It has been a while since I have updated the net worth statement for Koch Industries. The last update I did was back in 2018 and how things have changed since then. David Koch passed away in August 2019 and his shares went to Julia Koch and family. I blogged extensively on the passing of David Koch here and here. Also I reported how recently Julia Koch had been added to the board of directors of Koch Industries as well.
Looking at the 2021 Koch website they report $115 billion in revenues (although they claim it comes from Forbes since they don't report revenue numbers but this number must be somewhat accurate. Taking $115 billion of revenue x a 13% profit margin (which was calculated here) would say after tax earning are $11.3 billion (assuming a 24% tax rate which again calculated here) . Koch reinvests 90% of their earnings back into the company which would say $10.2 billion of earnings are reinvested back into Koch Industries every year. The company based off historical information pays out 7% of their earnings as dividends (leaving about 3% for short term liquidity needs). This would say that Koch pays out close to $800 million of dividends to all their shareholders.
Charles Koch and his family (Chase Koch has mentioned he is a shareholder of Koch Industries here) would earn about $334 million (since they own about 42% interest in Koch Industries). Julia Koch and her family would earn about $334 million. Last but not least the Marshall family would earn $127 million. It is important to remember that Koch Industries is a C-Corporation (I uncovered that here) so the dividends are taxed first at the corporation level (21% under current tax law) and then taxed again individually. For federal income tax purposes Koch shareholders would pay 24% (20% + 3.8% Obamacare tax). In addition to this they would pay state income tax as well. Charles Koch lives in Wichita Kansas so the top income tax rate for that state is 5.7%. This would say that close to 30% of his dividends are taxed. Said another Charles Koch and family would earn $233 million from dividends after taxes were paid. Julia Koch lives in both Florida and New York. My hunch would be that her residence for tax purposes is Florida (which currently doesn't have a state income tax). However, if she truly were a resident of New York City the tax there would be 32% for just living there and throw on federal income taxes of 24% would result in roughly a 56%. To translate this into dollars it would say that Julia Koch and her family would receive $146 million after taxes which would be what she would use for her annual living needs.
The average compound growth in net worth of Koch Industries has been about 14%/year (again this is a rapid growth rate when looking at when Charles Koch took over the company back in 1967). Some smaller companies are able to achieve this for a decade or two at most and then at some point stall out because as you get larger it is harder to continue to grow. The largest jump in net worth was between 2005 to 2006. This was when Koch Industries purchased Georgia Pacific. I had reported on Georgia Pacific as a case study. Koch Industries grew from $60 billion of revenue (before the Georgia Pacific merger) to $80 billion (after the merger). At the time Koch paid a larger premium (39% premium above the market value of the company). David Koch at the time told the New York Times that Koch Industries could streamline the manufacturing and production processes of Georgia Pacific and reduce the costs by investing in technology. The purchase of Georgia Pacific accelerated the size and number of employees for Koch Industries. This in turn increased the net worth of the Koch shareholders.
As I have mentioned before Koch Industries pays out 7% of it's earnings as dividends however as a yield for Koch Industries stock the shareholders really do earn a small yield compared to their net worth. For example, if you take the $334 million Charles Koch and his family earn it would say and divide this by his recent net worth of $46 billion would say that the yield on Koch Industries stock is only .7%. If you compare this to yield of the S&P 500 (1.5%) it would say that Koch Industries shareholders could double their current dividend by selling the company and investing into the S&P 500. However, the long term dividends of Koch Industries as I calculated before have grown an astounding 21% per year (this is over a 50+ year period since Charles Koch took over too). Running some math Charles Koch was worth $500 million back in 1985 which exceeded his lifetime goal by a factor of 70) when he first took over the company after his father passed away.
Without a doubt there is no question that Koch Industries has grown quite exponentially over many many decades. When Charles Koch took over the company after his father passed away in 1967 Koch Industries only paid out $300,000 a year and now that amount in 2021 is roughly $800 million a year. Charles Koch back in 1984 had a reported net worth of only $375 million and now has a net worth of $40 billion. Central to this growth in my view has been two key characteristics. The first is the company philosophy of what is called market based management (MBM). This philosophy is very different than any other company. The philosophy focuses on employees speaking up to share ideas, for all employees to act as if they are business owners, and to think critically about problems they are facing in the business they are in. The other key characteristic is Koch Industries for a long time has reinvested 90% of its earnings back into the business (to my knowledge no other company does this). Given that Koch Industries is private gives them the flexibility to do this. This type of policy would be considered crazy in any public company of board of directors. At any rate no one can deny that Koch Industries is like no other company.
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