Berkshire Hathaway 2009 Annual Report Download

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B
ERKSHIRE
H
ATHAWAY
INC.
2009
ANNUAL REPORT

Table of contents

  • Page 1
    BERKSHIRE HATHAWAY INC. 2009 ANNUAL REPORT

  • Page 2
    .... Berkshire's finance and financial products businesses primarily engage in proprietary investing strategies (BH Finance), commercial and consumer lending (Berkshire Hathaway Credit Corporation and Clayton Homes) and transportation equipment and furniture leasing (XTRA and CORT). McLane Company is...

  • Page 3
    ... Internal Control Over Financial Reporting ...22 Report of Independent Registered Public Accounting Firm ...23 Consolidated Financial Statements ...24 Management's Discussion ...61 Owner's Manual ...89 Common Stock Data ...95 Operating Companies ...96 Directors and Officers of the Company ...Inside...

  • Page 4
    Berkshire's Corporate Performance vs. the S&P 500 Annual Percentage Change in Per-Share in S&P 500 Book Value of with Dividends Berkshire Included (1) (2) 23.8 10.0 20.3 (11.7) 11.0 30.9 19.0 11.0 16.2 (8.4) 12.0 3.9 16.4 14.6 21.7 18.9 4.7 (14.8) 5.5 (26.4) 21.9 37.2 59.3 23.6 31.9 (7.4) 24.0 6.4 ...

  • Page 5
    ...and Class B stock by 19.8%. Over the last 45 years (that is, since present management took over) book value has grown from $19 to $84,487, a rate of 20.3% compounded annually.* Berkshire's recent acquisition of Burlington Northern Santa Fe (BNSF) has added at least 65,000 shareholders to the 500,000...

  • Page 6
    ... (shown on page 2). Our market gain is better because in 1965 Berkshire shares sold at an appropriate discount to the book value of its underearning textile assets, whereas today Berkshire shares regularly sell at a premium to the accounting values of its first-class businesses. Summed up, the table...

  • Page 7
    ... the market at all. Any investors who were misled by the sensationalists paid a big price: The Dow closed the day of the letter at 7,063 and finished the year at 10,428. Given a few experiences we've had like that, you can understand why I prefer that our communications with you remain as direct and...

  • Page 8
    ... still tap-dances to the office every day, just as I do at 79. We both feel lucky to work at a business we love. GEICO's customers have warm feelings toward the company as well. Here's proof: Since Berkshire acquired control of GEICO in 1996, its market share has increased from 2.5% to 8.1%, a gain...

  • Page 9
    ... gains in the future. In 1995, GEICO was the country's sixth largest auto insurer; now we are number three. The company's float has grown from $2.7 billion to $9.6 billion. Equally important, GEICO has operated at an underwriting profit in 13 of the 14 years Berkshire has owned it. I became excited...

  • Page 10
    ... business. We got business all right - but of the wrong type. Our pre-tax losses from credit-card operations came to about $6.3 million before I finally woke up. We then sold our $98 million portfolio of troubled receivables for 55¢ on the dollar, losing an additional $44 million. GEICO's managers...

  • Page 11
    ... as public utilities. Indeed, the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow. We are fortunate to own a number of such businesses, and we would love to buy more. Anticipating, however, that Berkshire...

  • Page 12
    ... will provide certainty about allowable returns so that we can confidently make the huge investments required to maintain, replace and expand the plant. We see a "social compact" existing between the public and our railroad business, just as is the case with our utilities. If either side shirks its...

  • Page 13
    ...: COMPANY Benjamin Moore (paint) Borsheims (jewelry retailing) H. H. Brown (manufacturing and retailing of shoes) CTB (agricultural equipment) Dairy Queen Nebraska Furniture Mart (furniture retailing) Pampered Chef (direct sales of kitchen tools) See's (manufacturing and retailing of candy) Star...

  • Page 14
    ... as any other owner, meaning we pay the same prices as everyone else does when we are using our personal contracts. In short, we eat our own cooking. In the aviation business, no other testimonial means more. Finance and Financial Products Our largest operation in this sector is Clayton Homes, the...

  • Page 15
    ...as Capmark), the country's third-largest servicer of commercial mortgages. In addition to servicing a $235 billion portfolio, the company is an important originator of mortgages, having 25 offices spread around the country. Though commercial real estate will face major problems in the next few years...

