Biglari Holdings Inc. (BH)

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

(dollars in thousands)

Overview

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. Biglari.

Net earnings (loss) are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.

Restaurants

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

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.

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

Restaurant operations are summarized below.

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.

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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.

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 of Financial Condition and Results of Operations (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.

Earnings of our insurance operations are summarized below.

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

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

First Guard

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 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.

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

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Management’s Discussion a

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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.

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.

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.

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.

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.

Earnings of our insurance operations are summarized below.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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