Jump to content

Berkshire Hathaway

From Wikipedia, the free encyclopedia

This is an old revision of this page, as edited by Rsegrest (talk | contribs) at 22:29, 3 January 2008 (→Other non-insurance businesses: Added reference, deleted redundant information). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

Berkshire Hathaway
Company typePublic (NYSE: BRKA, NYSE: BRKB)
IndustryProperty and casualty insurance, Diversified investments
Founded1839
HeadquartersOmaha, Nebraska
Key people
Warren Buffett, Chairman & CEO
Charlie Munger, Vice Chairman
ProductsConglomerate focused on insurance
RevenueIncrease US$98.539 billion (2006)
120,166,000,000 United States dollar (2023) Edit this on Wikidata
Increase US$11.015 billion (2006)
Total assets873,729,000,000 United States dollar (2020) Edit this on Wikidata
Number of employees
217,000 (mostly in subsidiaries)
Websitewww.berkshirehathaway.com

Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Berkshire Hathaway's core business is insurance, including property and casualty insurance, reinsurance and specialty nonstandard insurance. The Company averaged a 25%+ annual return to its shareholders for the last 25 years while employing large amounts of capital and minimal debt.

Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (a policyholder's money which it holds temporarily until claims are paid out) to finance his investments. In the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, but more recently he has turned to buying whole companies. Berkshire now owns a diverse range of businesses including candy production; retail, home furnishings, encyclopedias, vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; and manufacture, import and distribution of footwear.

History

Berkshire Hathaway was founded as a textile manufacturing company in 1839 as the Valley Falls Company in Valley Falls, Rhode Island by Oliver Chace. Chace had previously worked for Samuel Slater, the "father of the industrial revolution," and founded his first textile mill in 1806. In 1929 the Valley Falls Company merged with Berkshire Fine Spinning Associates, another textile company that was founded as the Berkshire Cotton Manufacturing Company in Adams, Massachusetts in 1889. The combined company was known as Berkshire Fine Spinning Associates.[1]

In 1955 Berkshire Spinning merged with the Hathaway Manufacturing Company which was founded in 1888 in New Bedford, Massachusetts by Horatio Hathaway as a cotton milling business. Hathaway was successful in its first decades, but it suffered during a general decline in the textile industry after World War I. At this time, Hathaway was run by Seabury Stanton, whose investment efforts were rewarded with renewed profitability after the Depression. After the merger, Berkshire Hathaway had 15 plants employing over 12,000 workers with over $120 million in revenue and was headquartered in New Bedford, Massachusetts. However, seven of those locations were closed by the end of the decade, accompanied by large layoffs.

In 1962, Warren Buffett began buying stock in Berkshire Hathaway. After some clashes with the Stanton family, he bought up enough shares to change the management and soon controlled the company.

Buffett initially maintained Berkshire's core business of textile milling, but by 1967, he was expanding into the insurance industry and other investments. Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for Berkshire Hathaway's other investments). In 1985, the last textile operations (Hathaway's historic core) were shut down.

Berkshire facts

Berkshire's Class A shares sell for over $150,000 as of December 7, 2007, making them the highest-priced shares on the New York Stock Exchange, in part because they have never had a stock split. Shares closed over $100,000 for the first time October 23, 2006. As of November 30 2007, Berkshire's Class A shares closed at $140,100.00 [1]

Berkshire's CEO, Warren Buffett, is respected for his investment prowess and his deep understanding of a wide spectrum of businesses. His annual chairman letters are read and quoted widely. Barron's Magazine named Berkshire the most respected company in the world in 2007 based on a survey of American money managers.[2]

As of 2005, Buffett owns 38% of Berkshire Hathaway. Berkshire's Vice-Chairman Charlie Munger also holds a stake big enough to make him a billionaire, and early investments in Berkshire by David Gottesman and Franklin Otis Booth resulted in their becoming billionaires as well. Bill Gates' Cascade Investments LLC is the second largest shareholder of Berkshire and owns more than 5% of class B shares.

Berkshire Hathaway is notable in that it has never split its shares, which not only contributed to their high per-share price but also significantly reduced the liquidity of the stock. But despite its size, it is not included in broad stock market indexes such as the S&P 500. However, Berkshire Hathaway has created a Class B stock, with an ownership value of 1/30th of that of the original shares (now Class A) and 1/200th of the per-share voting rights. Holders of Class A stock are allowed to convert their stock to Class B, though not vice versa.

Buffett was reluctant to create the Class B shares, but did so to thwart the creation of unit trusts that would have marketed themselves as Berkshire look-alikes. As Buffett said in his 1995 shareholder letter:

"The unit trusts that have recently surfaced fly in the face of these goals. They would be sold by brokers working for big commissions, would impose other burdensome costs on their shareholders, and would be marketed en masse to unsophisticated buyers, apt to be seduced by our past record and beguiled by the publicity Berkshire and I have received in recent years. The sure outcome: a multitude of investors destined to be disappointed."

Berkshire's annual shareholders' meetings, taking place in the Qwest Center in Omaha, Nebraska, are routinely visited by 20,000 people[2]. The 2007 meeting had an attendance of approximately 27,000. The meetings, nicknamed "Woodstock for Capitalists", are considered Omaha's largest annual event along with the baseball College World Series[3]. Known for their humor and light-heartedness, the meetings typically start with a movie made for Berkshire shareholders. The 2004 movie featured Arnold Schwarzenegger in the role of 'The Warrenator' who travels through time to stop Buffett and Munger's attempt to save the world from a "mega" corporation formed by Microsoft-Starbucks-Wal-Mart. Schwarzenegger is later shown arguing in a gym with Buffett regarding Proposition 13.[4] The 2006 movie depicted actresses Jamie Lee Curtis and Nicollette Sheridan lusting after Munger.[5] The meeting is also an opportunity for investors to ask Mr. Buffett questions, which is scheduled to last six hours.

The salary for the CEO is US$100,000 per year with no stock options, which is among the lowest CEO salary [3] for other large companies in the United States. [4]

Corporate governance

Current members of the board of directors of Berkshire Hathaway are: Howard Graham Buffett, Warren Buffett, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Donald Keough, Charlie Munger, Thomas S. Murphy, Ronald Olson, and Walter Scott Jr.

Financials

  • Cash and cash equivalents at December 31 2006: USD 43.743 billion
  • Equity investments at December 31 2006: USD 61.533 billion
  • Total shareholders’ equity at December 31 2006: USD 108.419 billion
  • Revenue for 2006: USD 98.539 billion
  • Net earnings for 2006: USD 11.015 billion
  • Income taxes for 2006: USD 5.505 billion

Source: Berkshire Hathaway 2006 Annual Report

Holdings

Main article: List of assets owned by Berkshire Hathaway

Insurance and finance subsidiaries

Other subsidiaries

Berkshire Hathaway businesses

Source: SEC filings

Insurance and reinsurance businesses

Insurance and reinsurance business activities are conducted through more than 50 domestic and foreign-based insurance companies. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks primarily in the United States. In addition, as a result of the General Re acquisition in December 1998, Berkshire’s insurance businesses also include life, accident and health reinsurers, as well as internationally-based property and casualty reinsurers.

Berkshire’s insurance companies maintain capital strength at exceptionally high levels. This strength differentiates Berkshire’s insurance companies from their competitors. Collectively, the aggregate statutory surplus of Berkshire’s U.S. based insurers was approximately $48 billion at December 31 2004. All of Berkshire’s major insurance subsidiaries are rated AAA by Standard & Poor’s Corporation, the highest Financial Strength Rating assigned by Standard & Poor’s, and are rated A++ (superior) by A. M. Best with respect to their financial condition and operating performance. This Triple-A status is the result of Buffett's astuteness in the management of capital, people and business.

  • GEICO — Berkshire acquired GEICO in January 1996. GEICO is headquartered in Chevy Chase, Maryland and its principal insurance subsidiaries include: Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, and GEICO Casualty Company. Over the past five years, these companies have offered primarily private passenger automobile insurance to individuals in 49 states and the District of Columbia. The subsidiaries market their policies primarily through direct response methods, in which applications for insurance are submitted directly to the companies by telephone, through the mail, or via the Internet.
  • General Re — Berkshire acquired General Re in December 1998. General Re held a 91% ownership interest in Cologne Re as of December 31 2004. General Re subsidiaries currently conduct global reinsurance business in approximately 72 cities and provide reinsurance coverage worldwide. General Re operates the following reinsurance businesses: North American property/casualty, international property/casualty, which principally consists of Cologne Re and the Faraday operations, and life/health reinsurance. General Re’s reinsurance operations are primarily based in Stamford, Connecticut and Cologne, Germany. General Re is one of the largest reinsurers in the world based on net premiums written and capital.

Non-insurance businesses

Apparel

  • Berkshire acquired Fruit of the Loom on April 29 2002 for $835 million in cash. Fruit of the Loom, headquartered in Bowling Green, Kentucky, is a vertically integrated manufacturer of basic apparel.

Building products

  • In August 2000, Berkshire entered the building products business with the acquisition of Acme Building Brands. Acme, headquartered in Fort Worth, Texas, manufactures and distributes clay bricks (Acme Brick), concrete block (Featherlite) and cut limestone (Texas Quarries).
  • Berkshire acquired Benjamin Moore & Co. in December of 2000. Benjamin Moore, headquartered in Montvale, New Jersey, is a formulator, manufacturer and retailer of primarily architectural coatings, available principally in the United States and Canada.
  • Berkshire acquired Johns Manville in February of 2001. JM has been serving the building products industry since 1885 and is a manufacturer of fiber glass wool insulation products for walls, attics and floors in homes and commercial buildings, as well as pipe, duct and equipment insulation products.
  • Berkshire acquired a 90% equity interest in MiTek Inc. in July 2001. MiTek is headquartered in Chesterfield, Missouri and makes engineered connector products, engineering software and services, and manufacturing machinery for the truss fabrication segment of the building components industry.
  • Berkshire acquired Shaw Industries, Inc. in 2001. Shaw, headquartered in Dalton, Georgia, is the world’s second largest carpet manufacturer based on both revenue and volume of production. Shaw designs and manufactures over 3,000 styles of tufted and woven carpet and laminate flooring for residential and commercial use under about 30 brand and trade names and under certain private labels.
  • On August 7, 2003, Berkshire acquired Clayton Homes, Inc. Clayton, headquartered near Knoxville, Tennessee, is a vertically integrated manufactured housing company. At year-end 2004, Clayton operated 32 manufacturing plants in 12 states. Clayton’s homes are marketed in 48 states through a network of 1,540 retailers, 391 of which are company-owned sales centers.

Flight services

  • In 1996, Berkshire acquired FlightSafety International Inc. FSI’s corporate headquarters is located at LaGuardia Airport in Flushing, New York. FSI engages primarily in the business of providing high technology training to operators of aircraft and ships. FlightSafety is the world's leading provider of professional aviation training services.
  • Berkshire acquired NetJets Inc. in 1998. NJ is the world’s leading provider of fractional ownership programs for general aviation aircraft. In 1986, NJ created the fractional ownership of aircraft concept and introduced its NetJets® program in the United States with one aircraft type. In 2004, the NetJets® program operated 15 aircraft types. In late 1996, NJ expanded its fractional ownership programs to Europe via a joint venture arrangement which is now 100% owned by NJ. The fractional ownership of aircraft concept permits customers to acquire a specific percentage of a certain aircraft type and allows them to utilize the aircraft for a specified number of flight hours per annum.

Retail businesses

  • The home furnishings businesses are the Nebraska Furniture Mart, R.C. Willey Home Furnishings, Star Furniture Company, and Jordan’s Furniture, Inc.
  • CORT Business Services Corporation was acquired in 2000 by an 80.1% owned subsidiary of Berkshire and is the leading national provider of rental furniture, accessories and related services in the “rent-to-rent” segment of the furniture rental industry.

Other non-insurance businesses

  • Marmon Holdings Inc on December 25, 2007. Privately held conglomerate owned by the Pritzker family for over fifty years. Owns and operates an assortment of manufacturing companies that produce railroad tank cars, plumbing pipes, metal fasteners, and wiring and water treatment products used in residential construction.[5]
  • Berkshire acquired McLane Company, Inc. in May 2003 from Wal-Mart Stores, Inc. McLane provides wholesale distribution and logistics services in all 50 states and internationally in Brazil to customers that include discount retailers, convenience stores, quick service restaurants, drug stores and movie theatre complexes.
  • Scott Fetzer Companies — The Scott Fetzer Companies are a diversified group of 21 businesses that manufacture and distribute a wide variety of products for residential, industrial and institutional use. The two most significant of these businesses are Kirby home cleaning systems and Campbell Hausfeld products. Scott Fetzer also manufactures Ginsu Knives.
  • The Buffalo News publishes one edition daily from its headquarters in Buffalo, New York.
  • Berkshire acquired XTRA in September 2001. XTRA, headquartered in St. Louis, Missouri, is a leading transportation equipment lessor. XTRA manages a diverse fleet of approximately 105,000 units, constituting a net investment of approximately $1 billion as of December 31 2004. The fleet includes over-the-road and storage trailers, chassis, intermodal piggyback trailers and domestic containers.
  • See's Candies produces boxed chocolates and other confectionery products in two large kitchens in California. See’s revenues are highly seasonal with approximately 50% of total annual revenues being earned in the months of November and December.
  • International Dairy Queen services a system of approximately 6,000 stores operating under the names Dairy Queen, Orange Julius and Karmelkorn that offer various dairy desserts, beverages, prepared foods, blended fruit drinks, popcorn and other snack foods.
  • In 2002, Berkshire acquired Albecca Inc. Albecca is headquartered in Norcross, Georgia, and primarily does business under the Larson-Juhl name. Albecca designs, manufactures and distributes custom framing products, including wood and metal moulding, matboard, foamboard, glass, equipment and other framing supplies.
  • Berkshire acquired CTB International Corp. in 2002. CTB, headquartered in Milford, Indiana, is a designer, manufacturer and marketer of systems used in the grain industry and in the production of poultry, hogs, and eggs. Products are produced in the United States and Europe and are sold primarily through a global network of independent dealers and distributors, with peak sales occurring in the second and third quarters.
  • In 2002 Berkshire acquired The Pampered Chef, LTD, the largest direct seller of kitchen tools in the United States. Products are researched, designed and tested by TPC, and manufactured by third party suppliers. From its Addison, Illinois headquarters, TPC utilizes a network of more than 65,000 independent sales representatives to sell its products through home-based party demonstrations, principally in the United States.

Common stock holdings

This includes outstanding stock as reported in the last SEC EDGAR filing (Form 13F), and the latest annual report.

Companies with a "beneficial owner" relationship

This includes some of the companies where a Berkshire Hathaway stake is 5% or more of the outstanding stock, as reported in the last proxy statement SEC filing, and the latest annual report.

In order of percentage stake:

References

  1. ^ Berkshire Hathaway A-class share price at finance.yahoo.com
  2. ^ Associated Press. Warren Buffett's Berkshire Hathaway named most respected company. September 16 2007.
  3. ^ http://www.forbes.com/2001/04/26/buffett.html
  4. ^ http://money.cnn.com/2007/05/05/news/newsmakers/buffett/index.htm?postversion=2007050517
  5. ^ http://www.berkshirehathaway.com/news/dec2507.pdf
  • Chairman's Letter of 1990 Appendix B discusses Buffett's hands-off management style.^
  • Krantz, Matt (15 March 2005). "As company priorities shift, fewer get AAA debt rating". USA Today. {{cite news}}: Check date values in: |date= (help)
Retrieved from "https://en.wikipedia.org/w/index.php?title=Berkshire_Hathaway&oldid=181973025"