  • Page 16
    ...Wal-Mart Stores, Inc...Wells Fargo & Company ...Others ...Total Common Stocks Carried at Market ... *This is our actual purchase price and also our tax basis; GAAP "cost" differs in a few cases because of write-ups or write-downs that have been required. In addition, we own positions in non-traded...

  • Page 17
    ... for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business - through the purchase of a small piece of it in the stock market...

  • Page 18
    ...nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well. An Inconvenient Truth (Boardroom Overheating) Our subsidiaries made a few small "bolt-on" acquisitions last year...

  • Page 19
    ... amount of BNSF stock that we purchased in the market for cash. All told, therefore, only about 30% of our cost overall was paid with Berkshire shares. In the end, Charlie and I decided that the disadvantage of paying 30% of the price through stock was offset by the opportunity the acquisition gave...

  • Page 20
    ... many thousands of copies from its Internet site. (Should you need to ship your book purchases, a nearby shipping service will be available.) If you are a big spender - or, for that matter, merely a gawker - visit Elliott Aviation on the east side of the Omaha airport between noon and 5:00 p.m. on...

  • Page 21
    At Nebraska Furniture Mart, located on a 77-acre site on 72nd Street between Dodge and Pacific, we will again be having "Berkshire Weekend" discount pricing. To obtain the Berkshire discount, you must make your purchases between Thursday, April 29th and Monday, May 3rd inclusive, and also present ...

  • Page 22
    ... more fascinating; no wonder we tap-dance to work. If pushed, we would gladly pay substantial sums to have our jobs (but don't tell the Comp Committee). Nothing, however, is more fun for us than getting together with our shareholder-partners at Berkshire's annual meeting. So join us on May 1st at...

  • Page 23
    BERKSHIRE HATHAWAY INC. and Subsidiaries Selected Financial Data for the Past Five Years (dollars in millions except per share data) 2009 Revenues: Insurance premiums earned (1) ...Sales and service revenues ...Revenues of utilities and energy businesses (2) ...Interest, dividend and other ...

  • Page 24
    ... our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2009 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making...

  • Page 25
    ... REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Berkshire Hathaway Inc. Omaha, Nebraska We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related...

  • Page 26
    ... ...Unearned premiums ...Life and health insurance benefits ...Accounts payable, accruals and other liabilities ...Notes payable and other borrowings ...Utilities and Energy: Accounts payable, accruals and other liabilities ...Notes payable and other borrowings ...Finance and Financial Products...

  • Page 27
    ... Revenues: Insurance and Other: Insurance premiums earned ...Sales and service revenues ...Interest, dividend and other investment income ...Investment gains/losses ...Other-than-temporary impairment losses on investments ...Utilities and Energy: Operating revenues ...Other ...Finance and Financial...

  • Page 28
    ...Acquisitions of businesses, net of cash acquired ...Purchases of property, plant and equipment ...Other ...Net cash flows from investing activities ...Cash flows from financing activities: Proceeds from borrowings of finance businesses ...Proceeds from borrowings of utilities and energy businesses...

  • Page 29
    BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (dollars in millions) Berkshire Hathaway shareholders' equity Common stock Accumulated and capital in other excess of par comprehensive Retained value income earnings Total ...

  • Page 30
    ... and basis of consolidation Berkshire Hathaway Inc. ("Berkshire") is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, service and retailing. In these...

  • Page 31
    ... the ability and intent to hold the securities to maturity. Trading investments are carried at fair value and include securities acquired with the intent to sell in the near term. All other securities are classified as available-for-sale and are carried at fair value with net unrealized gains or...

  • Page 32
    ... prescribes no specific methodology for making adjustments to transaction prices or quoted prices but rather confirms that different valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an...

  • Page 33
    ... of the purchase price over the fair value of identifiable net assets acquired in business acquisitions. We evaluate goodwill for impairment at least annually. Evaluating goodwill for impairment involves a two-step process. The first step is to estimate the fair value of the reporting unit. There...

  • Page 34
    ... balances of deferred premium acquisition costs are included in other assets and were $1,770 million and $1,698 million at December 31, 2009 and 2008, respectively. (p) Regulated utilities and energy businesses Certain domestic energy subsidiaries prepare their financial statements in accordance...

  • Page 35
    ...transfers and it requires that Level 3 purchases, sales, issuances and settlements activity be reported on a gross rather than a net basis. ASU 2010-06 also requires fair value measurement disclosures for each class of assets and liabilities and disclosures about valuation techniques and inputs used...

  • Page 36
    ... BNSF shares, as required under ASC 805 Business Combinations, we will re-measure our previously owned investment in BNSF at fair value (approximately $7.7 billion based upon the market price of the BNSF stock at the acquisition date). In the first quarter of 2010, we will record a one-time holding...

  • Page 37
    ...Unrealized Losses * Fair Value December 31, 2009 U.S. Treasury, U.S. government corporations and agencies ...States, municipalities and political subdivisions ...Foreign governments ...Corporate bonds ...Mortgage-backed securities ...Insurance and other ...Finance and financial products ... $ 2,362...

  • Page 38
    ...). Cost Basis Unrealized Gains Unrealized Losses Fair Value December 31, 2009 American Express Company ...The Coca-Cola Company ...Kraft Foods Inc...The Procter & Gamble Company ...Wells Fargo & Company ...Other ...Insurance and other ...Utilities and energy * ...Finance and financial products...

  • Page 39
    ... ...Finance and financial products ... $17,269 3,102 $20,371 Fixed maturity and equity investments in the preceding table include our investments in The Goldman Sachs Group, Inc. ("GS") and The General Electric Company ("GE"), which were acquired in 2008 and investments in Swiss Reinsurance Company...

  • Page 40
    ...at a rate of 8.5% per annum. As of December 31, 2008, equity method investments included Burlington Northern Santa Fe Corporation ("BNSF") and Moody's Corporation ("Moody's"). During the fourth quarter of 2008, our investment in common stock and our related voting interest in each of these companies...

  • Page 41
    ... 2008 Insurance premiums receivable ...Reinsurance recoverables ...Trade and other receivables ...Allowances for uncollectible accounts ... $ 5,295 $ 4,961 2,922 3,235 6,977 7,141 (402) (412) $14,792 $14,925 Loans and finance receivables of finance and financial products businesses are comprised...

  • Page 42
    ...including rail cars leased from others) were as follows (in millions): 2010 - $597; 2011 - $458; 2012 - $329; 2013 - $216; 2014 - $133; and thereafter - $291. Property, plant and equipment of utilities and energy businesses is comprised of the following (in millions). Ranges of estimated useful life...

  • Page 43
    ... and financial products businesses follows (in millions). December 31, 2009 Notional Assets (3) Liabilities Value December 31, 2008 Notional Assets (3) Liabilities Value Equity index put options ...Credit default obligations: High yield indexes ...States/municipalities ...Individual corporate...

  • Page 44
    ... in the market prices in the purchases and sales of natural gas and electricity and in commodity fuel costs through our regulated utility operations. Derivative instruments, including forward purchases and sales, futures, swaps and options are used to manage these commodity price risks. Unrealized...

  • Page 45
    ...). 2009 2008 2007 Cash paid during the year for: Income taxes ...Interest of finance and financial products businesses ...Interest of utilities and energy businesses ...Interest of insurance and other businesses ...Non-cash investing and financing activities: Investments received in connection with...

  • Page 46
    ...due in 2012; $1.2 billion par amount of floating rate notes due in 2013; $600 million par amount of 1.4% notes due in 2012; $1.4 billion par amount of 2.125% notes due in 2013; and $1.7 billion par amount of 3.2% notes due in 2015. These notes were issued in connection with the BNSF acquisition. 44

  • Page 47
    ... Financial Statements (Continued) (15) Notes payable and other borrowings (Continued) 2009 2008 Utilities and energy: Issued by MidAmerican Energy Holdings Company ("MidAmerican") and its subsidiaries and not guaranteed by Berkshire: MidAmerican senior unsecured debt due 2012-2037 ...Subsidiary...

  • Page 48
    ...). 2009 2008 Deferred tax liabilities: Investments - unrealized appreciation and cost basis differences ...Deferred charges reinsurance assumed ...Property, plant and equipment ...Other ...Deferred tax assets: Unpaid losses and loss adjustment expenses ...Unearned premiums ...Accrued liabilities...

  • Page 49
    ...(154) - 18 (119) (149) $ 3,538 $1,978 $ 6,594 * Relates to adjustments made to deferred income tax assets and liabilities in 2007 upon the enactment of reductions to corporate income tax rates in the United Kingdom and Germany. We file income tax returns in the U.S. federal jurisdiction and in many...

  • Page 50
    ... all of our equity investments are traded on an exchange in active markets and fair value is based on the closing prices as of the balance sheet date. Level 2 - Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities...

  • Page 51
    ... is widely used by market participants. Inputs to this model include current index price, expected volatility, dividend and interest rates and contract duration. Credit default contracts are primarily valued based on indications of bid or offer data as of the balance sheet date. These contracts...

  • Page 52
    ...1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. The Class B share data in the following table and the related disclosures regarding Class B shares are presented on a post-split basis for all periods. Changes in issued and outstanding Berkshire...

  • Page 53
    ... shares of preferred stock authorized, none of which are issued and outstanding. (20) Pension plans Several of our subsidiaries individually sponsor defined benefit pension plans covering certain employees. Benefits under the plans are generally based on years of service and compensation, although...

  • Page 54
    ... at fair value with significant unobservable inputs (Level 3) for the year ended December 31, 2009 consisted primarily of real estate and limited partnership interests. Pension plan assets are generally invested with the long-term objective of earning sufficient amounts to cover expected benefit...

  • Page 55
    ...net periodic pension expense. 2009 2008 Discount rate ...Expected long-term rate of return on plan assets ...Rate of compensation increase ... 5.9% 6.9 4.0 6.3% 6.9 4.2 Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee...

  • Page 56
    ...could be subject to additional claims for relief from the SEC. The Office of the Director of Corporate Enforcement in Ireland is conducting a preliminary evaluation in relation to Cologne Reinsurance Company (Dublin) Limited ("CRD"), a wholly owned subsidiary of General Re, concerning, in particular...

  • Page 57
    ... Litigation") asserted on behalf of investors who purchased publicly-traded securities of AIG between October 1999 and March 2005. The complaint, originally filed in April 2005, asserts various claims against AIG and certain of its officers, directors, investment banks and other parties, including...

  • Page 58
    ... in In re American International Group, Inc. Consolidated Derivative Litigation, Case No. 769-N, Delaware Chancery Court. In June 2007, AIG filed an Amended Complaint in the Delaware Derivative Litigation asserting claims against two of its former officers, but not against General Reinsurance. On...

  • Page 59
    ... commercial accounts Proprietary investing, manufactured housing and related consumer financing, transportation equipment leasing, furniture leasing, life annuities and risk management products An association of approximately 130 manufacturing and service businesses that operate within 11 diverse...

  • Page 60
    ..., Business Wire, FlightSafety, International Dairy Queen, Pampered Chef, NetJets and TTI Ben Bridge Jeweler, Borsheims, Helzberg Diamond Shops, Jordan's Furniture, Nebraska Furniture Mart, See's Candies, Star Furniture and R.C. Willey Service Retailing A disaggregation of our consolidated data for...

  • Page 61
    ...-end 2009 2008 Identifiable assets at year-end 2009 2008 Operating Businesses: Insurance group: GEICO ...General Re ...Berkshire Hathaway Reinsurance and Primary Groups ...Total insurance group ...Finance and financial products ...Marmon ...McLane Company ...MidAmerican ...Shaw Industries ...Other...

  • Page 62
    ... remainder primarily in Canada and Europe. In 2009, consolidated sales and service revenues included $12.2 billion of sales to Wal-Mart Stores, Inc. which were primarily related to McLane's wholesale distribution business. At December 31, 2009, over 80% of our net property, plant and equipment were...

  • Page 63
    ...marketing, purchasing, legal or human resources) and there is minimal involvement by our corporate headquarters in the day-to-day business activities of the operating businesses. Our senior corporate management team does participate in and is ultimately responsible for significant capital allocation...

  • Page 64
    ... District of Columbia. GEICO's policies are marketed mainly by direct response methods in which customers apply for coverage directly to the company via the Internet, over the telephone or through the mail. This is a significant element in our strategy to be a low-cost auto insurer. In addition, we...

  • Page 65
    ... issuance costs and increased salary and employee benefit expenses, which included increased interest on deferred compensation liabilities. Premiums earned in 2008 increased 5.7% over 2007, reflecting an 8.2% increase in voluntary auto policies-in-force partially offset by lower average premiums per...

  • Page 66
    ...429 million from loss reserve reductions related to pre-2007 loss events. The pre-tax underwriting losses from casualty business in 2007 included $120 million of loss reserve discount accretion and deferred charge amortization, as well as legal costs associated with finite reinsurance investigations...

  • Page 67
    ...expenses with respect to past loss events. Other multi-line refers to other business written on both a quota-share and excess basis, participations in and contracts with Lloyd's syndicates as well as property, aviation and workers' compensation programs. BHRG's underwriting results are summarized in...

  • Page 68
    ... in 2009 or 2007, which also benefited from relatively low property loss ratios and favorable loss experience on workers' compensation business. In December 2007, we formed a monoline financial guarantee insurance company, Berkshire Hathaway Assurance Corporation ("BHAC"). BHAC commenced operations...

  • Page 69
    ... increases were reductions in dividends earned from our investments in Wells Fargo and U.S. Bancorp common stock as a result of dividend rate cuts by those companies. Beginning in 2009, our insurance investment income also includes earnings from equity method investments (BNSF and Moody's). Equity...

  • Page 70
    ... earned by Berkshire (net of related income taxes). Through our 89.5% ownership interest in MidAmerican Energy Holdings Company ("MidAmerican"), we operate an international energy business. MidAmerican's domestic regulated energy interests are comprised of two regulated utility companies and two...

  • Page 71
    Management's Discussion (Continued) Utilities and Energy ("MidAmerican") (Continued) generally subject to regulatory approval. Rates are based in large part on the costs of business operations, including a return on capital. To the extent we are not allowed to include such costs in the approved ...

  • Page 72
    ... well as lower average home sale prices. Real estate brokerage activities generated a loss before interest and taxes of $45 million in 2008 versus EBIT of $42 million in 2007. The loss in 2008 reflected the weak U.S. housing markets. EBIT from other activities in 2009 included $125 million in stock...

  • Page 73
    ... related to plant closures compared to $59 million in 2008. Revenues in 2008 declined $321 million (6%) compared to 2007, principally due to a reduction in year-to-date carpet sales volume, partially offset by higher average selling prices and revenues from business acquisitions. In 2008, pre-tax...

  • Page 74
    ... actions to reduce costs and reduce or delay capital spending until the economy improves. Other service Our other service businesses include NetJets, the world's leading provider of fractional ownership programs for general aviation aircraft, and FlightSafety, a provider of high technology training...

  • Page 75
    ...losses from asset writedowns and plant closure costs. In both years overall operating results were negatively impacted by declines in home sales, increased borrowing costs and higher levels of borrowings. Revenues and pre-tax earnings from our furniture/transportation equipment leasing businesses in...

  • Page 76
    ... millions. 2009 2008 2007 Investment gains/losses from - Sales and other disposals of investments - Insurance and other ...Finance and financial products ...Other-than-temporary impairment losses on investments ...Other ...Derivative gains/losses from - Credit default contracts ...Equity index put...

  • Page 77
    ...). Our invested assets are held predominantly in our insurance businesses. In 2009, we acquired a 12% convertible perpetual security issued by Swiss Re for $2.7 billion, an 8.5% Cumulative Convertible Perpetual Preferred Stock of Dow for $3 billion and senior notes of Wrigley due in 2013 and 2014...

  • Page 78
    ...on BNSF debt outstanding at the acquisition date or issued in the future. Capital expenditures of our utilities and energy businesses in 2009 were approximately $3.4 billion and are currently forecasted to be approximately $2.6 billion in 2010. We expect MidAmerican and its operating subsidiaries to...

  • Page 79
    ... Balance Sheets without discounting for time value, regardless of the length of the claim-tail. Amounts are in millions. Gross unpaid losses Dec. 31, 2009 Dec. 31, 2008 Net unpaid losses * Dec. 31, 2009 Dec. 31, 2008 GEICO ...General Re ...BHRG ...Berkshire Hathaway Primary Group ...Total...

  • Page 80
    ...31, 2009, gross reserves included $6,187 million of reported average, case and case development reserves and $2,374 million of IBNR reserves. GEICO predominantly writes private passenger auto insurance which has a relatively short claim-tail. The key assumptions affecting the setting of our reserves...

  • Page 81
    ..., claims and other management. For each of GEICO's major coverages, we test the adequacy of the total loss reserves using one or more actuarial projections based on claim closure models, paid loss triangles and incurred loss triangles. Each type of projection analyzes loss occurrence data for claims...

  • Page 82
    ... report annually, often 90 to 180 days after the end of the annual period. The different client reporting practices generally do not result in a significant increase in risk or uncertainty as the actuarial reserving methodologies are adjusted to compensate for the delays. Premium and loss data...

  • Page 83
    ..., counts of claims or average amounts per claim are not utilized because clients do not consistently provide reliable data in sufficient detail. Upon notification of a reinsurance claim from a ceding company, our claim examiners make independent evaluations of loss amounts. In some cases, examiners...

  • Page 84
    ...property losses. In response to favorable claim developments and another year of information, estimated remaining World Trade Center losses were reduced by $17 million. In certain reserve cells within excess directors and officers and errors and omissions ("D&O and E&O") coverages, IBNR reserves are...

  • Page 85
    ...effective date. We paid retroactive reinsurance losses and loss adjustment expenses of $1.1 billion in 2009. The classification "reported case reserves" has no practical analytical value with respect to retroactive policies since the amount is often derived from reports in bulk from ceding companies...

  • Page 86
    ...single name and municipal issuer credit default contracts, our fair values are generally based on credit default spread information obtained from a widely used reporting source. We monitor and review pricing data for consistency as well as reasonableness with respect to current market conditions. We...

  • Page 87
    ... index put option contracts based on the widely used Black-Scholes option valuation model. Inputs to the model include the current index value, strike price, discount rate, dividend rate and contract expiration date. The weighted average discount and dividend rates used as of December 31, 2009 were...

  • Page 88
    ... may occur with respect to assets. We strive to maintain high credit ratings so that the cost of debt is minimized. We utilize derivative products, such as interest rate swaps, to manage interest rate risks on a limited basis. The fair values of our fixed maturity investments and notes payable and...

  • Page 89
    ... to our investments provided that the underlying business, economic and management characteristics of the investees remain favorable. We strive to maintain above average levels of shareholder capital to provide a margin of safety against short-term equity price volatility. Market prices for equity...

  • Page 90
    ... in forward market prices by the expected volumes for these contracts as of that date. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios. Dollars are in millions. Fair Value Net Assets (Liabilities) Estimated Fair Value after Hypothetical...

  • Page 91
    ...consistently earn above-average returns on capital. Our second choice is to own parts of similar businesses, attained primarily through purchases of marketable common stocks by our insurance subsidiaries. The price and availability of businesses and the need for insurance capital determine any given...

  • Page 92
    ... access to two low-cost, non-perilous sources of leverage that allow us to safely own far more assets than our equity capital alone would permit: deferred taxes and "float," the funds of others that our insurance business holds because it receives premiums before needing to pay out losses. Both of...

  • Page 93
    ...own portfolios through direct purchases in the stock market. Charlie and I are interested only in acquisitions that we believe will raise the per-share intrinsic value of Berkshire's stock. The size of our paychecks or our offices will never be related to the size of Berkshire's balance sheet. 9. We...

  • Page 94
    ...company during that holding period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire's stock price at a fair level than a high...

  • Page 95
    ... regularly report our per-share book value, an easily calculable number, though one of limited use. The limitations do not arise from our holdings of marketable securities, which are carried on our books at their current prices. Rather the inadequacies of book value have to do with the companies we...

  • Page 96
    ... of dividends. It would be difficult to develop a peer group of companies similar to Berkshire. The Corporation owns subsidiaries engaged in a number of diverse business activities of which the most important is the property and casualty insurance business and, accordingly, management has used the...

  • Page 97
    ... owners. Price Range of Common Stock Berkshire's Class A and Class B common stock are listed for trading on the New York Stock Exchange, trading symbol: BRK.A and BRK.B. The following table sets forth the high and low sales prices per share, as reported on the New York Stock Exchange Composite List...

  • Page 98
    ...Willey Home Furnishings ...2,250 World Book (1) ...191 XTRA ...523 Non-insurance total ...227,758 Corporate Office ...21 257,113 (1) (2) (3) (4) (5) A Scott Fetzer Company A MidAmerican Energy Holdings Company A Fruit of the Loom, Inc. Company Approximately 130 manufacturing and service businesses...

  • Page 99
    ... and communications products. SUSAN L. DECKER, Entrepreneur-in-Residence at Harvard Business School WILLIAM H. GATES III, Chairman of the Board of Directors of Microsoft Corp, a software company. DAVID S. GOTTESMAN, Senior Managing Director of First Manhattan Company, an investment advisory...

  • Page 100
    BERKSHIRE HATHAWAY INC. Executive Offices - 3555 Farnam Street, Omaha, Nebraska 68131