Biglari (BH) - 2025 Q1 - Quarterly Report

Part I – Financial Information Financial Statements Q1 2025 saw a net loss, reversing prior-year earnings, driven by investment partnership losses and a decline in total assets Consolidated Balance Sheets Total assets decreased to $829.1 million in Q1 2025, primarily due to lower investment partnerships and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $829,060 | $866,133 | ($37,073) | | Cash and cash equivalents | $28,664 | $30,709 | ($2,045) | | Investment partnerships | $169,135 | $201,727 | ($32,592) | | Total Liabilities | $289,224 | $293,172 | ($3,948) | | Total Shareholders' Equity | $539,836 | $572,961 | ($33,125) | Consolidated Statements of Earnings Q1 2025 net loss of $33.3 million reversed prior-year earnings, driven by a $49.6 million loss from investment partnerships Q1 2025 vs Q1 2024 Earnings (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $95,035 | $89,451 | | Investment partnership gains (losses) | $(49,592) | $21,985 | | Earnings (loss) before income taxes | $(41,183) | $29,395 | | Net Earnings (Loss) | $(33,275) | $22,579 | | Net Earnings (Loss) per Class A share | $(126.40) | $79.56 | Consolidated Statements of Cash Flows Net cash from operations decreased in Q1 2025, while investing activities used more cash, leading to a $2.1 million overall cash decrease Q1 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,795 | $19,125 | | Net cash used in investing activities | $(19,894) | $(11,242) | | Net cash provided by (used in) financing activities | $2,002 | $(1,403) | | Increase (decrease) in cash | $(2,057) | $6,470 | Notes to Consolidated Financial Statements Notes detail diverse business segments, the significant impact of investment partnerships, and the CEO's controlling voting interest - Biglari Holdings is a diversified holding company whose major investment and capital allocation decisions are centralized under its Chairman and CEO, Sardar Biglari[21][22] - As of March 31, 2025, CEO Sardar Biglari beneficially owns shares representing approximately 74.3% of the company's voting interest[23] Q1 2025 Investment Partnership Impact (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gains (losses) from investment partnerships | $(49,592) | $21,985 | | Contribution to net earnings | $(39,426) | $17,148 | - The oil and gas segment recorded a gain of $9.3 million in Q1 2025 from the sale of undeveloped reserves by Abraxas Petroleum, significantly boosting the segment's earnings[49] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q1 2025 net loss to a $39.4 million after-tax loss from investment partnerships, despite operating business earnings Disaggregated Net Earnings (Loss) - After Tax (in thousands) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total operating businesses | $7,439 | $4,099 | | Investment partnership gains (losses) | $(39,426) | $17,148 | | Investment gains (losses) | $(1,288) | $1,332 | | Net earnings (loss) | $(33,275) | $22,579 | Restaurants Restaurant segment earnings fell to $2.2 million in Q1 2025, impacted by higher food costs and declining traffic despite sales growth - Steak n Shake's same-store sales increased by 3.9% at company-operated units in Q1 2025, but customer traffic declined[114] - Cost of food as a percentage of net sales increased from 28.3% to 30.0% YoY, primarily because Steak n Shake changed its frying oil to 100% beef tallow[118] - The total number of restaurants across all brands decreased by 4 units during Q1 2025, from 458 to 454[111] Insurance Insurance segment earnings decreased to $1.2 million in Q1 2025, as Southern Pioneer's underwriting loss offset First Guard's gains Pre-tax Underwriting Gain (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | First Guard | $1,215 | $800 | | Southern Pioneer | $(502) | $59 | | Total | $713 | $859 | - Southern Pioneer's earned premiums increased by 29.4% in Q1 2025, but its loss ratio also increased, leading to an underwriting loss[131] Oil and Gas Oil and gas segment earnings surged to $8.3 million in Q1 2025, primarily due to a $9.3 million gain from property sales Oil and Gas Earnings Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Oil and gas revenues | $9,930 | $9,510 | | Gain on sale of properties | $9,323 | $481 | | Contribution to net earnings | $8,298 | $1,149 | - Abraxas Petroleum recorded a gain of $9.3 million from selling undeveloped reserves to an unaffiliated party[138] Brand Licensing Brand licensing reported a stable net loss in Q1 2025, despite revenue growth to $1.4 million from a new digital contests venture - Licensing and media revenue increased significantly to $1,407,000 in Q1 2025 from $212,000 in Q1 2024, primarily due to a new digital contests venture[142] Investment Gains and Investment Partnership Gains The company recorded a $39.4 million after-tax loss from investment partnerships in Q1 2025, causing significant earnings volatility Investment Partnership Contribution to Net Earnings (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Investment partnership gains (losses) | $(49,592) | $21,985 | | Contribution to net earnings | $(39,426) | $17,148 | - Management states that investment gains/losses are generally meaningless for analytical purposes in understanding reported quarterly results due to their volatility[147] Financial Condition and Liquidity The company maintains strong liquidity despite a decrease in cash and investments to $304.5 million and increased borrowings Consolidated Cash and Investments (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $28,664 | $30,709 | | Investments | $106,667 | $102,975 | | Carrying value of cash and investments | $304,466 | $335,411 | - The company had net borrowings of $3.4 million on its lines of credit in Q1 2025[157] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for the current reporting period - Not applicable[164] Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2025, due to un-remediated material weaknesses in internal control - The Chief Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2025[165] - The ineffectiveness is due to material weaknesses previously identified in the Annual Report on Form 10-K for the year ended December 31, 2024[165] - Remediation efforts are ongoing, but the material weaknesses cannot be considered remediated until controls have operated effectively for a sufficient period[166] Part II – Other Information Legal Proceedings The company believes that the ultimate liability from pending legal matters will not materially affect its financial position or results - The company believes that the ultimate liability from various legal proceedings and unresolved claims is not likely to have a material effect on its results of operations, financial position, or cash flow[87][169] Risk Factors No material changes to risk factors previously disclosed in the Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors previously disclosed in the Form 10-K for the year ended December 31, 2024[170] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None[171] Exhibits The report includes required CEO and Controller certifications and Interactive Data Files (XBRL) - Exhibits filed include CEO and Controller certifications (31.01, 31.02, 32.01) and Interactive Data Files (101, 104)[175]