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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 271 added, 16 removed, 44 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.

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

Amounts are recorded after deducting income taxes.

First Quarter

Operating businesses:

Restaurant $ 2,038 $ 2,189

Insurance 2,885 1,201

Oil and gas 907 8,298

Brand licensing 116 (267)

Interest expense (4,281) (693)

Corporate and other (4,548) (3,289)

Total operating businesses (2,883) 7,439

Investment partnership gains (losses) (10,251) (39,426)

Investment gains (losses) (1,397) (1,288)

Net earnings (loss) $ (14,531) $ (33,275)

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 437 company-operated and franchise restaurants as of March 31, 2026.

Steak n Shake Western Sizzlin

operated Franchise

Partner Traditional

Franchise Company-

operated Franchise Total

Total stores as of December 31, 2025

131 179 94 3 28 435

Corporate stores transitioned (3) 3 — — — —

Net restaurants opened (closed) — 2 — — 2

Total stores as of March 31, 2026

128 182 96 3 28 437

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

As of March 31, 2026, seven of the 128 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.

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

Restaurant operations are summarized below.

First Quarter

Net sales $ 40,347 $ 41,615

Franchise partner fees 20,541 17,139

Franchise royalties and fees 3,126 3,489

Other revenue 2,132 2,106

Total revenue 66,146 64,349

Restaurant cost of sales

Cost of food 12,665 31.4 % 12,464 30.0 %

Labor costs 12,858 31.9 % 13,439 32.3 %

Occupancy and other 11,942 29.6 % 11,855 28.5 %

Total cost of sales 37,465 37,758

Selling, general and administrative

General and administrative 11,836 17.9 % 11,928 18.5 %

Marketing 5,427 8.2 % 3,232 5.0 %

Other expenses (income) 155 0.2 % 294 0.5 %

Total selling, general and administrative 17,418 26.3 % 15,454 24.0 %

Depreciation and amortization 7,030 10.6 % 6,490 10.1 %

Interest on finance leases and obligations 1,357 1,333

Earnings before income taxes 2,876 3,314

Income tax expense 838 1,125

Contribution to net earnings $ 2,038 $ 2,189

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

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

Net sales for the first quarter of 2026 were $40,347 as compared to $41,615 during the first quarter of 2025.

Steak n Shake’s domestic same-store sales increased 10.0%.

Total revenue decreased due to fewer company-operated units in 2026 compared to 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.

Fees generated by our franchise partners were $20,541 during the first quarter of 2026, as compared to $17,139 during the first quarter of 2025.

Franchise partner same-store sales increased approximately 13%.

The franchise royalties and fees generated by the traditional franchising business were $3,126 during the first quarter of 2026, as compared to $3,489 during the first quarter of 2025.

There were 96 Steak n Shake traditional units open on March 31, 2026, as compared to 104 units open on March 31, 2025.

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

The cost of food at company-operated units during the first quarter of 2026 was $12,665 or 31.4% of net sales, as compared to $12,464 or 30.0% of net sales during the first quarter of 2025.

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 2026 were $12,858 or 31.9% of net sales, as compared to $13,439 or 32.3% of net sales during the first quarter of 2025.

The decrease as a percentage of net sales was primarily due to a decrease in management labor costs.

General and administrative expenses during the first quarter of 2026 were $11,836 or 17.9% of total revenue, as compared to $11,928 or 18.5% of total revenue during the first quarter of 2025.

General and administrative expenses in 2026 remained consistent with 2025.

Interest on obligations under leases was $1,357 during the first quarter of 2026 versus $1,333 during the first quarter of 2025.

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 unaudited 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 $ 96,024 $ 80,317

Restaurant cost of sales

Cost of food $ 29,376 30.6 % $ 23,419 29.2 %

Labor costs 24,651 25.7 % 21,490 26.8 %

Occupancy and other 20,188 21.0 % 16,665 20.7 %

Total cost of sales $ 74,215 $ 61,574

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 $ 1,571 $ 1,215

Southern Pioneer 1,312 (502)

Pre-tax underwriting gain 2,979 713

Income tax expense 626 150

Net underwriting gain $ 2,353 $ 563

Earnings of our insurance operations are summarized below.

