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Berkshire Hathaway Energy

Central United States in Berkshire’s Solar Plans

(BRK.A), (BRK.B)

Berkshire Hathaway Energy, which is already a leader in solar energy generation in California and Arizona, is looking to the central U.S. to locate a new solar farm development. The company filed its land acquisition plans with the Midcontinent Independent System Operator (MISO), a Regional Transmission Organization that covers the transfer of energy along the interconnected transmission system in 15 states and the Canadian province of Manitoba.

According to the filing, BHE has acquired a site for solar generation development in MISO’s central region, consisting of 74 individual locations not to exceed 1 megwatt each.

The precise location of the land has not been released.

Currently Berkshire Hathaway Energy, through its subsidiary BHE Renewables, has 1,271 megawatts of owned solar generation.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Dairy Queen

Dairy Queen Goes for First Movie Tie-In in 20 years with Jurassic World

(BRK.A), (BRK.B)

Dairy Queen continues to boost its national advertising profile with its new cross-promotion campaign tied to Universal Picture’s film Jurassic World, which hits theaters June 12.

The film is the next installment of Steven Spielberg’s Jurassic Park series.

Dairy Queen is promoting its Jurassic Smash Blizzard Treat and Jurassic Snack Wrap Duo through a mix of television, digital advertising, and social media. The national and spot advertising already had 3,765 airings as of June 9.

The campaign was created by Clarity Coverdale Fury Advertising, Inc., and is the first movie tie-in for Dairy Queen in 20 years.

The campaign features a customer purchasing Jurassic Smash Blizzard Treat while the Dairy Queen is under attack by raptors.

“We are absolutely thrilled to be partnering with Universal Pictures for the new Jurassic World promotion,” said Tim Hawley, Vice President of Marketing Communications for American Dairy Queen Corporation. “Like the Dairy Queen system, the Jurassic Park franchise has a tremendous fan base and incredible staying power. This is a spectacular cross-promotional, retail marketing program for us to kick off the summer season and it is certainly one of the highlights of our 75th Fanniversary year.”

The campaign’s tagline is “An adventure in every bite.”

For more information, read a Mazor’sEdge special report on Dairy Queen.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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CORT Special Report

Special Report: CORT Furniture Courts Academic Institutions

(BRK.A), (BRK.B)

With formerly generous relocation dollars in short supply in the aftermath of the 2009 recession, CORT Furniture has been aggressively seeking new markets. While relocation dollars still exist, “companies are no longer giving them out like candy,” says George Bertrand, CORT’s Regional Vice President for Operations and Sales.

Founded in 1972, and acquired by Berkshire Hathaway in January 2000, CORT’s primary business is providing rental furniture for homes, businesses and events (including trade shows), and providing relocation services. The company’s service area is the U.S. and the U.K., and annual revenues for all CORT operations exceeds $420 million.

Earnings in 2014 were roughly $36 million.

Seeking New Markets

With its core business hit hard by the 2009 recession, CORT expanded into the party rental business with the 2011 acquisition of the Seattle-based ABC Special Event Rentals, and the 2014 acquisition of another Seattle-area party rental business, AA Party Rentals. Party rentals now make up roughly $12 million in CORT’s annual revenues.

Academic Institutions Offer Opportunities for Growth

Another market CORT sees great potential in is providing furniture leasing to academic institutions.

Traditionally, academic institutions maintain huge inventories of furniture for dorm rooms that requires a high degree of maintenance and upkeep. These days, colleges and universities are increasingly aware that the on-campus quality of life is a major selling point to prospective students. They have upgraded athletic facilities with rock-climbing walls and rows of treadmills, and they have upgraded food services with gourmet entrees that are a far cry from the bland foods of yesteryear. They have also upgraded the dormitory experience, and in this area CORT is providing solutions that include furniture delivery service and ongoing maintenance.

Currently, only 14.3 percent of academic institutions are outsourcing their furnishing services, offering CORT a huge potential market for expansion.

According to CORT’s own survey, which they conducted with University Business Magazine, “budget restrictions” were the biggest impediments respondents cited in providing up-to-date and top condition furniture for students’ dorm rooms.

