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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 14 added, 275 removed, 43 unchanged (87% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands)

Biglari Holdings Inc.

is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance and reinsurance, licensing and media, restaurants, and oil and gas.

Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized financial decision-making.

Operating decisions for the various business units are made by their respective managers.

All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr.

As of March 31, 2025, Mr.

Biglari beneficially owns shares of the Company that represent approximately 74.3% of the voting interest.

Net earnings (loss) are disaggregated in the table that follows.

Amounts are recorded after deducting income taxes.

First Quarter

Operating businesses:

Restaurant $ 2,189 $ 3,473

Insurance 1,201 1,738

Oil and gas 8,298 1,149

Brand licensing (267) (265)

Interest expense (693) —

Corporate and other (3,289) (1,996)

Total operating businesses 7,439 4,099

Investment partnership gains (losses) (39,426) 17,148

Investment gains (losses) (1,288) 1,332

Net earnings (loss) $ (33,275) $ 22,579

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 454 company-operated and franchise restaurants as of March 31, 2025.

Steak n Shake Western Sizzlin

operated Franchise

Partner Traditional

Franchise Company-

operated Franchise Total

Total stores as of December 31, 2024

146 173 107 3 29 458

Corporate stores transitioned — — — — — —

Net restaurants opened (closed) — (1) (3) — — (4)

Total stores as of March 31, 2025

146 172 104 3 29 454

Total stores as of December 31, 2023

148 181 128 3 32 492

Corporate stores transitioned 3 (3) — — — —

Net restaurants opened (closed) (3) — (3) — (1) (7)

Total stores as of March 31, 2024

148 178 125 3 31 485

As of March 31, 2025, nine of the 146 company-operated Steak n Shake stores were closed.

Steak n Shake plans to sell or lease six of the nine locations and refranchise the balance.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Restaurant operations are summarized below.

First Quarter

Net sales $ 41,615 $ 38,735

Franchise partner fees 17,139 17,758

Franchise royalties and fees 3,489 3,477

Other revenue 2,106 2,026

Total revenue 64,349 61,996

Restaurant cost of sales

Cost of food 12,464 30.0 % 10,974 28.3 %

Labor costs 13,439 32.3 % 12,429 32.1 %

Occupancy and other 11,855 28.5 % 11,018 28.4 %

Total cost of sales 37,758 34,421

Selling, general and administrative

General and administrative 11,928 18.5 % 11,730 18.9 %

Marketing 3,232 5.0 % 2,945 4.8 %

Other expenses (income) 294 0.5 % (234) (0.4) %

Total selling, general and administrative 15,454 24.0 % 14,441 23.3 %

Impairments — — % 107 0.2 %

Depreciation and amortization 6,490 10.1 % 6,835 11.0 %

Interest on finance leases and obligations 1,333 1,314

Earnings before income taxes 3,314 4,878

Income tax expense 1,125 1,405

Contribution to net earnings $ 2,189 $ 3,473

Cost of food, labor costs, and occupancy and other costs are expressed as a percentage of net sales.

General and administrative, marketing, other expenses, impairments, and depreciation are expressed as a percentage of total revenue.

Net sales for the first quarter of 2025 were $41,615 as compared to $38,735 during the first quarter of 2024.

Steak n Shake’s same-store sales increased 3.9% but customer traffic declined at its company-operated units during the first quarter of 2025.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue.

Because we derive most of our revenue from our share of the profits, revenue will decline as we transition from company-operated units to franchise partner units.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Fees generated by our franchise partners were $17,139 during the first quarter of 2025, as compared to $17,758 during the first quarter of 2024.

Our share of franchise partner fees was $619 lower primarily due to fewer open units in 2025 compared to 2024.

As of March 31, 2025, there were 172 franchise partner units as compared to 178 franchise partner units as of March 31, 2024.

Included in franchise partner fees were $5,553 and $5,705 of rental income during the first quarter of 2025 and 2024, respectively.

Franchise partners rent buildings and equipment from Steak n Shake.

The franchise royalties and fees generated by the traditional franchising business were $3,489 during the first quarter of 2025, as compared to $3,477 during the first quarter of 2024.

There were 104 Steak n Shake traditional units open on March 31, 2025, as compared to 125 units open on March 31, 2024.

