Buffett/Berkshire - general news

[thepupil]

maybe a 3% EBITDA margin business, tops? So possible value of company at 15x (just to throw a  very high number there) = 0.45x sales = $9B enterprise value as an upper limit.

 

Maybe they make more money, but TravelCenters GAAP financials certainly don't indicate that (EBITDA margins are <3% in all years and <1% in many)It's possible (highly likely) Flying J is much better run, but how much better?

 

In the absence of other info, I think it's fair to say this may be a very small transaction relative to the headline of "one of the largest private co's in America", and doesn't really change the earnings power materially.

 

More of a varmint than an elephant.

[John Hjorth]

This must be fairly big. That flying thing actually has 770 locations.

 

It appears that they have roadside truck services as well. Can see some connections with McLane, Xtra and Geico(?). In somewhat of a related way, DQ, Burger King are surely co-located at some of the 770 locations?

 

The way it's going, with Berkshire gobbling up pieces of America, how can there not be a connection ;D

 

You are right, longinvestor. If you click on "locations" top right on main page, then on "all locations", you can actually download the whole thing to Excel. Lots of McDs, Wendies and Dairy Queens are mentioned as Facitilities/Restaurants.

[rogermunibond]

http://www.knoxnews.com/story/money/business/2017/10/03/haslams-warren-buffett-join-forces-pilot-flying-j-sale/726050001/

 

Knoxville paper has details on the ownership stake breakdown and who's selling.

[Guest longinvestor]

https://finance.yahoo.com/quote/BRK-A/?p=BRK-A

 

Buffett & Haslam with Betty Q @ CNBC.  This is just like many others, being a two-step deal. Interesting comment by Haslam, they are a giant logistics company in that they carry a lot of diesel around to gas stations across 44 states; plus sell over a billion $ in food at their truck centers. $20 B sales; Big opportunity to grow organically and hopefully sock up some of Omaha's billions. 

[Guest longinvestor]

Hope Byron Trott brings many more such deals. In a sense, the fourth T ;)

[dutchman]

In a world of autonomous trucks, is this business nearly as valuable as it is today?  I'm still scratching my head on this one.  Trucking is the easiest application of autonomous tech, as the highway system is a very predictable and easily navigable environment.  Can't be far off.

[villainx]

My main thought is that Brookfield (via sub) recently bought some gas station type thing too.  There is some magic there or predictability of business or something?

[dartmonkey]

maybe a 3% EBITDA margin business, tops? So possible value of company at 15x (just to throw a  very high number there) = 0.45x sales = $9B enterprise value as an upper limit.

 

Maybe they make more money, but TravelCenters GAAP financials certainly don't indicate that (EBITDA margins are <3% in all years and <1% in many)It's possible (highly likely) Flying J is much better run, but how much better?

 

In the absence of other info, I think it's fair to say this may be a very small transaction relative to the headline of "one of the largest private co's in America", and doesn't really change the earnings power materially.

 

More of a varmint than an elephant.

 

Operating income was $1.4B in 2015, up from $1.1B the year before. So maybe your numbers are a bit low. Not as big as an elephant, but bigger than varmint - a deer, say, or maybe a moose.

[John Hjorth]

I'm curious about your data source about the operating income, dartmonkey, and I hope you will share it.

[rb]

Yeah, I'd be interested in the source as well. Dartmonkey's numbers indicate an op margin somewhere in the 7% range when their competitors are in the 1%-1.5% range. This would make them insanely profitable. I just don't see the way you get those margins selling diesel.

[DooDiligence]

Yeah, I'd be interested in the source as well. Dartmonkey's numbers indicate an op margin somewhere in the 7% range when their competitors are in the 1%-1.5% range. This would make them insanely profitable. I just don't see the way you get those margins selling diesel.

 

Credit?

[rb]

Debt doesn't figure into operating margins. If you were to go lower in the P&L debt would lower margins not raise them.

[John Hjorth]

I hereby suggest a topic split to to here for discussion of the Berkshire Pilot Flying J aquisition in detail.

 

It deserves its own topic, I think.

[Guest longinvestor]

https://finance.yahoo.com/video/automated-trains-speeding-past-self-171026128.html

 

Interesting, autonomous train test in western australia. Planes, trains.....yes; automobiles?..no.  Unsexy and it's not coming from Silicon Valley ;)

[DooDiligence]

Debt doesn't figure into operating margins. If you were to go lower in the P&L debt would lower margins not raise them.

 

I actually meant selling fuel on credit.

 

Sorry John, future posts will go to the right thread.

[John Hjorth]

You are forgiven, DooDiligence, [ ; - ) ]

 

The board members interested in this transaction will get it right anyway, by reading the whole board.

