BH-A 10-K & 10-Q changes, risk factors and insider trading

We are a holding company and are largely dependent upon dividends and other sources of funds from our subsidiaries in order to meet our needs. The ability of our insurance subsidiaries to pay dividends to Biglari Holdings is regulated by state insurance laws, which limit the amount of, and in certain circumstances may prohibit the payment of, cash dividends.dividends, and Steak n Shake’s credit facility contains restrictions on its ability to pay dividends to Biglari Holdings. Furthermore, as a result of our substantial investments in The Lion Fund, L.P., and The Lion Fund II, L.P., investment partnerships controlled by Mr. Biglari, our access to capital is restricted by the terms of their respective partnership agreements. There is also a high likelihood that we will make additional investments in these investment partnerships.

In prior years, bills have been introduced in Congress that, if enacted, would have prohibited the listing of common stock on a national securities exchange if such common stock were part of a class of securities that has no voting rights or carries disproportionate voting rights. Although these bills have not been acted upon by Congress, there can be no assurance that such a bill (or a modified version thereof) will not be introduced in Congress in the future. Legislation or other regulatory developments could make the shares of Class A common stock and Class B common stock ineligible for trading on the NYSE or other national securities exchanges.

The Company manages its operating businesses on a decentralized basis. Decentralized operations can inherently create additional control risks. Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company had five material weaknesses in internal controls over financial reporting during 2024. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 using criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission2025, and determined that the Company didremediated notfour designof effectivethe five 2024 material weaknesses. We cannot be certain that the measures we may take in the future will be sufficient to remediate the final 2024 control deficiency or that they will prevent or avoid potential future material weaknesses. If we are unable to successfully remediate our remaining material weakness or any future material weaknesses in our internal controlscontrol over financial reportingreporting, we would be exposed to mitigategreater potentialrisk risks.of misstatement in the financial statements.

The cost, availability, and quality of ingredients restaurant operations use to prepare their food are subject to a range of factors, many of which are beyond their control. A significant component of our restaurant business costs is related to food commodities, including beef and dairy products, which can be subject to significant price fluctuations due to seasonal shifts, climate conditions, industry demand, changes in commodity markets, inflation, tariffs, and other factors. If there is a substantial increase in prices for these food commodities, our results of operations may be negatively affected. In addition, our restaurants are dependent upon frequent deliveries of perishable food products that meet certain specifications. Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, disease or food-borne illnesses, inclement weather, or other conditions could adversely affect the availability, quality, and cost of ingredients, which would likely lower revenues, damage our reputation, or otherwise harm our business. We cannot predict whether we will continue to be able to anticipate and react to changing food costs by adjusting our purchasing practices, menu offerings, and menu prices, and a failure to do so could adversely affect our operating results.

To avoid becoming and registering as an investment company under the Investment Company Act, we operate as an ongoing enterprise, with approximately 2,5002,300 employees, along with an asset base from which to pursue acquisitions. Furthermore, Section 3(c)(3) of the Investment Company Act excludes insurance companies from the definition of “investment company.” Because we monitor the value of our investments and structure transactions accordingly, we may structure transactions in a less advantageous manner than if we did not have Investment Company Act concerns, or we may avoid otherwise economically desirable transactions due to those concerns. In addition, adverse developments with respect to our ownership of certain of our operating subsidiaries, including significant appreciation in the market value of certain of our publicly traded holdings, could result in our inadvertently becoming an investment company. If it were established that we were an investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the SEC,SEC; that we would be unable to enforce contracts with third parties, or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which it was established that we were an unregistered investment company.

Our ManagementManagement’s Discussion and Analysis generally discusses 20242025 and 20232024 items. Discussions of 20222023 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, 2023,2024, filed with the SEC on FebruaryMarch 26,1, 2024.2025.

As of December 31, 2024,2025, 10seven of the 146131 company-operated Steak n Shake stores were closed. Of the seven locations, Steak n Shake plans to reopen two locations and sell or lease sixfive of the 10 locations and refranchise the balance.locations.

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 restaurants’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 $70,616$77,001 in 20242025 as compared to $72,552$70,616 during 2023.2024. As of December 31, 2024,2025, there were 173179 franchise partner units as compared to 181173 franchise partner units as of December 31, 2023.2024. Franchise partner fees were higher primarily because franchise partner same-store sales increased 10.1% during 2025 compared to 2024.

The laborcost costsof food at company-operated restaurantsunits duringin 20242025 werewas $50,431,$56,205, or 31.7%30.9% of net sales as compared to $47,090,$47,891, or 30.9%30.1% of net sales in 2023.2024. LaborThe costscost expressedof food as a percentage of net sales increased during 20242025 compared to 20232024 primarily due to aninflation increaseand improvements in store-levelthe managers.quality of various products.

General and administrative expenses during 20242025 were $48,969, or 17.4% of total revenue as compared to $47,130, or 18.7% of total revenue as compared to $44,120, or 17.6% of total revenue during 2023.2024. The increase in general and administrative expenses was mainly attributable to higher salary expenses at Steak n Shake: higher legal fees ($700), fees related to its new prototype ($500), and contractual services ($900).Shake.

