Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in thousands, except per-share data)
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. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. 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. Biglari.
Discussion of Operations
Net earnings attributable to Biglari Holdings Inc. shareholders are disaggregated in the table that follows.
2025 2024 2023
Operating businesses:
Restaurant $ 16,377 $ 15,470 $ 21,831
Insurance 10,476 7,169 10,262
Oil and gas 10,908 15,458 25,406
Brand licensing (1,442) (884) 8
Interest expense (6,166) (589) (531)
Corporate and other (16,000) (12,503) (17,814)
Total operating businesses 14,153 24,121 39,162
Investment partnership gains (losses) (51,996) (28,119) 14,646
Investment gains 355 239 1,731
Net earnings (loss) (37,488) (3,759) 55,539
Earnings (loss) attributable to noncontrolling interest — — 591
Net earnings (loss) attributable to Biglari Holdings Inc. shareholders $ (37,488) $ (3,759) $ 54,948
The following discussion should be read in conjunction with Item 1, Business and our Consolidated Financial Statements and the notes thereto included in this Form 10-K. The following discussion should also be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and the risks and uncertainties described in Item 1A, Risk Factors, set forth above.
Our Management’s Discussion and Analysis generally discusses 2025 and 2024 items. Discussions of 2023 items can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 1, 2025.
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 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.
Through our subsidiaries, we engage in numerous diverse business activities. We operate on a decentralized management structure. The business segment data (Note 16 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.
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Management’s Discussion and Analysis (continued)
Restaurants
Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 435 company-operated and franchise restaurants as of December 31, 2025.
Steak n Shake Western Sizzlin
Company-
operated Franchise
Partner Traditional
Franchise Company-
operated Franchise Total
Stores on December 31, 2022 177 175 154 3 36 545
Corporate stores transitioned (6) 7 (1) — — —
Net restaurants opened (closed) (23) (1) (25) — (4) (53)
Stores on December 31, 2023 148 181 128 3 32 492
Corporate stores transitioned 9 (8) (1) — — —
Net restaurants opened (closed) (11) — (20) — (3) (34)
Stores on December 31, 2024 146 173 107 3 29 458
Corporate stores transitioned (7) 7 — — — —
Net restaurants opened (closed) (8) (1) (13) — (1) (23)
Stores on December 31, 2025 131 179 94 3 28 435
As of December 31, 2025, seven of the 131 company-operated Steak n Shake stores were closed. Of the seven locations, Steak n Shake plans to reopen two locations and sell or lease five locations.
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Management’s Discussion and Analysis (continued)
Restaurant operations for 2025, 2024, and 2023 are summarized below.
2025 2024 2023
Revenue
Net sales $ 181,884 $ 159,213 $ 152,545
Franchise partner fees 77,001 70,616 72,552
Franchise royalties and fees 13,587 13,632 16,443
Other revenue 8,398 7,986 9,317
Total revenue 280,870 251,447 250,857
Restaurant cost of sales
Cost of food 56,205 30.9 % 47,891 30.1 % 44,993 29.5 %
Labor costs 56,175 30.9 % 50,431 31.7 % 47,090 30.9 %
Occupancy and other 48,941 26.9 % 45,127 28.3 % 45,903 30.1 %
Total cost of sales 161,321 143,449 137,986
Selling, general and administrative
General and administrative 48,969 17.4 % 47,130 18.7 % 44,120 17.6 %
Marketing 17,951 6.4 % 12,584 5.0 % 12,631 5.0 %
Other expenses (income) (3,944) (1.4) % (5,800) (2.3) % (7,935) (3.2) %
Total selling, general and administrative 62,976 53,914 48,816
Impairments 1,251 0.4 % 107 — % 3,947 1.6 %
Depreciation and amortization 26,759 9.5 % 27,002 10.7 % 27,031 10.8 %
Interest on finance leases and obligations 5,421 5,361 5,114
Earnings before income taxes 23,142 21,614 27,963
Income tax expense 6,765 6,144 6,132
Contribution to net earnings $ 16,377 $ 15,470 $ 21,831
Cost of food, labor, and occupancy and other costs are expressed as a percentage of net sales.
General and administrative, marketing, other expenses, impairments, and depreciation and amortization are expressed as a percentage of total revenue.
Net sales for 2025 were $181,884, representing an increase of $22,671, or 14.2% compared to 2024. The increase in net sales was primarily due to an increase of 10.5% in Steak n Shake’s same-store sales for company-operated units. The same-store sales performance was 10.2% for company-operated and franchise partner units combined.
