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White Mountains Insurance Group Ltd (NYSE:WTM)
Operating Income
$411 Mil (TTM As of Jun. 2014)

White Mountains Insurance Group Ltd's operating income for the three months ended in Jun. 2014 was $109 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2014 was $411 Mil.

Operating margin is calculated as operating income divided by its revenue. White Mountains Insurance Group Ltd's operating income for the three months ended in Jun. 2014 was $109 Mil. White Mountains Insurance Group Ltd's revenue for the three months ended in Jun. 2014 was $653 Mil. Therefore, White Mountains Insurance Group Ltd's operating margin for the quarter that ended in Jun. 2014 was 16.70%.

White Mountains Insurance Group Ltd's 3-Year average Growth Rate for operating margin was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. White Mountains Insurance Group Ltd's annualized return on capital for the quarter that ended in Jun. 2014 was %. White Mountains Insurance Group Ltd's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 was %.

Operating income is also linked to Joel Greenblatt’s definition of earnings yield. White Mountains Insurance Group Ltd's earnings yield (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 was 10.20%.


Definition

Operating income, sometimes also called Earnings Before Interest and Taxes (EBIT), is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

White Mountains Insurance Group Ltd's Operating Income for the fiscal year that ended in Dec. 2013 is calculated as

Operating Income (EBIT)(A: Dec. 2013 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=2317.4-0-181.3
-Research & Development-Depreciation, Depletion & Amortization-Others
-0-0-1791.2
=345

White Mountains Insurance Group Ltd's Operating Income for the quarter that ended in Jun. 2014 is calculated as

Operating Income (EBIT)(Q: Jun. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=652.8-0-70.3
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-0-473.5
=109

Operating Income (EBIT)(Q: Jun. 2014 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=119-0-10
=109

White Mountains Insurance Group Ltd Operating Income for the trailing twelve months (TTM) ended in Jun. 2014 was 55.3 (Sep. 2013 ) + 134.2 (Dec. 2013 ) + 112.1 (Mar. 2014 ) + 109 (Jun. 2014 ) = $411 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition.

White Mountains Insurance Group Ltd's annualized Return on Capital (ROC) for the quarter that ended in Jun. 2014 is calculated as:

Return on Capital (ROC)(Q: Jun. 2014 )
=(EBIT - Adjusted Taxes)/Average Total Capital
=Net Income/( (Total Capital (Q: Mar. 2014 ) + Total Capital (Q: Jun. 2014 ))/ 2 )
=382.4/( (-1032.5 + -971.6)/ 2 )
=382.4/-1002.05
= %

where

Total Capital(Q: Mar. 2014 )
=Book Value of Debt + Book Value of Equity - Cash
=Total Current Assets + Property, Plant and Equipment + Other Current Assets
=0 + 0 + -1032.5
=-1032.5

Total Capital(Q: Jun. 2014 )
=Book Value of Debt + Book Value of Equity - Cash
=Total Current Assets + Property, Plant and Equipment + Other Current Assets
=0 + 0 + -971.6
=-971.6

Note: The Net Income data used here is four times the quarterly (Jun. 2014) net income data.

2. Joel Greenblatt’s definition of Return on Capital:

White Mountains Insurance Group Ltd's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 is calculated as:

ROC (Joel Greenblatt’s)(Q: Jun. 2014 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=Operating Income/Average of (Net PPE+Net Working Capital)
     Q: Mar. 2014  Q: Jun. 2014
=Operating Income/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=436/( ( (0 + max(-1012.6, 0)) + (0 + max(-895, 0)) )/2 )
=436/( ( 0 + 0 )/2 )
=436/0
= %

where Working Capital is:

Working Capital(Q: Mar. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(19.9 + 0 + -1032.5) - (238.8 + 0 + -238.8)
=-1012.6

Working Capital(Q: Jun. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(76.6 + 0 + -971.6) - (187.4 + 0 + -187.4)
=-895

When net working capital is negative, 0 is used.

Note: The Operating Income data used here is four times the quarterly (Jun. 2014) operating income data.

3. It is also linked to Joel Greenblatt’s definition of Earnings Yield:

White Mountains Insurance Group Ltd's Earnings Yield (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 is calculated as:

Earnings Yield (Joel Greenblatt’s)=Operating Income (TTM)/Enterprise Value (Q: Jun. 2014 )
=410.6/4024.4925
=10.20 %

4. EBIT is also linked to Operating Margin:

White Mountains Insurance Group Ltd's Operating Margin for the quarter that ended in Jun. 2014 is calculated as:

Operating Margin=Operating Income (Q: Jun. 2014 )/Total Revenue (Q: Jun. 2014 )
=109/652.8
=16.70 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense, Research & Development, Gross Profit, EBITDA, Depreciation, Depletion and Amortization, Return on Capital, Return on Capital (Joel Greenblatt’s), Earnings Yield, Operating Margin


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

White Mountains Insurance Group Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Operating Income 297402780682-1,13876418998263345

White Mountains Insurance Group Ltd Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Operating Income 14138135-51152455134112109
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