and cash equivalents which is comparableto $331,000 as of December 31, 2008.

 

**Investmentof Available Capital**

 

The Company’s cash flowsfrom restaurant and franchise activities have exceeded its working capital,financing and capital investment needs of its restaurant and franchiseoperations, and management expects that the Company’s cash flows will continueto exceed its operating cash needs for the foreseeable future.  The Company regularly evaluates how best touse available capital to increase stockholder value.  The Company may pursue investments in theform of acquisitions, joint ventures and partnerships where the Companybelieves attractive returns can be obtained. Further, the Company may determine under certain market conditions thatavailable capital is best utilized to fund investments that it believes offersthe Company attractive return opportunities, whether or not related to itsongoing business activities.

 

As previously discussedin Note 3 of Notes to the Consolidated Financial Statements in Part I,Item 1 of this Form 10-Q, the Company’s Board of Directors has delegatedauthority to direct investment of the Company’s surplus cash to its Chairman,Sardar Biglari, subject to Board reporting requirements and various limitationsthat have been or may be from time to time adopted by the Board ofDirectors.  These investments may includesignificant and highly concentrated direct investments with respect to theequity securities of public companies. Any such investments will involve risks, and stockholders shouldrecognize that the Company’s balance sheet may change depending on theperformance of investments.  Furthermore,such investments could be subject to volatility that may affect both the recordedvalue of the investments as well as the Company’s periodic earnings.

 

**Operating Activities and Cash Flows**

 

TheCompany provided (used) approximately $239,000 and ($1.1) million in operatingcash flows for the three months ended March 31, 2009 and 2008,respectively, with the significant variance in investment activities.  The Company’s primary source of operatingcash flows is the operating profits generated from restaurant and franchiseactivities.  Adjustments to reconcile netincome (loss) to net cash provided by restaurant and franchise activities wereapproximately $149,000 and $265,000 for the three months ended March 31,2009 and 2008, respectively.  Adjustmentsto reconcile net income (loss) to net cash provided by (used in) investmentactivities were approximately ($1.9) million and $3.1 million for the threemonths ended March 31, 2009 and 2008, respectively.

 

**Investing Activities**

 

Duringthe three months ended March 31, 2009 and 2008, the Company spent $4,600and $5,000 on capital expenditures on Company restaurants.

 

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**Financing Activities**

 

TheCompany made scheduled payments on long-term debt of $291,000 and $43,000 forthe three months ended March 31, 2009 and 2008, respectively, and paiddown $2 million on line of credit borrowings during 2008.  Also, the Company received proceeds from lineof credit of $350,000 and from issuance of long-term debt of $2.6 million forthe three months ended March 31, 2009 and 2008, respectively.  Also included in financing activities are$97,000 in distributions to noncontrolling interests in 2009 and $540,000 incapital contributions from noncontrolling interests in 2008.

 

**Liquidity**

 

The Company’s primarysources of liquidity are cash generated from operations and, if needed,borrowings under its existing line of credit. The Company continually reviewsits available financing alternatives.  Inaddition, the Company may consider, on an opportunistic basis, strategicdecisions to create value and improve operational performance.

 

**CONTRACTUALOBLIGATIONS**

** **

The table belowsets forth a summary of contractual obligations that will impact futureliquidity as of March 31, 2009:

 
| ** **                       | ** ** | **Payment due by period** | ** ** |
|----------------------------------|------------|------------------------------------------|------------|
| **Contractual Obligations** | ** ** | **2009**                                 | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Totals** | ** ** |
| Long-term debt                   |       | $                                        | 2,839,688  |   | $ | 92,170 |   | $ | 134,189 |   | $ | 148,342 |   | $ | 52,576 |   | — |   | $ | 3,266,965 |   |
| Operating leases                 |       | 501,190                                  |       | 639,880 |   | 367,611 |   | 399,171 |   | 405,086 |   | 766,908 |   | 3,079,846 |   |
| Interest expense (1)             |       | 83,007                                   |       | 40,459 |   | 27,655 |   | 13,501 |   | 1,101 |   |   |   | 165,723 |   |
| Tax obligations (2)              |       | 9,872                                    |       | — |   | — |   | — |   | — |   | — |   | 9,872 |   |
| Other long-term liabilities (3)  |       | —                                   |       | — |   | — |   | — |   | — |   | 382,462 |   | 382,462 |   |
| Totals                           |       | $                                        | 3,433,757  |   | $ | 772,509 |   | $ | 529,455 |   | $ | 561,014 |   | $ | 458,763 |   | $ | 1,149,370 |   | $ | 6,904,868 |   |
|                                  |            |                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)         Reflects future interest payments throughscheduled maturity dates based upon average borrowing rates, outstanding debtbalances and scheduled principal payments on long-term debt.  Interest on the Company’s variable rate debtis based on the interest rate in effect at March 31, 2009.

