2 answers, 1 technical and the other practical.
The technical answer is that there are 2 potential sources of UBTI when you invest in an MLP. The first source is the easy one - Line 20V of the K-1. The second potential source is when you sell, there will be an amount of your gain that is reported as ordinary gain. The IRS position is that this portion of your gain is also UBTI. You can have ordinary gain even if you have an overall loss on your investment in the MLP. (You may have line 20V losses that can be used to offset any potential UBTI on sale, but that would still require a filing. Also, there's a $ 1,000 exemption each year before the UBTI tax kicks in.)
Now the practical answer - ignore what I just wrote. MLPs have been around for 30+ years and the IRS has never given a lot of guidance with respect to MLPs and UBTI. I have never heard of the IRS examining an IRA for UBTI, although there are cases and rulings involving UBTI through partnerships (not MLPs) with respect to other types of tax-exempt entities. Since the IRS doesn't seem interested in enforcing its own rules, I wouldn't worry too much. My recommendation, though, is this: if you're talking any MLP investments where your economic gain might exceed a few thousand dollars, don't invest thru an IRA. Buy a C Corp MLP general partner or invest through a CEF or ETN. Eventually the IRS will wake up and since there are other alternative ways to invest in MLPs that don't raise any UBTI issue, why bother with direct investments?
Not related to your post but Yahoo won't let me start a new thread.
US Steel today announced the idling of its Granite City steel works in response to oil & gas weakness. SXCP and SXC, which supply coke to the Granite City plant, are tanking today. I don't know who supplies the met coal to the plant, but it doesn't matter much. Less usage will hurt pricing for everyone. And since NRP is heavily into met coal, it will eventually do some damage.
Funny thing - I think US Steel has a take or pay contract with SXCP/SXC so the immediate damage to those names should be limited. But they are getting killed. Maybe I'm wrong on the contract.
The March 25 dividend is the regular quarterly dividend, not the special dividend which will be needed to eliminate the company's earnings & profits. The quarterly dividend is like any other - the stock will presumably drop by 39 cents on the day it goes ex (March 25, I guess) and who knows how it might trade for the rest of the day? If people are comfortable that the dividend will be maintianed, I would expect the stock price to recover whatever drop it suffers within a week or so, but that's just a guess.
The special dividend is supposed to be announced in March or April (maybe they will give an update when they announce Q4 results next week).and is expected to be paid before the end of 2015. That's the big one - the company estimated it might be as much #$%$ 4.50 per share. When a dividend is that large, the ex date is usually the payment date. But we won't know much about that dividend until the company says something.
GES reported last night. GES's year-end is January 31, so still short of VOXX's February year-end. GES has connection to VOXX's business, except that GES has a large European operation. From GES's earnings release:
"European revenues decreased 16% in U.S. dollars and 5% in constant currency" So an 11 % revenue hit from the drop in the euro.
Looking to 2015, GES estimates:
"Currency headwinds are expected to negatively impact consolidated revenue growth by approximately 8 percentage points, for a net decline between 9 and 7 percentage points." "The estimated impact on earnings per share of the currency headwinds is roughly 50 cents." So no rest for the weary.
I have no idea if VOXX hedges its currency exposure to any extent. But now that Venezuela is in the rear view mirror, the euro looks to be a continuing hurdle. Q4 numbers will probably be ugly. Hopefully the market will see that as a short-term item.
Yahoo has this little "remove" button on the posts. You might want to use it before too many people read this post. Dangerous thing, making predictions. First rule - be vague about the prediction or the timing.
If you believe those prices are coming, buy stock in gas station companies. TA (runs travel centers on highways) had a blow-out Q4 due to lower gas prices. More usage, better margins and lower interest expense to carry inventories. All upside from lower prices. GLP (also an MLP) has a decent sized gas station business and I think SUN might also.
And the numbers you mention (depending on just how far below $ 1 for gas you think is coming), the crack spread for refiners should do nicely. So you might want to buy NTI or one of the other MLP refiners, or a C Corp refiner.
Or you could buy one of the reverse oil price ETFs.
So if you believe those prices are coming, you might want to do some research in those areas, and away from NRP.
C'mon, go easy on old Carl. He's just an SA editor - he was reporting what Macquarie Research and one of its analysts said. If anyone is to blame, it's the analyst.
Hey, Money, good to hear from you.
If that was the reason, today was a gift for buyers. The OCI that passed on the Q1 distribution was OCIP, down in TX. They make something that goes into fertilizer.