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.

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 2024.2025, 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.

Abraxas Petroleum operates oil and natural gas properties in the Permian Basin. Earnings for Abraxas Petroleum from the date of acquisition, September 14, 2022, are summarized below.

Abraxas Petroleum’s revenue decreased $4,986,$5,592, or 18.1%24.8% during 20242025 compared to 2023.2024. AbraxasThe Petroleumrevenue reduceddecline productionwas by shutting in wells during 2024primarily due to lower naturalcrude gasoil prices.

During 2025, Abraxas Petroleum recorded a gain of $16,700$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 the2024 third quarter ofand 2023, Abraxas Petroleum entered into a similar royalty-based arrangementarrangements on its undeveloped properties, which began producing in the third quarter of 2024.properties.

Southern Oil’s revenue decreased $3,140,$1,142, or 17.9%8.0% during 20242025 compared to 2023.2024. Southern Oil repaired several nonperforming wells throughout 2024. Southern Oil completed the drilling of a well during the second half of 2024, which accountedincreased forproduction during 2025. However, the majoritylower sales prices of thecrude increasedoil depletionduring costs.2025 compared to 2024 resulted in a $1,909 decrease in revenue.

The consolidated income tax benefit was $10,203 in 2025 versus $4,395 in 2024 versus the tax expense of $9,308 in 2023.2024. The variance in income taxes between 20242025 and 20232024 is attributable to taxes on income generated by the investment partnerships. Excluding investment partnership activities, pretaxpre-tax income was $32,904$19,310 and $45,407$32,904 and tax expense was $8,544$4,802 and $4,514$8,544 during 20242025 and 2023,2024, respectively. The effective tax rate for the Company (excluding investment partnership activities) was 26.0%24.9% during 20242025 compared to 9.9%26.0% during 2023. The increase in the effective tax rates is primarily attributable to certain tax benefits recognized by Abraxas Petroleum during 2023.2024.

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 and $17,814 during 2023.2024. The decreaseincrease in net losses was primarily due to aan decreaseincrease in accrued incentiveprofessional fees.

In 2024, cashCash provided by operating activities decreasedincreased during 2025 by $23,342$57,299 as compared to 2023.2024. The change was primarily attributable to a decrease$56,000 of $15,511 in cash from our business operations and a $4,500 decrease in distributions from the investment partnerships.partnerships during 2025.

Biglari HoldingsHoldings’ LinesLine of Credit

Biglari Holdings’ line of credit wasis amended on September 13, 2024,$35,000 and the available line of credit was increased to $35,000. The line of credit matures on September 13, 2026. The line of credit includes customary covenants as well as financial maintenance covenants. As of December 31, 2024,2025, we were in compliance with all covenants. There was a $35,000The balance on the line of credit on December 31, 2024. There was no$27,250 balanceand on the line of credit$35,000 on December 31, 2023.2025 and 2024, respectively. Our interest rate was 6.7% and 7.1% on December 31, 2024,2025 and 8.1% on December 31, 2023,2024, respectively.

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 437428 company-operated and franchise restaurants as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, seveneight of the 128126 company-operated Steak n Shake stores were closed. Of the seveneight locations, Steak n Shake plans to reopen two locations and sell or lease fivesix locations.

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

Net sales for the second quarter and first quartersix months of 2026 were $40,347$45,648 asand $85,995, respectively, representing a decrease of $1,210 or 2.6% and $2,478 or 2.8%, compared to $41,615the duringsecond thequarter and first quartersix months of 2025.2025, Steak n Shake’s domestic same-store sales increased 10.0%.respectively. Total revenue decreased due to fewer company-operated units in 2026 compared to 2025. Steak n Shake’s domestic same-store sales increased 11.9% during the second quarter of 2026.

Fees generated by our franchise partners were $20,541$23,141 during the firstsecond quarter of 2026, as compared to $17,139$20,150 during the firstsecond quarter of 2025. Franchise partner fees were $43,682 and $37,289 during the first six months of 2026 and 2025, respectively. Franchise partner same-store sales increased approximately 13%.14.5%.

The franchise royalties and fees generated by the traditional franchising business were $3,126$3,350 during the firstsecond quarter of 2026, as compared to $3,489$3,128 during the second quarter of 2025. Franchise royalties and fees during the first quartersix months of 2026 were $6,476 as compared to $6,617 during the first six months of 2025. There were 9690 Steak n Shake traditional units open on MarchJune 31,30, 2026, as compared to 104100 units open on MarchJune 31,30, 2025.

The cost of food at company-operated units during the second quarter of 2026 was $15,203 or 33.3% of net sales, as compared to $14,167 or 30.2% of net sales during the second quarter of 2025. The cost of food at company-operated units during the first quartersix months of 2026 was $12,665$27,868 or 31.4%32.4% of net sales, as compared to $12,464$26,631 or 30.0%30.1% of net sales during the first quartersix months of 2025. The increase was primarily duebecause toof Steak n Shake changingmaterially enhancing the quality of its fryingfood oil to 100% beef tallow.ingredients.