According to the survey results:

87 percent of respondents stated that budget and personnel restrictions are the biggest challenges facing their institution.

95 percent said the appearance and condition of their furnishings is important or very important to the maintaining the college’s image and integrity.

However, 37 percent described their furnishings as “outdated” and almost 20 percent said it’s “showing its age.

Out-sourcing their furniture needs to CORT is one way for institutions to keep their focus on academics, rather than on running a used furniture empire. CORT puts it simply. “Furniture leasing is a simple and affordable solution, especially as many colleges and universities are trying to meet increasing expectations with less available resources.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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NetJets

NetJets Drama Could Lead to Labor Breakthrough

(BRK.A), (BRK.B)

With the twists and turns of a political thriller, changes in NetJets’s management may just lead to a breakthrough in its labor dispute between its pilots and management.

The ongoing dispute has been a familiar sight to anyone attending Berkshire’s annual meeting the past few years, as hundreds of pilots from the NetJets Association of Shared Aircraft Pilots Union have picketed in “informational protests” that laid out a host of grievances, including working without a contract for two years.

“It’s human nature to sometimes have differences about how people get paid,” Berkshire chairman Warren Buffett said when questioned about the dispute at the annual meeting.

Pedro Leroux, president of the pilots’ union, has said that NetJets has demanded that pilots and other unionized employees concede to wage and health care concessions despite the luxury jet fractional ownership business having revived from near bankruptcy levels during the 2009 recession.

Berkshire credited its 9.5% increase in 2014 revenue in its service businesses to NetJets and aviation training company FlightSafety International.

Leroux also noted that the pilots had lost trust in NetJets’s chief executive and chairman, Jordan Hansell.

Now, in an odd twist, Hansell is out the door after four years at the helm, and Adam Johnson has been appointed CEO and chairman.

Letters to Buffett

After almost 22 years at NetJets, where Johnson had risen to number 2 in the management hierarchy, Adam Johnson left the company on May 1, ostensibly to take a job outside of the aviation industry. According to reports, it was clear that Johnson and Bill Noe, who had also resigned, were dissatisfied with Hansell’s leadership, and The New York Post wrote that Johnson had sent a letter to Berkshire chairman Warren Buffett questioning “the direction of the company.” They also reported that Johnson had sent a similar letter back in 2009 that lead to the ouster of NetJets founder Richard Santulli.

With Johnson back as the new chairman, Noe has also returned and moved up the ladder as president and chief operating officer.

Now the pressure is on Johnson and Noe to resolve a dispute that Hansell had no luck with. He apparently had avoided meeting with Leroux over the two years since the contract had expired, something that Johnson and Noe promptly remedied after just a few days back on the job.

No word yet if the talks were fruitful, but its clearly time that NetJets resolves the conflict, as a shortage of pilots has given the pilots union increased leverage.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Nebraska Furniture Mart

Nebraska Furniture Mart Looks to Grab Half of Dallas’s Furniture Market

(BRK.A), (BRK.B)

Move over Bassett, Charter Furniture, and Pottery Barn, when it comes to the new Nebraska Furniture Mart in Dallas, Texas, Warren Buffett has high hopes. “I believe the store will do over $1 billion,” Buffett recently told CNBC.

Officially, NFM has been projecting that the new Dallas store will have annual revenues of $600 million, which is $200 million more than its Kansas store generates.

If the $1 billion annual sales goal Buffett spoke of can be reached, it will be roughly half of all the home furnishing sales in the Dallas area.

In order to generate that type of business, NFM has built a massive store with a 560,000-square-foot retail showroom and 58 acres of parking. The store’s massive loading area can load 120 cars simultaneously.

Over 2,000 people are staffing the new store, and if the Kansas store is any indication, the average furniture sales associate will sell some $1.1 million of home furnishings a year.

Big Stores for a Big Market

According to Furniture Today Magazine, 41% of all U.S. households have plans to buy furniture and mattresses, and it looks like a huge number of them will be doing that at a Nebraska Furniture Mart.