 

(2)         Reflects recognized liabilities foruncertain tax positions under the provision FIN 48.  (See Note 7)

 

(3)         Reflects the cash portion of the Company’spurchase obligation to purchase the ownership percentage of the minorityinterest holder of Mustang Capital Advisors, LP.

 

**CRITICAL ACCOUNTING ESTIMATES**

** **

The discussion andanalysis of financial condition and results of operations is based on theconsolidated financial statements and accompanying notes that have beenprepared in accordance with United States generally accepted accountingprinciples.  The preparation of theseconsolidated financial statements requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Actual results coulddiffer from those estimates.

 

Application of thecritical accounting policies discussed below requires significant judgments bymanagement, often as a result of the need to make estimates of matters that areinherently uncertain.  If actual resultswere to differ materially from the estimates made, the reported results couldbe materially affected.  The Company isnot currently aware of any reasonably likely events or circumstance that wouldresult in materially different results. The Company’s senior management hasreviewed the critical accounting policies and estimates and the Management’sDiscussion and Analysis regarding them with the Audit and Finance Committee ofthe Board of Directors.

 

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The following areareas requiring significant judgments and estimates due to uncertainties as ofthe reporting date: trade accounts and notes receivables and the allowance fordoubtful accounts, investments, determination of useful lives and theevaluation of any impairment of long-lived assets (including franchise royaltycontracts, investment management contracts and limited partnership agreements,goodwill and property and equipment), commitments and contingencies, and incometaxes.

 

*TradeAccounts and Notes Receivable and the Allowance for Doubtful Accounts*

 

The Companycollects royalties, and in some cases rent, from franchisees.  The Company views trade accounts and notesreceivable and the related allowance for doubtful accounts as a criticalaccounting estimate since the allowance for doubtful accounts is based onjudgments and estimates concerning the likelihood that individual franchiseeswill pay the amounts included as receivables from them.  In determining the amount of allowance fordoubtful accounts to be recorded for individual franchisees, the Companyconsiders the age of the receivable, the financial stability of the franchisee,discussions that may have occurred with the franchisee and a judgment as to theoverall collectability of the receivable from the franchisee.  In addition, the Company establishes anallowance for all other receivables for which no specific allowances are deemednecessary.  If average sales or thefinancial health of franchisees were to deteriorate, the Company might have toincrease the allowance for doubtful accounts.

 

*Investments*

 

Marketable equity securities held by Western SizzlinCorporation are held for an indefinite period and thus are classified asavailable-for-sale. Available-for-sale securities are recorded at fair value inInvestments in Marketable Securities on the consolidated balance sheet, withthe change in fair value during the period excluded from earnings and recordednet of tax as a component of other comprehensive income (loss).  Fair value is determined through the use ofquoted market values on national exchanges.

 

Western Acquisitions, LPand Mustang Capital Advisors, LP are, for GAAP purposes, investment companiesunder the AICPA Audit and Accounting Guide *Investment Companies*.  The Company has retained the specializedaccounting for Western Acquisitions, LP and Mustang Capital Advisors, LPpursuant to EITF Issue No. 85-12, *Retention of SpecializedAccounting for Investments in Consolidation.*  As such, marketable equity securities held byWestern Acquisitions, LP and Mustang Capital Advisors, LP are recorded at fairvalue in Investments in Marketable Securities, with unrealized gains and lossesresulting from the change in fair value reflected in the Statement ofOperations.  Fair value is primarilydetermined through the use of quoted market values on national exchanges.

 

*Long-livedAssets, Franchise Royalty Contracts and Goodwill*

 

The Company viewsthe determination of the carrying value of long-lived assets, franchise royaltycontracts, goodwill, investment management contracts and limited partnershipagreements as critical accounting estimates since it must evaluate theestimated economic useful life in order to properly depreciate or amortize thelong-lived assets, franchise royalty contracts, and investment managementcontracts and limited partnership agreements and because it must consider ifthe value of any of the long-lived assets have been impaired, requiringadjustments to the carrying value. Goodwill is not subject to amortization but is subject to at least anannual impairment test to determine if the carrying amount exceeds its fairvalue.

 

Economic usefullife is the duration of time the asset is expected to be productively employed,which may be less than its physical life. The estimated economic useful lives of long-lived assets are monitoredto determine if they continue to be appropriate in light of changes in businesscircumstances.