The labor costs at company-operated restaurants during the firstsecond quarter of 2026 were $12,858$13,749 or 31.9%30.1% of net sales, as compared to $13,439$14,020 or 32.3%29.9% of net sales duringin the firstsecond quarter of 2025. TheLabor decreasecosts at company-operated restaurants during the first six months of 2026 were $26,607 or 30.9% of net sales, as compared to $27,460 or 31.0% of net sales in 2025. Labor costs expressed as a percentage of net sales wasremained primarilyconsistent duewith to a decrease in management labor costs.2025.

General and administrative expenses during the second quarter of 2026 were $12,348 or 16.5% of total revenue, as compared to $12,776 or 17.7% of total revenue in the second quarter of 2025. General and administrative expenses during the first quartersix months of 2026 were $11,836$24,184 or 17.9%17.2% of total revenue, as compared to $11,928$24,704 or 18.5%18.1% of total revenue duringin the first quartersix months of 2025. General and administrative expenses in 2026 remained consistent with 2025.

Interest on obligations under leases was $1,357$2,757 during the first quarter of 2026 versus $1,333$2,573 during the first quarter of 2025.

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 2026the second quarter and first six months of $1,571,2026. representingIts anunderwriting increasegain decreased $474 in the second quarter of $356, or 29.3%2026 compared to 2025.

Southern Pioneer produced an underwriting gain in the first six months of 2026 of $1,312,$2,255, representing an increase of $1,814$3,614 compared to 2025.

Abraxas Petroleum’s revenue increased $236,$3,371, or 4.0%33.5% during the first quartersix months of 2026 compared to 2025, primarily due to an increase in oil production during 2026 compared to 2025.prices.

InDuring the first quartersix months of 2026 and 2025, Abraxas Petroleum recorded a gain of $9,323$4,803 and $10,117, respectively, from selling undeveloped reserves to an unaffiliated party to conduct development activities; however, Abraxas Petroleum waswill not be required to fund any exploration expenditures on the undeveloped properties. No gain was recorded in the first quarter of 2026.

Southern Oil’s revenue decreased $1,030,$403, or 25.5%5.5% during the first quartersix months of 2026 compared to 2025. The revenue decline was primarily due to reduced production during 2026 compared to 2025.

Maxim’s revenue increased during the first quarterhalf of 2026 as compared to the same period in 2025 primarily duebecause toof its digital contests.contest business.

Investment lossesgains net of tax for the second quarter of 2026 were $7,394 as compared to $2,318 for the second quarter of 2025. Investment gains net of tax for the first quartersix months of 2026 and 2025 were $1,397$5,997 andas $1,288,compared respectively.to $1,030 for the first six months of 2025. 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 (lossesloss) from our investments in partnerships are summarized below.

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.

Corporate expenses exclude the activities of the restaurant, insurance, brand licensing, and oil and gas businesses. Corporate and other net losses during the second quarter and first quartersix months of 2026 were $4,548$5,090 and $9,638, respectively, compared to $3,289$3,530 and $6,819 in the firstsecond quarter and first six months of 2025.2025, respectively. The higher losscorporate expenses in 2026 waswere primarily due to higherincreased legallegal-related and professional fees.costs.

The incomeIncome tax benefitexpense for the firstsecond quarter of 2026 was $4,351$11,693 compared to an income tax benefitexpense of $7,908$14,171 for the second quarter of 2025. Income tax expense for the first quartersix months of 2026 was $7,342 compared to income tax expense of $6,263 for the first six months of 2025. The decreasedchange in income tax benefitexpense between 2026 and 2025 is primarily attributable to lower tax benefitstaxes on pre-tax lossesincome generated by the investment partnerships.

Cash provided by operating activities increased during the first quarter of 2026decreased by $4,537$22,662 as compared to the first quarter of 2025. The change was primarily attributable to $13,020lower ofreturns distributionson frompartnership the investment partnershipsinvestments during 2026.

Cash used in investing activities increased during the first quarter of 2026 by $75,249$211,205 as compared to the first quarter of 2025. The change was2025 primarily attributabledue to purchases of limited partnership interests,investments which were $24,810$222,793 higher,higher andin purchases of investments, which were $34,970 higher.2026.

Cash provided by financing activities increased during the first quarter of 2026 by $4,055$31,494 as compared to the first quarter of 2025. The Company had net payments on its line of credit and note payable of $7,000$8,688 offset by proceeds from the issuance of common stock of $14,920 compared to net borrowings of $3,400payments on itsthe linesCompany’s line of credit of $26,000 in the first quarter of 2025.

Biglari Holdings’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 MarchJune 31,30, 2026, we were in compliance with all covenants. The balance on the line of credit was $22,500 and $27,250 on MarchJune 31,30, 2026 and December 31, 2025, respectively.

On September 30, 2025, Steak n Shake obtained a loan of $225,000. 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 MarchJune 31,30, 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. All of the debt is secured by real estate owned by Steak n Shake.

Western Sizzlin’s available line of credit is $500. As of MarchJune 31,30, 2026 and December 31, 2025, Western Sizzlin had no debt outstanding on its revolver.