The cost of food at company-operated units during the first quarter of 2025 was $12,464 or 30.0% of net sales, as compared to $10,974 or 28.3% of net sales during the first quarter of 2024.

The increase was primarily due to Steak n Shake changing its frying oil to 100% beef tallow.

The labor costs at company-operated restaurants during the first quarter of 2025 were $13,439 or 32.3% of net sales, as compared to $12,429 or 32.1% of net sales during the first quarter of 2024.

Labor costs expressed as a percentage of net sales increased during 2025 as compared to 2024 primarily due to increased staffing in the restaurants.

General and administrative expenses during the first quarter of 2025 were $11,928 or 18.5% of total revenue, as compared to $11,730 or 18.9% of total revenue during the first quarter of 2024.

General and administrative expenses in 2025 remained consistent with 2024.

Interest on obligations under leases was $1,333 during the first quarter of 2025 versus $1,314 during the first quarter of 2024.

To better convey the performance of the franchise partnership model, the table below shows the underlying sales, cost of food, labor costs, and other restaurant costs of the franchise partners.

We believe the franchise partner information is useful to readers, as they have a direct effect on Steak n Shake’s profitability.

First Quarter

Net sales and other $ 80,317 $ 80,788

Restaurant cost of sales

Cost of food $ 23,419 29.2 % $ 23,170 28.7 %

Labor costs 21,490 26.8 % 21,765 26.9 %

Occupancy and other 16,665 20.7 % 16,778 20.8 %

Total cost of sales $ 61,574 $ 61,713

The Company’s consolidated financial statements do not include data in the table above.

Figures are shown for information purposes only.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

We view our insurance businesses as possessing two activities:

underwriting and investing.

Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari.

Our business units are operated under separate local management.

Biglari Holdings’ insurance operations consist of First Guard, Southern Pioneer, and Biglari Reinsurance.

Underwriting results of our insurance operations are summarized below.

First Quarter

Underwriting gain attributable to:

First Guard $ 1,215 $ 800

Southern Pioneer (502) 59

Pre-tax underwriting gain 713 859

Income tax expense 150 180

Net underwriting gain $ 563 $ 679

Earnings of our insurance operations are summarized below.

First Quarter

Premiums written $ 19,022 $ 16,527

Premiums earned $ 17,765 $ 15,922

Insurance losses 12,005 10,878

Underwriting expenses 5,047 4,185

Pre-tax underwriting gain 713 859

Other income and expenses

Investment income 837 915

Other income and expenses (13) 472

Total other income 824 1,387

Earnings before income taxes 1,537 2,246

Income tax expense 336 508

Contribution to net earnings $ 1,201 $ 1,738

Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

First Guard is a direct underwriter of commercial truck insurance, selling physical damage and nontrucking liability insurance to truckers.

First Guard’s insurance products are marketed primarily through direct response methods via the Internet or by telephone.

First Guard’s cost-efficient direct response marketing methods enable it to be a low-cost insurer.

A summary of First Guard’s underwriting results follows.

First Quarter

Amount % Amount %

Premiums written $ 9,209 $ 9,310

Premiums earned $ 9,209 100.0 % $ 9,310 100.0 %

Insurance losses 6,282 68.2 % 6,775 72.8 %

Underwriting expenses 1,712 18.6 % 1,735 18.6 %

Total losses and expenses 7,994 86.8 % 8,510 91.4 %

Pre-tax underwriting gain $ 1,215 $ 800

First Guard produced an underwriting gain in the first quarter of 2025.

Its underwriting gain increased $415 in the first quarter of 2025 compared to 2024.

It is the nature of the insurance industry to experience volatility in underwriting performance.

Southern Pioneer

Southern Pioneer underwrites garage liability and commercial property insurance, as well as homeowners and dwelling fire insurance.

A summary of Southern Pioneer’s underwriting results follows.

First Quarter

Amount % Amount %

Premiums written $ 9,813 $ 7,217

Premiums earned $ 8,556 100.0 % $ 6,612 100.0 %

Insurance losses 5,723 66.9 % 4,103 62.1 %

Underwriting expenses 3,335 39.0 % 2,450 37.0 %

Total losses and expenses 9,058 105.9 % 6,553 99.1 %

Pre-tax underwriting gain (loss) $ (502) $ 59

Premiums earned increased $1,944, or 29.4% in the first quarter of 2025 compared to 2024, primarily because of rate increases in its personal lines, e.g.

homeowners insurance.