The OCI that NRP owns a piece of is related to OCIR, OCI Resources, which mines soda ash. OCIR is doing fine. No bottlenecks that I know of.
But that will really be funny, if people misread the symbol and took $ 100 million off NRP's market cap (Funny in an ironic sort of way, not ha-ha funny.). But I don't think so. Not a good day for MLPs in general, a terrible day for coal and a bad day for E&P is my bet.
Mot that it matters, but NRP has purchased lots of reserves from Mr Cline and his companies. In addition to the 4.5 MM units you mention in 2006 (actually, Jan 2007), NRP issued Cline 8.91 MM units in 2007 in connection with one Gatling properties (NRP later wrote it off as worthless); in 2009 NRP issued Cline another 4.6 MM units for the Gatling Ohio property (also later written off as worthless) and then paid him $ 400 MM in cash for 2 more properties. Mr Cline has sold off most of the units long ago. What's left, if anything is left, is held in trust for his children.
But I can't see why NRP should fall on news of the FELP deal. FELP itself is trading OK, so why should NRP be down?
I have been waiting for a chance to buy NRP and now that I've been given the chance, I can't bite the bullet. There has to be something else going on that I don't understand.
Maybe it's just that NRP sold about 12.5 MM units in 2014, through an ATM program and an offering, at prices way above current prices and people are just dumping? I would have though most of them (except Mr Robertson) would have already dumped by now.
Strange. I only read the summary of the FELP deal, but it sure seems the public units are overpriced based on the terms of the deal.
Murray is already a pretty big lessee of NRP. They operate the AFG-Ohio property and they bought the Hibbs Run mine from CNX a little more than a year ago. But I suspect the relationship between Murray and NRP is a bit rocky - production on the AFG-Ohio property tanked 70% in 2014, so maybe they idled the mine or part of it. And the Hibbs Run mine was an ugly (for NRP) deal where CNX activated an ancient mine lease with unbelievably low royalties and then sold the mine to Murray. Production is 2014 was 6 MM tons, or about 12% of total production on NRP's properties and the royalty rate was below $ 1 per ton. And Murray fights with everyone (including Chris Cline until this deal was announced).
But the most interesting thing about the deal (to me, at least) is the financing. Murray is basically financing the whole purchase price and it doesn't look like Murray had problems getting loans. They are a private company so I don't know their entire debt load, but they paid $ v3.25 billion for the CNX mines a year ago and financed most of that. So financing is still available for coal, although I suspect the terms were not so great.
The web site says mid-march. Last year, the K-1s were released on March 31 on-line, a few days later in the mail. I think they were my last K-1 last year.
I haven't read a whole lot yet; just the conference call and a scan through the 10-K. But from the little I read, the technology products division lost $ 50 MM in operating income for the year, presumably $ 25 MM of which was nonrecurring write-offs. Industrial supply division made $ 40 MM and corporate charges were $ 15 MM, all netting to a loss of $ 25 MM, or break-even before the nonrecurring write-offs. Keep in mind that SYX has had "nonrecurring" write-offs for the last 5 years, so take the "nonrecurring" word with a grain of salt. I wonder if the nonrecurring items included all the extra legal fees.
I don't see a lot of projections of what the company's results might look like after the retail ops are closed. They talk about saving about $ 20 MM per year from the closings, but that's not enough. Throw in a little growth in industrial products, and throw out the nonrecurring expenses, and that gets you to maybe $ 30 MM of operating income. After interest and taxes, that's maybe $ 20 MM of income, which doesn't support the current price.
And boy, the original CompUSA and Circuit City purchases a bunch of years ago really ended up costing the company a ton, didn't they?
It's funny - I bought shares in SYX earlier this week, hoping that the Q wouldn't be as bad as people feared. Now I'm sitting on a little gain; I got what I wanted and I should sell. I don't really have the time to follow SYX. But now I'm getting greedy. I got a good price and maybe the company will turns things around. I don't have a lot of faith in management, though. All the stories about the Fiorentinos and now the law firm stealing from SYX makes me wonder who's asleep at the wheel.
The last thread was getting too long so I'm replying to the comments about today's price action in a new thread.