While the Dallas store is expected to draw customers from as far as 300 mile away, the reach of NFM is nearly nationwide, delivering to 48 states (excluding Alaska and Hawaii).

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF

BNSF Railway Unites With Oil Refineries in Washington State for Accident Response Mutual Aid Pact

(BRK.A), (BRK.B)

BNSF Railway and Washington State-based oil refineries have inked a Mutual Aid Agreement to respond to accidents. The agreement between BNSF and the Western States Petroleum Association (WSPA), which includes Phillips 66, BP Cherry Point, Shell Oil Products US, Tesoro Companies, and U.S. Oil Refining Company, covers both rail accidents and refinery accidents.

“We are extremely pleased to enter into this agreement to further advance rail safety. Working hand-in-hand with community first responders and emergency managers has long been ingrained in the BNSF culture,” said John Lovenburg, BNSF’s vice president, Environmental. “This agreement is an extension of our long-standing practice to provide aid to communities no matter if an incident involves rail or not. Nothing is more important than safely operating through the communities we serve and we are absolutely committed to ensuring local first responders have access to training, information and access to BNSF’s safety experts and response equipment.”

Pressure Builds for Safer Oil Trains

Growing pressure over railroad oil train accidents has BNSF taking a number of measures to increase safety. The measures include lower speeds in high-population density areas, new tank car safety standards that include increasing the thickness of tank car walls, and increased training for emergency responders along BNSF routes.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Benjamin Moore

Benjamin Moore Launches $50 Million Ad Campaign

(BRK.A), (BRK.B)

With much of the house paint sold to do-it-yourselfers these days being purchased at big-box stores, such as Lowes and Home Depot, Berkshire Hathaway’s Benjamin Moore has launched an aggressive campaign to highlight the brand as a premium product that is sold exclusively at 5,000 small retailers.

The campaign, which uses the new tagline—”Paint like no other,” parodies the big-box store experience by using two marionettes to represent the big-box store staff. The ads emphasis the professionalism of the Benjamin Moore retailers, which are small, locally-owned businesses.

The $50 million campaign is using a mix of TV, radio, print and digital media to reach consumers that have been increasing their DIY projects now that the 2009 recession is firmly in the rear-view mirror.

The ad campaign is Benjamin Moore’s largest ever, and is the first to be overseen by Ron Schuller, who joined the company in November 2014 as the Chief Marketing Officer.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway Energy

Berkshire’s NV Energy Faces Major Defectors

(BRK.A), (BRK.B)

Berkshire Hathaway’s 2014 $5.6 billion all-cash acquisition of Nevada electric utility NV Energy looked like a home run at the time. After all, who needs loads of electricity more than the neon-bright Las Vegas Casinos?

Well, the casinos need electricity but they are now pushing to get it elsewhere.

Wynn Las Vegas, MGM Resorts International and Las Vegas Sands Corp. are now planning to purchase their power from another “qualified energy provider,” using the exit provision passed by the Nevada Legislature in 2001.

Letters of intent to file applications to leave Nevada Power and its parent company, NV Energy, were submitted to Nevada state regulators in March.

Also looking to leave is Nevada-based Switch Communications, a developer and operator of data center facilities.

As they push for the change, Las Vegas Sands Corp., Wynn Resorts Ltd., Switch, and rooftop solar-energy providers Sunrun and SolarCity have collectively formed the Nevada Coalition to Protect Ratepayers.

Leaving Nevada Power can come with a hefty exit fee. The Public Utility Commission is proposing a $27.7 million exit fee for Switch to leave Nevada Power, and Switch is pushing for an exit fee more in the range of $18.5 million.

At the time of the NV Energy acquisition, MidAmerican (now Berkshire Hathaway Energy) looked at Nevada as a growth market, however, the defections could take a major bite out of NV Energy’s consumer demand.

The Battle Over Net Metering

NV Energy has also been in a battle with rooftop solar providers over Net Metering legislation, which currently caps the cumulative capacity of all net metering systems operating in Nevada at 3 percent of the total peak capacity of all electric utilities in the state. There are already over 3,300 residential systems that feed power in the electric grid, and solar providers are worried that the current cap would severely limit the market for rooftop solar panels.