 

The Company must alsoconsider whether long-lived assets (including property and equipment andintangible assets) have been impaired to the extent that we must recognize aloss on such impairment, including goodwill impairment. The Company evaluatesits long-lived assets for impairment at the restaurant, franchise andinvestment company levels on an annual basis or whenever changes or eventsindicate that the carrying value may not be recoverable. The Company assessesimpairment of each level of assets based on the operating cash flows of therestaurant, franchise and investment operations and our plans for eachrestaurant unit, franchisee contract, or investments. Generally, all units withnegative cash flows from operations for the most recent twelve months at each quarterend are included in the Company’s assessment. In performing our assessment, theCompany must make

 

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assumptions regardingestimated future cash flows, including estimated proceeds from similar assetsales, and other factors to determine both the recoverability and the estimatedfair value of the respective assets. If the long-lived assets of a restaurantare not recoverable based upon estimated future, undiscounted cash flows, theCompany writes the assets down to their fair value. If these estimates or theirrelated assumptions change in the future, the Company may be required to recordadditional impairment charges.

 

TheCompany evaluates goodwill for impairment on an annual basis during the fourthquarter of each year, or more frequently if an event occurs that triggers aninterim impairment test.  The Companydetermines the fair values of our reporting units using the discounted cashflow method.  This method usesprojections of cash flows from each of the reporting units.  Several of the key assumptions in estimatingfuture cash flows include periods of operations, projections of operatingprofits, and weighted average cost of capital. These assumptions are derived from the Company’s internal budgets andconsideration of available market data. The factors which contribute the greatest variability in our estimatesof fair values are the weighted average cost of capital and estimates of futureoperating profits.

 

*Purchase Obligation*

 

In connection with our acquisition of a controllinginterest in Mustang Capital Advisors, LP and Mustang Capital Management, LLC,the Company is obligated to purchase the minority interest holders ownershippercentage upon the occurrence of certain events.  The purchase obligation will ultimately besettled in cash and shares of the Company’s common stock.  The Company is accounting for this purchaseobligation pursuant to Statement of Financial Accounting Standards No. 150(As Amended) - *Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity.* The resulting liability is reported in otherlong-term liabilities on the accompanying financial statements.

 

*Commitmentsand Contingencies*

 

The Company viewsaccounting for contingencies as a critical accounting estimate since losscontingencies arising from claims, assessments, litigation, fines and penaltiesand other sources require judgment as to any probable liabilitiesincurred.  Actual results could differfrom the expected results determined based on such estimates.

 

*Income Taxes*

 

The Companyrecords valuation allowances against deferred tax assets, when necessary, inaccordance with SFAS No. 109, “*Accounting for IncomeTaxes*.” Realization of deferred tax assets is dependent on futuretaxable earnings and is therefore uncertain. The Company assesses thelikelihood that deferred tax assets in each of the jurisdictions in which itoperates will be recovered from future taxable income. Deferred tax assets donot include future tax benefits that the Company deems likely not to berealized.

 

In July 2006,the FASB issued FASB Interpretation Number 48, *Accountingfor Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,*(“FIN 48”).  FIN 48 prescribesa recognition threshold and measurement attributes for the financial statementrecognition and measurement of a tax position taken in a tax return.  The Company must determine whether it is “more-likely-than-not”that a tax position will be sustained upon examination, including resolution ofany related appeals or litigation processes, based on the technical merits ofthe position.  Once it is determined thata position meets the more-likely-than-not recognition threshold, the positionis measured to determine the amount of benefit to recognize in the financialstatements.  FIN 48 applies to all taxpositions related to income taxes subject to FASB Statement No. 109.

 

**OTHER**

 

**Impactof Inflation**

** **

The impact of inflation on the costs of food andbeverage products, labor and real estate can affect the Company’soperations.  Management believes theCompany has historically been able to pass on increased costs through certainselected menu price increases and has offset increased costs by increasedproductivity and purchasing efficiencies, but there can be no assurance thatthe Company will be able to do so in the future.  Management anticipates that the average costof restaurant real estate leases and construction cost could increase in thefuture which could affect the Company’s ability to expand.  In addition, mandated health care oradditional increases in the federal or state minimum wages could significantlyincrease the Company’s costs of doing business.

 

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**Item 3.  Quantitativeand Qualitative Disclosure about Market Risk**

 

As of March 31,2009, the Company’s financial instruments are not exposed to significant marketrisk due to foreign currency exchange risk. However, the Company is exposed to market risk related to changes inmarket prices of marketable securities, interest rates related to certain debtobligations, and commodity risks.

 

**MarketPrice Risk**

 

The Company’s marketablesecurities are currently concentrated in a few investments. A change in marketprices exposes the Company to market risk related to the investments inmarketable securities.  As of March 31,2009, the Company held $19 million in available-for-sale marketable securities.A hypothetical 10% decline in the market value of those securities would resultin $1.9 million of unrealized losses and a corresponding decline in their fairvalues at March 31, 2009.  Thishypothetical decline would not affect the Company’s cash flows unless thesecurities were disposed of.