First Quarter

Premiums written $ 18,508 $ 19,022

Premiums earned $ 17,801 $ 17,765

Insurance losses 9,956 12,005

Underwriting expenses 4,866 5,047

Pre-tax underwriting gain 2,979 713

Other income and expenses

Investment income 651 837

Other income and expenses (389) (13)

Total other income 262 824

Earnings before income taxes 3,241 1,537

Income tax expense 356 336

Contribution to net earnings $ 2,885 $ 1,201

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 $ 9,046 $ 9,209

Premiums earned $ 9,046 100.0 % $ 9,209 100.0 %

Insurance losses 5,907 65.3 % 6,282 68.2 %

Underwriting expenses 1,568 17.3 % 1,712 18.6 %

Total losses and expenses 7,475 82.6 % 7,994 86.8 %

Pre-tax underwriting gain $ 1,571 $ 1,215

First Guard produced an underwriting gain in 2026 of $1,571, representing an increase of $356, or 29.3% compared to 2025.

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 $ 9,462 $ 9,813

Premiums earned $ 8,755 100.0 % $ 8,556 100.0 %

Insurance losses 4,049 46.2 % 5,723 66.9 %

Underwriting expenses 3,394 38.8 % 3,335 39.0 %

Total losses and expenses 7,443 85.0 % 9,058 105.9 %

Pre-tax underwriting gain (loss) $ 1,312 $ (502)

Southern Pioneer produced an underwriting gain in 2026 of $1,312, representing an increase of $1,814 compared to 2025.

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 $ 332 $ 426

Southern Pioneer 315 389

Biglari Reinsurance 4 22

Pre-tax investment income 651 837

Income tax expense 137 176

Net investment income $ 514 $ 661

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 $ 9,136 $ 9,930

Oil and gas production costs 3,924 4,046

Depreciation, depletion and accretion 2,874 3,256

General and administrative expenses 1,325 1,303

Total cost and expenses 8,123 8,605

Gain on sale of properties — 9,323

Earnings before income taxes 1,013 10,648

Income tax expense 106 2,350

Contribution to net earnings $ 907 $ 8,298

Our oil and gas business is highly dependent on oil and natural 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 $ 6,126 $ 5,890

Oil and gas production costs 2,734 2,446

Depreciation, depletion and accretion 1,299 1,933

General and administrative expenses 588 649

Gain on sale of properties — 9,323

Earnings before income taxes 1,505 10,185

Income tax expense 238 2,380

Contribution to net earnings $ 1,267 $ 7,805

Abraxas Petroleum’s revenue increased $236, or 4.0% during the first quarter of 2026 compared to 2025, primarily due to an increase in oil production during 2026 compared to 2025.

In the first quarter of 2025, Abraxas Petroleum recorded a gain of $9,323 from selling undeveloped reserves to an unaffiliated party to conduct development activities;

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

No gain was recorded in the first quarter of 2026.

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 $ 3,010 $ 4,040

Oil and gas production costs 1,190 1,600

Depreciation, depletion and accretion 1,575 1,323

General and administrative expenses 737 654

Earnings before income taxes (492) 463

Income tax benefit (132) (30)

Contribution to net earnings $ (360) $ 493

Southern Oil’s revenue decreased $1,030, or 25.5% during the first quarter of 2026 compared to 2025.

The revenue decline was primarily due to reduced production during 2026 compared to 2025.

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 $ 3,261 $ 1,407

Licensing and media costs 2,874 1,651

Depreciation and amortization 191 70

General and administrative expenses 39 43

Earnings (loss) before income taxes 157 (357)

Income tax expense (benefit) 41 (90)

Contribution to net earnings $ 116 $ (267)

Maxim’s revenue increased during the first quarter of 2026 compared to 2025 primarily due to digital contests.

Investment Gains and Investment Partnership Gains

Investment losses net of tax for the first quarter of 2026 and 2025 were $1,397 and $1,288, respectively.

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 (losses) from our investments in partnerships are summarized below.