Under legislation which just passed the Nevada State Senate, S.B. 374 “revises the amount of cumulative capacity for which utilities are required to offer net metering in accordance with existing law.”

The bill allows 235 megawatts of residential systems to qualify under net metering through the end of 2015. It also empowers the state’s public utilities commission to set a new rate structure for solar.

Nevada leads the nation in solar power, the big question is will it be coming from NV Energy.

Transmission Lines a Valuable Asset

No matter who produces the power that flows into the grid, NV Energy will continue to make money from its ownership of the transmission lines, and ownership of transmission lines has been a key area of acquisition for Berkshire Hathaway Energy. In 2014, BHE acquired AltaLink, L.P., a transmission lines company serving Alberta, Canada.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Nebraska Furniture Mart

Nebraska Furniture Mart Has Record $9 Million Day

(BRK.A), (BRK.B)

The Berkshire Hathaway annual meeting not only brings lots of people to Omaha, Nebraska, it also brings lots of business to Berkshire’s Nebraska Furniture Mart.

Shareholders receive a special discount during the week of the annual meeting, and Tuesday, April 28, 2015, saw sales at the furniture retailer’s Omaha store top $9 million for the day.

The previous one-day record was $8.2 million set in 2014.

Shareholders are Valuable Customers

Over 40,000 shareholders descend on Omaha the first weekend in May each year, and Nebraska Furniture Mart counts on $20 million in sales during the week of the Berkshire annual meeting. It has likely topped that this year, as Berkshire’s shareholders were coming into town having seen a 27.25% rise in the share price in 2014.

While the $9 million day is a record for the Omaha store, (and probably for any furniture retailer anywhere), it could be threatened by Nebraska Furniture Mart’s new 560,000-square-foot store in Dallas, Texas, which is already drawing huge crowds. Customers are driving from as far as 300 miles away to visit the massive store.

For more info on Nebraska Furniture Mart, read a MazorsEdge Special Report on the new Dallas store.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF

Missouri Basin Power Project Settles Dispute with BNSF

(BRK.A), (BRK.B)

A decade long dispute between the Missouri Basin Power Project and BNSF Railway over coal transportation rates has finally been settled. The dispute predated Berkshire’s Hathaway’s ownership of BNSF.

The lawsuit was originally filed in 2004 by coal suppliers Basin Electric and Western Fuels Association Inc., complaining that BNSF (at that time still known as Burlington Northern Santa Fe) had doubled the shipping rates for coal transported to the Laramie River Station located near Wheatland, Wyoming.

BNSF hauls 8 million tons of coal each year from mines in Wyoming’s Powder River Basin.

The members of the Missouri Basin Power Project are Basin Electric, Lincoln Electric System, Tri-State Generation & Transmission Association Inc., Western Minnesota Municipal Power Agency, Heartland Consumers Power District, and the Wyoming Municipal Power Agency.

In 2009, the Surface Transportation Board (STB) concluded that BNSF’s coal transportation rates were “unlawfully high” at roughly six times the cost of providing the transportation. The STB ordered $345 million in reparations and rate reductions from the railroad. Under the ruling, BNSF was obligated to reimburse the Utilities for roughly $100 million in overcharges from 2004 through 2008 based on the volume of coal transported from the various PRB mines between 2004 and 2008.

The award was the single largest award to a captive shipper (a shipper with no alternative carrier) ever made by the STB.

The STB noted that “customers have been bearing the burden of these unreasonably high transportation rates in their monthly electric bills, a burden they should no longer be forced to bear.” The award was the single largest award to a captive shipper (a shipper with no alternative carrier) ever made by the STB.

BNSF appealed the ruling, spending the next six years in the appeals process, and the negotiated settlement came as a result of the STB’s order for both parties to “confer and resolve the precise amount of damages due the Utilities.”

The exact terms of the settlement between BNSF and the Missouri Basin Power Project have not been released, but BNSF spokeswoman Roxanne Butler said that “both parties are satisfied with the outcome.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.