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.
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Management’s Discussion and Analysis (continued)
Fees generated by our franchise partners were $77,001 in 2025 as compared to $70,616 during 2024. As of December 31, 2025, there were 179 franchise partner units as compared to 173 franchise partner units as of December 31, 2024. Franchise partner fees were higher primarily because franchise partner same-store sales increased 10.1% during 2025 compared to 2024.
Included in the franchise partner fees were $23,428 and $22,884 of rental income during 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 $13,587 during 2025 as compared to $13,632 during 2024. The decrease in franchise royalties and fees was primarily due to the closing of certain traditional franchise stores. There were 122 traditional units open on December 31, 2025, as compared to 136 units open on December 31, 2024.
The cost of food at company-operated units in 2025 was $56,205, or 30.9% of net sales as compared to $47,891, or 30.1% of net sales in 2024. The cost of food as a percentage of net sales increased during 2025 compared to 2024 primarily due to inflation and improvements in the quality of various products.
The labor costs at company-operated restaurants during 2025 were $56,175, or 30.9% of net sales as compared to $50,431, or 31.7% of net sales in 2024. Labor costs expressed as a percentage of net sales decreased during 2025 compared to 2024 primarily due to the benefit from higher sales in relation to fixed management labor.
General and administrative expenses during 2025 were $48,969, or 17.4% of total revenue as compared to $47,130, or 18.7% of total revenue during 2024. The increase in general and administrative expenses was mainly attributable to higher salary expenses at Steak n Shake.
Marketing expenses during 2025 were $17,951 or 6.4% of total revenue, as compared to $12,584 or 5.0% of total revenue during 2024. Marketing expenses increased during 2025 compared to 2024 primarily due to the promotion of new, enhanced products.
Other income decreased during 2025 compared to 2024, primarily because of fewer real estate transactions.
Interest on obligations under leases was $5,421 during 2025 versus $5,361 during 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 it has a direct effect on Steak n Shake’s profitability.
2025 2024
Revenue
Net sales and other $ 359,046 $ 326,736
Restaurant cost of sales
Cost of food $ 108,259 30.2 % $ 96,550 29.5 %
Labor costs 93,823 26.1 % 88,009 26.9 %
Occupancy and other 72,193 20.1 % 68,061 20.8 %
Total cost of sales $ 274,275 $ 252,620
The Company’s consolidated financial statements do not include data in the table above. Figures are shown for information purposes only.
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Management’s Discussion and Analysis (continued)
Insurance
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.
2025 2024 2023
Underwriting gain (loss) attributable to:
First Guard $ 6,015 $ 4,038 $ 9,492
Southern Pioneer 1,195 400 (1,038)
Pre-tax underwriting gain 7,210 4,438 8,454
Income tax expense 1,514 932 1,775
Net underwriting gain $ 5,696 $ 3,506 $ 6,679
Earnings of our insurance operations are summarized below.
2025 2024 2023
Premiums written $ 71,041 $ 68,394 $ 63,064
Premiums earned $ 70,147 $ 65,809 $ 61,225
Insurance losses 43,142 43,643 35,668
Underwriting expenses 19,795 17,728 17,103
Pre-tax underwriting gain 7,210 4,438 8,454
Investment income and other income and expenses
Investment income 3,339 3,928 3,074
Other income and expenses 2,167 724 1,555
Total investment income and other income and expenses 5,506 4,652 4,629
Earnings before income taxes 12,716 9,090 13,083
Income tax expense 2,240 1,921 2,821
Contribution to net earnings $ 10,476 $ 7,169 $ 10,262
Insurance premiums and other on the consolidated statement of earnings includes premiums earned, investment income, other income, and commissions. Commissions are in other income and expenses in the above table.
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Management’s Discussion and Analysis (continued)
First Guard
First Guard is a direct underwriter of commercial truck insurance, primarily 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.
2025 2024 2023
Amount % Amount % Amount %
Premiums written $ 36,674 $ 37,691 $ 36,917
Premiums earned $ 36,674 100.0 % $ 37,691 100.0 % $ 36,917 100.0 %
Insurance losses 23,028 62.8 % 27,236 72.3 % 20,861 56.5 %
Underwriting expenses 7,631 20.8 % 6,417 17.0 % 6,564 17.8 %
Total losses and expenses 30,659 83.6 % 33,653 89.3 % 27,425 74.3 %
Pre-tax underwriting gain $ 6,015 $ 4,038 $ 9,492
First Guard produced an underwriting gain in 2025 of $6,015, representing an increase of $1,977, or 49.0% compared to 2024.