[DooDiligence]

You are forgiven, DooDiligence, [ ; - ) ]

 

The board members interested in this transaction will get it right anyway, by reading the whole board.

 

I deleted a few posts/clogs over on that other thread but had to leave 2 in order to keep myself honest (probably could move those - yea or nay?)

[John Hjorth]

It's a bit funny to read, DooDiligence, actually,

 

I have been a bit active - call it just self-appointed couch moderator, absolutely uncalled for - to save some gold here on CoBF with regard to Berkshire stuff, and with the aim to keep the board temperature down, by trying also to avoid annoyance of other board members.

 

- - - o 0 o - - -

 

Trying to be constructive with the use of good mood has a fairly good success rate, if you are among constructive and rational thinking persons, like here on CoBF.

 

CoBF instantly caught self awareness under the "Big Bang" [it got folded out by Sanjeev at February 1, 2009 - basically out of nothing, except a very good user base pre "Big Bang" on another board [Yahoo?], now gone, I think.

 

Somehow, it has now gone to the level of getting self moderating, based on cooperative interaction among fellow board members.

 

Isen't that something very special, in its very own league? - At least to me, it is.

 

- - - o 0 o - - -

 

- Now back to Berkshire General News, & Peace.

[gfp]

Restaurant Brands International paying Berkshire back $3.3 Billion in December, and BRK loses another high yielding preferred (9%).

 

Kinda slipped this one in a press release without mentioning Berkshire at all -

http://www.rbi.com/file/Index?KeyFile=390786299

[Charlie]

Berkshire Hathaway: Tax Reform´s Big Winner?

 

https://www.barrons.com/articles/berkshire-hathaway-tax-reforms-big-winner-1512076594?mod=hp_highlight_1&

 

 

Cheers!  :)

[Valuehalla]

Here is a non-subscriber link of this article, but I think some figures are not correct:

 

https://www.barrons.com/articles/berkshire-hathaway-tax-reforms-big-winner-1512076594?mod=bol-social-fb

 

The effect of reduced deferred tax is, that we have to add 35 to 40 B to the bookvalue, not just 27B.

 

Anyone has an opinion on it ?

[John Hjorth]

Berkshire income taxes end of 2017Q3, balance sheet, liabilities, stated at USD B 86.559, with the text:"Income taxes, principally deferred".

 

So a rough estimate of effect on Berkshire equity according to the financials would be: [uSD B 86.559 * [[35% - 20%]/35%]] = USD 37,097. So the numbers mentioned so far here seem to me to be in right ballpark, and most of all material, even to Berkshire.

 

This estimate is most likely overstating the accounting effect, the most material part of the overstatement being deferred taxes in subs taxable outside US, who will continue to account for deferred taxes based on actual local/national corporation tax rates.

 

- - - o 0 o - - -

 

All other nitpicking omitted here.

- - - o 0 o - - -

 

Isen't Berkshire World Champion in deferring taxes by the way? -I do not recall ever having read any other balance sheet with such a large figure stated for deferred taxes.

[gfp]

Isen't Berkshire World Champion in deferring taxes by the way? -I do not recall ever having read any other balance sheet with such a large figure stated for deferred taxes.

 

I haven't seen a company with that big of a deferred tax liability either.  Obviously it is a consequence of rarely, if ever, selling anything large and a half century of acquisitions.  Even Precision Castparts came with ~$7.5 Billion of "income tax, principally deferred" - so a lot of this liability is never to be realized even if the equity portfolio was completely liquidated.

 

At the last 10Q there was $82.2 Billion of unrealized appreciation in equity securities and another $1 Billion on the bond portfolio.  At 35% that amounts to a $29 Billion deferred tax liability.  At 20% it is $16.65 Billion, a savings of over $12 Billion if the tax plan passes and Berkshire gets the 20% rate.

 

Year end gains look to be higher still, at least so far.

 

Berkshire's tax rate bounces all over the place between 30% and 20% most of the time.  But the tax liability on the unrealized investment gains is usually calculated right at 35%.

 

I can't speak to the rates used to calculate the rest of that income tax liability.  But it isn't nearly as important since it won't be spent.  The equities may actually be sold, resulting in a real cash savings.  I don't see them selling the land under BNSF's tracks or the property plant and equipment of PCC.

[DooDiligence]

Oh snap, I was looking at the wrong thread (or rather prolonging the agony for others by discussing there.)

 

The "there" I speak of is the "What are you buying today" thread.

[John Hjorth]

No harm done, DooDiligence,

 

We can just continue the Berkshire tax discussion here. [ : - ) ]