Southern Pioneer’s ratio of losses and loss adjustment expenses to premiums earned was 66.9% during 2025 compared to 62.1% during 2024.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

A summary of net investment income attributable to our insurance operations follows.

First Quarter

Interest, dividends and other investment income:

First Guard $ 426 $ 570

Southern Pioneer 389 345

Biglari Reinsurance 22 —

Pre-tax investment income 837 915

Income tax expense 176 192

Net investment income $ 661 $ 723

We consider investment income as a component of our aggregate insurance operating results.

However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

A summary of revenues and earnings of our oil and gas operations follows.

First Quarter

Oil and gas revenues $ 9,930 $ 9,510

Oil and gas production costs 4,046 4,499

Depreciation, depletion and accretion 3,256 2,792

General and administrative expenses 1,303 1,234

Total cost and expenses 8,605 8,525

Gain on sale of properties 9,323 481

Earnings before income taxes 10,648 1,466

Income tax expense 2,350 317

Contribution to net earnings $ 8,298 $ 1,149

Our oil and gas business is highly dependent on oil and natural gas prices.

We did not record any impairments to our oil and gas assets during 2025.

However, we may be required to record impairments of our oil and gas properties resulting from prolonged declines in oil and gas prices.

It is expected that the prices of oil and gas commodities will remain volatile, which will be reflected in our financial results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Abraxas Petroleum

Abraxas Petroleum operates oil and gas properties in the Permian Basin.

Earnings for Abraxas Petroleum are summarized below.

First Quarter

Oil and gas revenues $ 5,890 $ 5,868

Oil and gas production costs 2,446 2,819

Depreciation, depletion and accretion 1,933 1,547

General and administrative expenses 649 596

Gain on sale of properties 9,323 481

Earnings before income taxes 10,185 1,387

Income tax expense 2,380 319

Contribution to net earnings $ 7,805 $ 1,068

Abraxas Petroleum’s revenue remained consistent during the first quarter of 2025 compared to 2024.

Depletion increased in the first quarter of 2025 compared to 2024 due to an increase in the depletion rate.

Abraxas Petroleum recorded a gain of $9,323 from selling undeveloped reserves to an unaffiliated party to conduct development activities;

however, Abraxas Petroleum will not be required to fund any exploration expenditures on the undeveloped properties.

Southern Oil primarily operates oil and natural gas properties offshore in Louisiana state waters.

Earnings for Southern Oil are summarized below.

First Quarter

Oil and gas revenues $ 4,040 $ 3,642

Oil and gas production costs 1,600 1,680

Depreciation, depletion and accretion 1,323 1,245

General and administrative expenses 654 638

Earnings before income taxes 463 79

Income tax benefit (30) (2)

Contribution to net earnings $ 493 $ 81

Southern Oil’s revenue increased $398, or 10.9% during the first quarter of 2025 compared to 2024.

Southern Oil repaired several nonperforming wells throughout 2024.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Brand Licensing

Maxim’s business lies principally in licensing and media.

Earnings of operations are summarized below.

First Quarter

Licensing and media revenues $ 1,407 $ 212

Licensing and media costs 1,651 503

Depreciation and amortization 70 —

General and administrative expenses 43 63

Earnings (loss) before income taxes (357) (354)

Income tax benefit (90) (89)

Contribution to net earnings $ (267) $ (265)

Licensing and media revenue increased $1,195 during the first quarter of 2025 compared to 2024 primarily due to a new venture concerning digital contests.

Investment Gains and Investment Partnership Gains

Investment losses net of tax for the first quarter of 2025 were $1,288 and investment gains net of tax for the first quarter of 2024 were $1,332.

Dividends and interest earned on investments are reported as investment income by our insurance companies.

We consider investment income as a component of our aggregate insurance operating results.

However, we consider investment gains and losses, whether realized or unrealized, as non-operating.

Earnings from our investments in partnerships are summarized below.

First Quarter

Investment partnership gains (losses) $ (49,592) $ 21,985

Tax expense (benefit) (10,166) 4,837

Contribution to net earnings $ (39,426) $ 17,148

Investment partnership gains include gains/losses from changes in market values of underlying investments and dividends earned by the partnerships.

Dividend income has a lower effective tax rate than income from capital gains.