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.
2025 2024 2023
Amount % Amount % Amount %
Premiums written $ 34,367 $ 30,703 $ 26,147
Premiums earned $ 33,473 100.0 % $ 28,118 100.0 % $ 24,308 100.0 %
Insurance losses 20,114 60.1 % 16,407 58.4 % 14,807 60.9 %
Underwriting expenses 12,164 36.3 % 11,311 40.2 % 10,539 43.4 %
Total losses and expenses 32,278 96.4 % 27,718 98.6 % 25,346 104.3 %
Pre-tax underwriting gain (loss) $ 1,195 $ 400 $ (1,038)
Premiums earned increased $5,355, or 19.0% in 2025 compared to 2024, primarily because of higher average earned premium per policy. The loss ratio increased from higher claims frequencies, average claims severities, and adverse development of prior accident years’ claims.
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Management’s Discussion and Analysis (continued)
Insurance – Investment Income
A summary of net investment income attributable to our insurance operations follows.
2025 2024 2023
Interest, dividends, and other investment income:
First Guard $ 1,630 $ 1,976 $ 1,873
Southern Pioneer 1,675 1,895 1,201
Biglari Reinsurance 34 57 —
Pre-tax investment income 3,339 3,928 3,074
Income tax expense 701 825 646
Net investment income $ 2,638 $ 3,103 $ 2,428
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.
Oil and Gas
A summary of revenue and earnings of oil and gas operations follows.
2025 2024 2023
Oil and gas revenue $ 30,211 $ 36,945 $ 45,071
Oil and gas production costs 12,548 16,636 17,365
Depreciation, depletion, and accretion 11,674 11,102 10,339
General and administrative expenses 4,968 6,135 5,164
Total cost and expenses 29,190 33,873 32,868
Gain on sale of properties 11,877 16,700 13,563
Earnings before income taxes 12,898 19,772 25,766
Income tax expense 1,990 4,314 360
Contribution to net earnings $ 10,908 $ 15,458 $ 25,406
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, 2024, or 2023. 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.
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Management’s Discussion and Analysis (continued)
Abraxas Petroleum
Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. Earnings for Abraxas Petroleum are summarized below.
2025 2024 2023
Oil and gas revenue $ 16,998 $ 22,590 $ 27,576
Oil and gas production costs 8,839 9,517 9,605
Depreciation, depletion, and accretion 6,011 6,202 6,359
General and administrative expenses 2,889 3,718 2,765
Total cost and expenses 17,739 19,437 18,729
Gain on sale of properties 11,877 16,700 13,563
Earnings before income taxes 11,136 19,853 22,410
Income tax expense (benefit) 1,834 4,361 (384)
Contribution to net earnings $ 9,302 $ 15,492 $ 22,794
Abraxas Petroleum’s revenue decreased $5,592, or 24.8% during 2025 compared to 2024. The revenue decline was primarily due to lower crude oil prices.
During 2025, Abraxas Petroleum recorded a gain of $11,877 as a result of selling undeveloped reserves to an unaffiliated party whose aim is to conduct development activities; however, Abraxas Petroleum will not be required to fund any exploration expenditures on its undeveloped properties. During 2024 and 2023, Abraxas Petroleum entered into similar royalty-based arrangements on its undeveloped properties.
Southern Oil
Southern Oil primarily operates oil and natural gas properties offshore in Louisiana state waters. Earnings for Southern Oil are summarized below.
2025 2024 2023
Oil and gas revenue $ 13,213 $ 14,355 $ 17,495
Oil and gas production costs 3,709 7,119 7,760
Depreciation, depletion, and accretion 5,663 4,900 3,980
General and administrative expenses 2,079 2,417 2,399
Total cost and expenses 11,451 14,436 14,139
Earnings (loss) before income taxes 1,762 (81) 3,356
Income tax expense (benefit) 156 (47) 744
Contribution to net earnings $ 1,606 $ (34) $ 2,612
Southern Oil’s revenue decreased $1,142, or 8.0% during 2025 compared to 2024. Southern Oil repaired several nonperforming wells throughout 2024, which increased production during 2025. However, the lower sales prices of crude oil during 2025 compared to 2024 resulted in a $1,909 decrease in revenue.
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Management’s Discussion and Analysis (continued)
Brand Licensing
Maxim’s business lies principally in licensing and media. Earnings of operations are summarized below.