From today's WSJ (I stole it from a post on the investor village site, although that poster wasn't connecting the story to GLP): "Canada released tougher rules for railcars carrying dangerous goods, including crude oil, in a move that indicates the U.S. may adopt similar regulations and will increase pressure on the rail car industry to produce enough new cars on a tighter deadline, Paul Vieira and Bob Tita report. New cars would need thicker tank car walls and an outer cover for thermal protection."
Why affect GLP? Although the vast majority of GLP's operations are more traditional, it has been stressing its virtual pipeline for carrying oil - basically railroad cars. GLP has been buying all kinds of assets to support this business, including last year's buy of the terminal and related assets on the west coast. Maybe someone believes the hype and thought today's news offset the Q4, which I thought was pretty good.
Today's Q4 announcement showed GLP making lots of money at the 2 ends - gas stations and crude oil product margins both did great. The in between part kind of sucked wind, though. I haven't listened to the call or read the transcript, though so maybe they said something bad.
But volume looks to be about average so I'm not too concerned. I wish I hadn't bought more GLP over the last 3 days, though.
There was an article about CBS demanding more of its affiliates' retransmission fees in the WSJ last year. I know CBS is not SBGI's top system, but it's the only reasonably pure-play public broadcaster so it's easier to get information about it. I'm sure the other networks are doing the same. I don't think there's any question that SBGI's gross revenue from retrans will increase a lot over the next year or 2 - the question is how much will the networks let them keep?
BTW, I own both SBGI and CBS (and SSP, if that matters, waiting for the split) so I have no axe to grind.
From the article:
SNL Kagan estimates that networks currently take about 45% of the fees that affiliates receive, but it projects that will rise to about 50% by 2019. And Robin Flynn, the research director at SNL Kagan, says the Indianapolis affiliate change is one of several factors suggesting "it's going to get to 50% a lot quicker."
This is bad news for stations. Most of their revenue comes from advertising, which is growing very slowly, whereas retransmission fees are rising quickly. Kagan estimates retransmission fees will account for 16% of broadcast-station revenue this year, rising to 19% next year.
One of the big investor concerns has been that over time, the broadcast networks will squeeze station groups and request more and more from them in terms of program fees," says Marci Ryvicker,an analyst at Wells Fargo Securities. "And so the fantastic margins that these stations are getting on retransmission-consent revenue, which is the monthly fee they get from the cable guys, will go down."
CBS, which has fewer cable-channel properties than its competitors but has been working to reduce its reliance on advertising in recent years, has made no secret of its plans to aggressively claim its slice of the retransmission-consent-fee pie.
It has told investors that it plans to get to $2 billion in retransmission revenue, including money paid by affiliate stations, by 2020, up from $500 million last year.
"We decide what we think is fair. It generally is higher than the 50% number," Mr. Moonves said, adding that CBS affiliates are doing well "primarily because of network programming both in prime time and in sports."
The year ended last month. The euro tanked throughout Q4 so that's a problem. But it's down another 5% or so since Feb 28, so Q1 is starting off on the wrong foot also.
It was a direct purchase, just not by her.
A family trust bought the units from the estate of her father, Dan Duncan, the man who founded EPD. Per the SEC filing, the family partnership paid $ 34 per unit. RDW apparently started the trust (it has her name in its title) but she is not a trustee.
The SEC filing doesn't say that the purchase was for cash or a note, so we can't know the exact structure of the deal. But it was a direct purchase.
And I wouldn't put too much faith in it. It may have been done for family reasons; it may have been done to give the estate some liquidity; who knows? The family owns something like $ 20 billion of EPD. This purchase wasn't that big a deal.
Different industry but same price trend - the oil & gas E&P companies.
Credit Suisse has a report out today that surprised me a lot. I do not own any E&P companies. Most times I buy them, I end up losing money. But anyway, those companies are all down 50% or more from their 52-week highs, and just about every day you can read a different story about their problems.
CS points out that so far in Q1, about 15 E&P corporations (not MLPs) were able to raise capital by selling stock. The total equity raised was just less than $ 9 billion, which for these companies was a huge amount of equity. These companies ranged in market cap from the $ 7 billion range (SWN and ECA) down to $ 200 MM micro-caps (JONE and others). And this at a time when a lot of people are expecting another drop in the price of oil.
My point is that there will often be money available to out-of-favor industries even when things really look bleak. I suspect most of the larger coal companies will survive in some form and that they will continue to lease reserves from NRP. Prices and royalty rates may continue to decline for a while, and NRP may have to downsize its distribution to pay down debt, but I don't think it or its biggest lessees are going away any time soon.