BH-A

Biglari Holdings Inc. 2025 Annual Report (10-K) Summary

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2025. Biglari Holdings Inc. is a holding company with diverse operations including restaurant franchising (Steak n Shake, Western Sizzlin), property and casualty insurance (First Guard, Southern Pioneer), oil and gas (Southern Oil, Abraxas Petroleum), and brand licensing (Maxim). The company is led by Chairman and CEO Sardar Biglari, who controls over 50% of the voting stock and makes all major capital allocation decisions.

Key Financial Metrics

Note: Net loss was primarily driven by a $67.0 million loss from investment partnerships (The Lion Fund, L.P. and The Lion Fund II, L.P.). Excluding investment partnership activities, operating businesses generated pre-tax income of $19.3 million.

Material Changes vs. Prior Period

• Restaurant Operations: Revenue increased 11.7% to $280.9 million, driven by a 10.5% increase in same-store sales for company-operated Steak n Shake units. Net earnings from restaurants rose to $16.4 million.
• Investment Partnerships: Recorded a significant loss of $67.0 million in 2025 compared to a $41.1 million loss in 2024, largely due to unrealized losses on equity securities held within the funds.
• Oil and Gas: Revenue declined 18.2% to $30.2 million due to lower crude oil prices, though earnings were supported by an $11.9 million gain on the sale of undeveloped reserves by Abraxas Petroleum.
• Debt Structure: Steak n Shake secured a new $225 million note payable in September 2025, significantly increasing total debt and interest expense (which rose to $8.2 million from $0.8 million).
• Liquidity: Cash and cash equivalents surged to $268.8 million, up from $30.7 million, primarily due to the new Steak n Shake loan proceeds and $56.0 million in distributions from investment partnerships.

Guidance, Outlook, and Risks

Management Commentary: Management views investment gains and losses as non-operating and volatile, stating they are "generally meaningless for analytical purposes" regarding core business performance. The company intends to use cash flows and the new debt facility to fund operations and potential acquisitions.

Internal Controls: The company received an adverse opinion on its internal control over financial reporting due to a material weakness regarding the review and approval of insurance losses (insufficient segregation of duties). While four of five 2024 weaknesses were remediated, one remains.

Risks and Contingencies:

• Concentration Risk: Heavy reliance on Chairman Sardar Biglari for decision-making and significant exposure to the performance of investment partnerships controlled by him.
• Commodity Volatility: Oil and gas earnings are highly sensitive to crude oil and natural gas prices.
• Regulatory: Insurance subsidiaries face strict state regulations on capital and dividends; restaurant operations face labor and food safety regulations.
• Investment Company Act: Risk of inadvertently becoming a registered investment company due to the size of investment holdings relative to operating assets.

Investor Verification Checklist

• Investment Partnership Valuation: Verify the fair value methodology and unrealized losses of The Lion Fund, L.P. and The Lion Fund II, L.P., which drove the majority of the net loss.
• Internal Control Remediation: Monitor progress on remediating the remaining material weakness in insurance loss review and approval processes.
• Debt Covenants: Review compliance with financial maintenance covenants on the new $225 million Steak n Shake note and the holding company line of credit.
• Oil and Gas Reserves: Assess the impact of current commodity prices on the recoverability of oil and gas assets and potential future impairments.
• Related Party Transactions: Scrutinize the $11.4 million in service fees paid to Biglari Entities and the structure of incentive reallocations within investment partnerships.