2025 2024 2023
Licensing and media revenue $ 7,717 $ 1,029 $ 2,118
Licensing and media cost 9,040 2,036 1,840
General and administrative expenses 598 173 267
Earnings (loss) before income taxes (1,921) (1,180) 11
Income tax expense (benefit) (479) (296) 3
Contribution to net earnings $ (1,442) $ (884) $ 8
Maxim’s revenue increased during 2025 as compared to 2024 due to a new venture in the digital contest business, which increased the loss for the year.
Investment Gains and Investment Partnership Gains
Investment gains net of tax were $355 in 2025 as compared to $239 in 2024. 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.
2025 2024 2023
Investment partnership gains (losses) $ (67,001) $ (41,058) $ 19,440
Tax expense (benefit) (15,005) (12,939) 4,794
Contribution to net earnings $ (51,996) $ (28,119) $ 14,646
Investment partnership gains include gains/losses from changes in the 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 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 gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly or annual results.
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Management’s Discussion and Analysis (continued)
Interest Expense
The Company’s interest expense is summarized below.
2025 2024 2023
Interest expense on notes payable and other borrowings $ (8,221) $ (771) $ (681)
Tax benefit (2,055) (182) (150)
Interest expense net of tax $ (6,166) $ (589) $ (531)
The increase in interest expense is due to interest on Steak n Shake’s note payable obtained on September 30, 2025. The outstanding balance on Steak n Shake’s note payable was $223,875 on December 31, 2025. The interest rate was 8.8% on December 31, 2025. The outstanding balance on Biglari Holdings’ lines of credit was $27,250 on December 31, 2025, compared to $45,000 on December 31, 2024. The interest rate was 6.7% on December 31, 2025.
Income Taxes
The consolidated income tax benefit was $10,203 in 2025 versus $4,395 in 2024. The variance in income taxes between 2025 and 2024 is attributable to taxes on income generated by the investment partnerships. Excluding investment partnership activities, pre-tax income was $19,310 and $32,904 and tax expense was $4,802 and $8,544 during 2025 and 2024, respectively. The effective tax rate for the Company (excluding investment partnership activities) was 24.9% during 2025 compared to 26.0% during 2024.
Corporate and Other
Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Net losses for Corporate and other were $16,000 during 2025 and $12,503 during 2024. The increase in net losses was primarily due to an increase in professional fees.
Financial Condition
Our consolidated shareholders’ equity on December 31, 2025, was $523,429, a decrease of $49,532 as compared to the December 31, 2024, balance. The decrease in shareholders’ equity was primarily due to a net loss of $37,488 and a change in treasury stock of $13,566.
Consolidated cash and investments are summarized below.
December 31,
2025 2024
Cash and cash equivalents $ 268,782 $ 30,709
Investments 69,050 102,975
Fair value of interest in investment partnerships 772,585 656,266
Total cash and investments 1,110,417 789,950
Less: portion of Company stock held by investment partnerships (618,310) (454,539)
Carrying value of cash and investments on balance sheet $ 492,107 $ 335,411
Unrealized gains/losses of Biglari Holdings’ stock held by the investment partnerships are eliminated in the Company’s consolidated financial results.
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Management’s Discussion and Analysis (continued)
Liquidity
Our balance sheet continues to maintain significant liquidity. Consolidated cash flow activities are summarized below.
2025 2024 2023
Net cash provided by operating activities $ 106,959 $ 49,660 $ 73,002
Net cash used in investing activities (65,470) (87,388) (66,080)
Net cash provided by (used in) financing activities 196,533 39,484 (16,132)
Effect of exchange rate changes on cash 39 22 59
Increase (decrease) in cash, cash equivalents, and restricted cash $ 238,061 $ 1,778 $ (9,151)
Cash provided by operating activities increased during 2025 by $57,299 as compared to 2024. The change was primarily attributable to $56,000 of distributions from the investment partnerships during 2025.
Cash used in investing activities decreased during 2025 by $21,918 as compared to 2024 primarily due to an increase of $33,411 in sales of investments and redemptions of fixed maturity securities.
Cash provided by financing activities increased during 2025 by $157,049 as compared to 2024 primarily due to Steak n Shake’s note payable of $225,000 on September 30, 2025. During 2025, the Company had net payments on its revolving lines of credit of $17,750 compared to net borrowings of $45,000 during 2024.
We intend to meet the working capital needs of our operating subsidiaries, principally through cash flows generated from operations and cash on hand. We continually review available financing alternatives.
Biglari Holdings ’ Line of Credit
Biglari Holdings’ line of credit is $35,000 and matures on September 13, 2026. The line of credit includes customary covenants as well as financial maintenance covenants. As of December 31, 2025, we were in compliance with all covenants. The balance on the line of credit was $27,250 and $35,000 on December 31, 2025 and 2024, respectively. Our interest rate was 6.7% and 7.1% on December 31, 2025 and 2024, respectively.
On November 8, 2024, Biglari Holdings entered into a line of credit in an aggregate principal amount of up to $75,000. The line of credit was terminated on September 29, 2025.
Steak n Shake Note Payable
On September 30, 2025, Steak n Shake obtained a loan of $225,000. The term of the loan is five years, with an interest rate fixed at 8.8% per annum, and the loan will be amortized at a rate of 3.0% per annum. The loan includes customary covenants as well as financial maintenance covenants and customary events of default. As of December 31, 2025, we were in compliance with all covenants. The debt is an obligation of Steak n Shake and the proceeds from the loan were distributed to Biglari Holdings. All of the debt is secured by real estate owned by Steak n Shake.
Western Sizzlin Revolver
Western Sizzlin’s available line of credit is $500. As of December 31, 2025 and 2024, Western Sizzlin had no debt outstanding under its revolver.
Critical Accounting Policies
Certain accounting policies require us to make estimates and judgments in determining the amounts reflected in the consolidated financial statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. A discussion of our principal accounting policies that required the application of significant judgments as of December 31, 2025, follows.
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Management’s Discussion and Analysis (continued)
Impairment of Restaurant Long-lived Assets
We review company-operated restaurants for impairment on a restaurant-by-restaurant basis when events or circumstances indicate a possible impairment. Assets included in the impairment assessment generally consist of property, equipment, and leasehold improvements directly associated with an individual restaurant as well as any related finance or operating lease assets. We test for impairment by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total estimated future cash flows are less than the carrying amount of the asset, the carrying value is written down to the estimated fair value, and a loss is recognized in earnings. Determining the future cash flows expected to be generated by an asset requires significant judgment regarding future performance of the asset, fair market value if the asset were to be sold, and other financial and economic assumptions.
Oil and Natural Gas Reserves
Crude oil and natural gas reserves are estimates of future production that impact certain asset and expense accounts. Proved reserves are the estimated quantities of oil and gas that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future under existing economic conditions, operating methods, and government regulations. Proved reserves include both developed and undeveloped volumes. Proved developed reserves represent volumes expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are volumes expected to be recovered from new wells on undrilled proved acreage, or from existing wells where expenditure is required for recompletion. We estimate our proved oil and natural gas reserves in accordance with the guidelines established by the SEC. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as additional information becomes available.
Income Taxes
We record deferred tax assets or liabilities, which are based on differences between financial reporting and the tax basis of assets and liabilities and are measured using the currently enacted rates and laws that will be in effect when the differences are expected to reverse. We record deferred tax assets to the extent we believe there will be sufficient future taxable income to utilize those assets prior to their expiration. To the extent deferred tax assets are unable to be utilized, we would record a valuation allowance against the unrealizable amount and record that amount as a charge against earnings. Due to changing tax laws and state income tax rates, significant judgment is required to estimate the effective tax rate applicable to tax differences arising from reversal in the future. We must also make estimates about the sufficiency of taxable income in future periods to offset any deductions related to deferred tax assets currently recorded.
Goodwill and Other Intangible Assets
We evaluate goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Goodwill impairment occurs when the estimated fair value of goodwill is less than its carrying value. The valuation methodology and underlying financial information included in our determination of fair value require significant managerial judgment. Based on a review of the qualitative factors, if we determine it is not more likely than not that the fair value is less than the carrying value, we may bypass the quantitative impairment test. We may also elect not to perform the qualitative assessment for the reporting unit or intangible assets and perform a quantitative impairment test instead.
Recently Issued Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 1 “Summary of Significant Accounting Policies” in the accompanying notes to consolidated financial statements included in Part II, Item 8 of this report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In general, forward-looking statements include estimates of future revenues, cash flows, capital expenditures, or other financial items, and assumptions underlying any of the foregoing. Forward-looking statements reflect management’s current expectations regarding future events and use words such as “anticipate,” “believe,” “expect,” “may,” and other similar terminology. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Investors should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, many beyond our control, including, but not limited to, the risks and uncertainties described in Item 1A, Risk Factors, set forth above. We undertake no obligation to publicly update or revise them, except as may be required by law.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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