First Quarter

Investment partnership gains (losses) $ (13,454) $ (49,592)

Tax expense (benefit) (3,203) (10,166)

Contribution to net earnings $ (10,251) $ (39,426)

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 2026 and 2025 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 $ (5,651) $ (900)

Tax benefit (1,370) (207)

Interest expense net of tax $ (4,281) $ (693)

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 $221,625 on March 31, 2026.

The interest rate on Steak n Shake’s note payable is fixed at 8.8%.

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 2026 were $4,548 compared to $3,289 in the first quarter of 2025.

The higher loss in 2026 was primarily due to higher legal and professional fees.

The income tax benefit for the first quarter of 2026 was $4,351 compared to an income tax benefit of $7,908 for the first quarter of 2025.

The decreased income tax benefit between 2026 and 2025 is primarily attributable to lower tax benefits on pre-tax losses generated by the investment partnerships.

Financial Condition

Consolidated cash and investments are summarized below.

September 30,

2025 December 31, 2024

March 31, 2026 December 31,

Cash and cash equivalents $ 200,075 $ 268,782

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 Nine Months

First Quarter

Net cash provided by operating activities $ 20,332 $ 15,795

2 unchanged sentences

Effect of exchange rate changes on cash 47 40

Increase in cash, cash equivalents and restricted cash $ 241,764 $ 1,576

In 2025, cash from operating activities increased by $57,523 as compared to 2024.

The change was primarily attributable to $54,000 of distributions from investment partnerships during 2025.

Cash used in investing activities increased during 2025 by $1,284 as compared to 2024 primarily due to a reduction in proceeds from the sale of property and equipment.

Cash provided by financing activities increased during 2025 by $183,853 as compared to 2024 primarily due to a note payable of $225,000 to Steak n Shake on September 30, 2025.

Increase (decrease) in cash, cash equivalents and restricted cash $ (68,707) $ (2,057)

Cash provided by operating activities increased during the first quarter of 2026 by $4,537 as compared to the first quarter of 2025.

The change was primarily attributable to $13,020 of distributions from the investment partnerships during 2026.

Cash used in investing activities increased during the first quarter of 2026 by $75,249 compared to the first quarter of 2025.

The change was primarily attributable to purchases of limited partnership interests, which were $24,810 higher, and purchases of investments, which were $34,970 higher.

Cash provided by financing activities increased during the first quarter of 2026 by $4,055 compared to the first quarter of 2025.

The Company had net payments on its line of credit and note payable of $7,000 offset by proceeds from the issuance of common stock of $14,920 compared to net borrowings of $3,400 on its lines of credit in the first quarter of 2025.

On January 16, 2026, we entered into an At the Market Offering Agreement with a third party providing for the sale of up to $500,000 in shares of our common stock.

Through May 8, 2026, the Company sold 4,312 shares of Class A Common Stock for $9,080 and 14,500 shares of Class B Common Stock for $5,993.

We intend to use the net proceeds from these offerings to support our business and investment activities and build a stronger capital position at the holding company for the acquisition of businesses, for augmenting the capital of insurance subsidiaries, or for other general corporate purposes.

Biglari Holdings ’ Line of Credit

Biglari Holdings’ line of credit was amended on September 13, 2024, and the available line of credit was increased to $35,000.

The line of credit matures on September 13, 2026.

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 September 30, 2025, we were in compliance with all covenants.

The balance on the line of credit was $15,000 and $35,000 on September 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.

The line of credit was terminated on September 29, 2025.

As of March 31, 2026, we were in compliance with all covenants.

The balance on the line of credit was $22,500 and $27,250 on March 31, 2026 and December 31, 2025, respectively.

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 term 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 March 31, 2026, Steak n Shake was 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.

2 unchanged sentences

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

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

As of March 31, 2026 and December 31, 2025, Western Sizzlin had no debt outstanding on its revolver.

Critical Accounting Policies

4 unchanged sentences

There have been no material changes to critical accounting policies previously disclosed in our annual report on Form 10-K for the year ended December 31, 2025.

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

Recently Issued Accounting Pronouncements

12 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