These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

The investment partnerships hold the Company’s common stock as investments.

The Company’s pro-rata share of its common stock held by the investment partnerships is recorded as treasury stock even though these shares are legally outstanding.

Gains and losses on Company common stock included in the earnings of the partnerships are eliminated in the Company’s consolidated financial results.

Investment gains and losses in 2025 and 2024 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period.

We believe that investment and derivative gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly and annual results.

These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest Expense

The Company’s interest expense is summarized below.

First Quarter

Interest expense on note payable and other borrowings $ (900) $ —

Tax benefit (207) —

Interest expense net of tax $ (693) $ —

Corporate and Other

Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses.

Corporate and other net losses during the first quarter of 2025 were $3,289 compared to $1,996 in the first quarter of 2024.

Income tax benefit for the first quarter of 2025 was $7,908 compared to an income tax expense of $6,816 for the first quarter of 2024.

The variance in income taxes between 2025 and 2024 is primarily attributable to taxes on income generated by the investment partnerships.

Investment partnership pre-tax losses were $49,592 during the first quarter of 2025 compared to pre-tax gains of $21,985 during the first quarter of 2024.

Financial Condition

Consolidated cash and investments are summarized below.

March 31, 2025 December 31,

2025 December 31, 2024

Cash and cash equivalents $ 32,766 $ 30,709

5 unchanged sentences

Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our balance sheet continues to maintain significant liquidity.

Consolidated cash flow activities are summarized below.

First Quarter

First Six Months

Net cash provided by operating activities $ 57,942 $ 20,910

Net cash used in investing activities (27,161) (19,586)

Net cash provided by (used in) financing activities 2,002 (1,403)

Net cash used in financing activities (28,778) (2,691)

Effect of exchange rate changes on cash 42 (7)

Increase in cash, cash equivalents and restricted cash $ (2,057) $ 6,470

Cash provided by operating activities decreased $3,330 as compared to the first quarter of 2024.

The decrease was primarily attributable to changes in our working capital accounts.

Cash used in investing activities was $8,652 higher during the first quarter of 2025 compared to 2024.

The change was primarily attributable to purchases of limited partnership interests, which were $13,345 higher, offset by $9,323 of proceeds from the sale of oil and gas properties.

The Company had net borrowings of $3,400 on its lines of credit in the first quarter of 2025 and no activity in the first quarter of 2024.

Decrease in cash, cash equivalents and restricted cash $ 2,045 $ (1,374)

In 2025, cash from operating activities increased by $37,032 as compared to 2024.

The change was primarily attributable to $35,000 of distributions from investment partnerships during 2025.

Cash used in investing activities increased during 2025 by $7,575 as compared to 2024 primarily due to a reduction in proceeds from the sale of property and equipment.

Cash used in financing activities increased during 2025 by $26,087 as compared to 2024 primarily due to payments on the Company’s line of credit in 2025.

Biglari Holdings Lines of Credit

2 unchanged sentences

The line of credit includes customary covenants, as well as financial maintenance covenants.

As of March 31, 2025, we were in compliance with all covenants.

There was a $35,000 balance on the line of credit on March 31, 2025 and December 31, 2024.

As of June 30, 2025, we were in compliance with all covenants.

The balance on the line of credit was $19,000 and $35,000 on June 30, 2025 and December 31, 2024, respectively.

On November 8, 2024, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $75,000.

1 unchanged sentence

The line of credit includes customary covenants as well as financial maintenance covenants.

As of March 31, 2025, we were in compliance with all covenants.

The balance on the line of credit was $13,400 and $10,000 on March 31, 2025 and December 31, 2024, respectively.

As of June 30, 2025, we were in compliance with all covenants.

The balance on the line of credit was $10,000 on December 31, 2024.

As of June 30, 2025, Biglari Holdings had no debt outstanding on its line of credit.

Western Sizzlin Revolver

Western Sizzlin’s available line of credit is $500.

As of March 31, 2025 and December 31, 2024, Western Sizzlin had no debt outstanding on its revolver.

As of June 30, 2025 and December 31, 2024, Western Sizzlin had no debt outstanding on its revolver.

Critical Accounting Policies

6 unchanged sentences

No recently issued accounting pronouncements were applicable for this Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cautionary Note Regarding Forward-Looking Statements

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis