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EspañolBERKSHIRE HATHAWAY
'Berkshire Hathaway' (, ) is a 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 phenomenal 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 originally founded as a textile manufacturing company in 1839 as the 'Valley Falls Company' in Valley Falls, Rhode Island by Oliver Chace, the progenitor of a well-known Yankee family. 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 Hathaway's other investments). In 1985, the last textile operations (Hathaway's historic core) were shut down.
One of Berkshire's best run subsidiaries is Oakriver Insurance Company, part of the Berkshire Hathaway Homestate companies. Specializing in California worker's compensation, Oakriver has pioneered the industry standard in underwriting, claims administration and client service relationships.
Berkshire facts
Berkshire's Class A shares sell for over $110,000 a share, 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
[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.
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.
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 [2] for other large companies in the United States. [3]
Environmental record
Researchers at the University of Massachusetts Amherst have identified Berkshire Hathaway as the 34th-largest corporate producer of air pollution in the United States, with roughly eight million pounds of toxic chemicals released annually into the air.[4] Major pollutants indicated by the study include formaldehyde, diisocyanates, nickel and cobalt compounds, and hydrogen fluoride.[5] The corporation has also been identified by the Environmental Protection Agency as a potentially responsible party in two Superfund toxic waste sites.[6]
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 articles: List of assets owned by Berkshire Hathaway
Insurance and finance subsidiaries
★ GEICO
★ General Re
★ Kansas Bankers Surety Company
★ National Indemnity Company
★ Wesco Financial Corporation
★ Applied Underwriters Inc.
★ Medical Protective
Other subsidiaries
★ Acme Brick Company
★ Borsheim's Fine Jewelry
★ Business Wire
★ Clayton Homes
★ Dairy Queen
★ FlightSafety International
★ Forest River
★ Fruit of the Loom
★ Helzberg Diamonds
★ ISCAR Metalworking
★ Jordan's Furniture
★ McLane Company
★ Mouser Electronics
★ Nebraska Furniture Mart
★ NetJets
★ The Pampered Chef
★ Russell Corporation
★ Richline Group
★ See's Candies
★ Shaw Industries
★ TTI, Inc.
★ World Book
★ Xtra Lease
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’s apparel businesses include manufacturers and distributors of a variety of clothing and footwear. Businesses engaged in the manufacture and distribution of clothing include Fruit of the Loom, Garan, Fechheimer Brothers and Russell Corporation. Berkshire’s footwear businesses include H.H. Brown Shoe Group, Acme Boots and Justin Brands.
★ 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.
★ Berkshire acquired Russell Corporation on August 2, 2006 for $600 million or $18.00 per share.
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
★ 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 manufacturs Ginsu Knives.
★ The Buffalo News publishes three editions on Saturday and Sunday and eight editions each weekday 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.
★ Berkshire currently holds 83.7% (80.5% on a fully-diluted basis) of the MidAmerican Energy Holdings Company. At the time of purchase, Berkshire's voting interest was limited to 10% of the company's shares, but this restriction ended when the Public Utility Holding Company Act of 1935 was repealed in 2005.
Common stock holdings
This includes outstanding stock as reported in the last SEC EDGAR filing (Form 13F), and the latest annual report.
★ American Express Co. (12.6%)
★ American Standard Companies
★ Anheuser-Busch Cos. (4.7%)
★ Burlington Northern Santa Fe Corporation (14.8%)
★ The Coca-Cola Company (8.6%)
★ Comcast
★ Comdisco
★ ConocoPhillips (1.1%)
★ Costco Wholesale
★ Diageo PLC
★ First Data Corporation
★ Gannett
★ General Electric
★ The Home Depot
★ H&R Block Inc. (sold out in 2007)
★ Ingersoll Rand
★ Iron Mountain
★ Johnson & Johnson (0.7%)
★ Kraft Foods (rumour?)
★ Lexmark International (sold out in 2006)
★ Lowes Companies
★ M&T Bank (6.1%)
★ Moody’s Corporation (17.2%)
★ Mueller Industries (sold out in 2006)
★ Nike
★ Norfolk Southern Corp.
★ Outback Steakhouse
★ PetroChina (1.3%)
★ Pier 1 Imports (sold out in 2007)
★ Posco (4.0%)
★ Procter & Gamble Co. (3.2%)
★ Sanofi-Aventis
★ Sealed Air
★ ServiceMaster
★ Shaw Communications
★ SunTrust Banks
★ Tesco (2.9%)
★ Tyco International
★ UnitedHealth Group
★ United Parcel Service
★ USG (19.0%)
★ U.S. Bancorp (1.8%)
★ Wal-Mart Stores Inc. (0.5%)
★ The Washington Post Company (18.0%)
★ Wells Fargo (6.5%)
★ Wesco Financial Corporation
★ White Mountains Insurance (16.0%)
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:
★ The Washington Post Company (18.1%)
★ Moody’s Corporation (16.2%)
★ American Express (12.1%)
★ Burlington Northern Santa Fe Corporation (14.8%)
★ The Coca-Cola Company (8.3%)
★ Wells Fargo (6.0%+)
External links
★ Berkshire Hathaway Official Website - Source for annual reports, which include Berkshire Hathaway Shareholder Letters by Warren Buffett.
★ Yahoo! - Berkshire Hathaway Inc. Company Profile
★ List of Berkshire Hathaway holdings as of the latest quarter
★ Chronicle of SEC Filings for Berkshire Hathaway
★ Berkshire Hathaway vs S&P 500 charts and table
References
1. Berkshire Hathaway A-class share price at finance.yahoo.com
2. http://www.forbes.com/2001/04/26/buffett.html
3. http://money.cnn.com/2007/05/05/news/newsmakers/buffett/index.htm?postversion=2007050517
4. Political Economy Research Institute Toxic 100 retrieved 15 Aug 2007
5. Toxics Release Inventory courtesy rtknet.org
6. EPA database courtesy Center for Public Integrity
★ Chairman's Letter of 1990 Appendix B discusses Buffett's hands-off management style.
★ As company priorities shift, fewer get AAA debt rating Matt Krantz
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