 

**InterestRate Risk**

 

The Company has exposureto interest rate risk related to certain instruments entered into for otherthan trading purposes. Specifically, borrowings under the loan associated withthe Texas land purchase and revolving credit facility bear interest at variablerates based on the prime rate minus .5%. The nature and amount of borrowings under the credit facility may varyas a result of future business requirements, market conditions and otherfactors.

 

**CommodityPrice Risk**

 

The Company purchasescertain food products such as beef, poultry, pork, eggs and coffee, andutilities such as gas and electricity, which are affected by commodity pricingand are, therefore, subject to price volatility caused by weather, productionproblems, delivery difficulties and other factors that are outside of theCompany’s control and which are generally unpredictable. Changes in commodityprices affect the Company and competitors generally and often simultaneously.In general, the Company purchases food products and utilities based upon marketprices established with vendors. Although many of the items purchased are subjectto changes in commodity prices, the majority of our purchasing arrangements arestructured to contain features that minimize price volatility by establishingfixed pricing and/or price ceilings and floors. The Company uses these types ofpurchase arrangements to control costs as an alternative to using financialinstruments to hedge commodity prices. The Company has determined that ourpurchasing agreements do not qualify as derivative financial instruments orcontain embedded derivative instruments. In many cases, the Company believes itwill be able to address commodity cost increases which are significant andappear to be long-term in nature by adjusting our menu pricing or changing ourproduct delivery strategy. However, competitive circumstances could limit suchactions and, in those circumstances, increases in commodity prices could lowerits margins. Because of the often short-term nature of commodity pricingaberrations and our ability to change menu pricing or product deliverystrategies in response to commodity price increases, the Company believes thatthe impact of commodity price risk is not significant.

 

The Company hasestablished a policy to identify, control and manage market risks which mayarise from changes in interest rates, commodity prices and other relevant ratesand prices.

 

**Item 4T.  Controlsand Procedures**

 

Based on an evaluation ofthe Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(c) under the Securities Exchange Act of 1934, as amended),  the Company’s Chief Executive Officer and Chief Financial Officer have concluded thatits disclosure controls and procedures were effective as of March 31,2009.  There have been no changes in itsinternal control over financial reporting that occurred during the currentquarter ended March 31, 2009 that have materially affected, or that arereasonably likely to materially affect, the internal control over financialreporting.

 

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**PART II.OTHER INFORMATION**

 

Item1.    Legal Proceedings

 

In addition to thoseproceedings discussed in Note 11 in the Company’s consolidated financialstatements, the Company is involved in various other claims and legal actionswhich are routine litigation matters incidental to the business.  In the opinion of the management, theultimate disposition of these other matters will not have a material adverseeffect on the Company’s financial condition, results of operations orliquidity.

 

Item1A. Risk Factors

 

An investment in thecommon stock of any company involves a degree of risk.  Investors should consider carefully the risksand uncertainties described in the Company’s Annual Report on Form 10-Kfiled with the SEC, and those other risks described elsewhere in this report,before deciding whether to purchase our common stock.  Additional risks and uncertainties notcurrently known to us or that we currently deem immaterial may also become importantfactors that may harm the Company’s business, financial condition, and resultsof operations.  The occurrence of riskfactors could harm the Company’s business, financial condition, and results ofoperations for company operations, as well as franchised operations.  The trading price of the Company’s commonstock could decline due to any of these risks and uncertainties, andstockholders may lose part or all of their investment.

 

Item6.    Exhibits:

 

See Exhibit Indexon page 29.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned hereunto duly authorized.

 
| ** **             | **Western Sizzlin Corporation** |
|------------------------|---------------------------------|
|                   |                            |
|                   | By:                             | /s/ Sardar Biglari |
|                   |                            | Sardar Biglari |
|                   |                            | President and Chief  Executive Officer |
|                   |                            |   |
|                   | By:                             | /s/ Robyn B. Mabe |
|                   |                            | Robyn B. Mabe |
|                   |                            | Vice President and Chief  Financial Officer |
|                   |                            |   |
| Date: May 6, 2009 |                            |   |

 

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**EXHIBITINDEX**

 
| 10.1.4 | Employment Agreement of  Robert Moore                                              |
|--------|------------------------------------------------------------------------------------|
|   |                                                                               |
| 31.1   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a).         |
|   |                                                                               |
| 31.2   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a).         |
|   |                                                                               |
| 32.1   | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350. |
|   |                                                                               |
| 32.2   | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350. |

 

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