Berkshire Hathaway – Company Information

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Berkshire-Hathaway
Company Berkshire Hathaway Inc.
Headquarters 3555 Farnam Street, Omaha, Nebraska 68131, USA
Chairman and CEO  Warren E. Buffett
Industry Conglomerate
Founder Oliver Chace
Founded 1839 (as Valley Falls Company) / 1955 (as Berkshire Hathaway)
Type Public
NYSE stock symbol Class A: BRK.A
Class B: BRK.B
Revenue $194.673 billion (2014)
Net income $19,872 million (2014)
Earnings per share $8.06 USD (2014)
Employees 316,000 (2014)
Website http://www.berkshirehathaway.com/
Contact number: (402)346-1400

Berkshire Hathaway Inc., based in Omaha, Nebraska, is a multinational holding company involved in a multitude of businesses. It is run by billionaire Chairman and CEO Warren Buffett, the world’s third richest person.

The Forbes Global 2000 places Berkshire Hathaway as the fifth biggest publicly-listed company worldwide. It employs more than 316,000 workers across the globe.

Its insurance subsidiaries make up an important part of the company’s total commercial activities and revenues. However, it manages literally hundreds of different businesses.

Among Berkshire Hathaway’s better known wholly owned companies are GEICO, Fruit of the Loom, Dairy Queen, Lubrizol, Helzberg Diamonds, NetJets, and FlightSafety International.

It also owns 50% of The H J Heinz Company, and has an undisclosed but considerable stake in Mars Inc. It is also a significant minority stakeholder in Wells Fargo, IBM, Coca-Cola and American Express.

Since 1965, the company’s average annual growth in book value has been 19.7% (to shareholders), which is much higher than the S&P500’s 9.8%. Berkshire Hathaway boasts huge amounts of capital and extremely low debt.

History

Berkshire Hathaway started off as a textile manufacturing firm founded by Oliver Chace (1769-1852) in 1839.

Oliver Chace set up several textile manufacturing companies in the early 19th century in New England.

The textile mill that eventually grew to become the business giant today was originally called the Valley Falls Company, located in Valley Falls, Rhode Island.

In 1929, the Valley Falls Company and the Berkshire Cotton Manufacturing Company merged and became Berkshire Fine Spinning Associates.

Berkshire Fine Spinning Associates and the Hathaway Manufacturing Company merged in 1955. The new entity, Berkshire Hathaway, was enormous, with more than 12,000 workers, 15 plants and revenue in excess of $120 million.

Within five years the company closed down seven of its plants and laid off a considerable number of workers. Analysts had written off the firm, and its stock price was very low.

Warren Buffett enters the scene

Warren Buffett,  the only son of Congressman Howard Buffett, started buying shares in Berkshire Hathaway, believing that the company’s intrinsic value was much higher than the price of its stocks at the time. He had noticed that its stock fell in value every time it closed down a mill.

 

Warren Buffett  1962

Warren Buffett was in his early 30s when he started becoming interested in Berkshire Hathaway.

Warren Buffett,  the only son of Congressman Howard Buffett, started buying shares in Berkshire Hathaway, believing that the company’s intrinsic value was much higher than the price of its stocks at the time. He had noticed that its stock fell in value every time it closed down a mill.

By 1963, a group of investors led by Mr. Buffett were the largest stakeholders in the firm, and he started taking a more active interest in the business. However, by 1964 he began to think that the textile business in the US was declining and the company’s financial situation was likely to get worse.

Jack Stanton, who had taken over running the company from his father Seabury Stanton, made a verbal offer of $11½ per share for Buffett’s stake. Buffett accepted the offer. However, when the written confirmation arrived, it quoted a lower figure of $11⅜. Mr. Buffett did not like being undercut, in fact, he later said the strategy made him angry.

Mr. Buffett responded to the lowered written offer not by selling, but by doing the opposite. He acquired more stock, took control of the business and got rid of Mr. Stanton. However, the move left him as the majority stockholder in a business that was in decline.

Berkshire Hathaway diversifies

While holding onto the company’s core business of textiles, Mr. Buffett expanded into insurance and other sectors.

In 1967, Berkshire Hathaway acquired two Nebraska companies, National Indemnity and National Fire and Marine Insurance. In the late 1970s it bought shares in GEICO (Government Employees Insurance Company), which today it wholly owns and forms a major part of its insurance operations.

By the end of 1985, all its textile interests had been either sold off or shut down.

Four years ago, Mr. Buffett said that buying Berkshire Hathaway was a huge mistake, which cost him a total of $200 billion (in compound investment returns) over the subsequent 45 years. Had he invested his money in the early 1960s directly into insurance companies he would have made much more money, he said.

Berkshire Hathaway Class A shares are worth more than $20,000 each today, making them the most expensive on the New York Stock Exchange.

Mr. Buffett says that when the US economy does well, so does Berkshire Hathaway, because most of its activities are US based.


Income statement data (in $ millions) 2014* 2013*
Revenues $194,673 $182,150
-Insurance and other $148,879 $138,492
-Railroad, Utilities and Energy $40,690 $34,757
-Finance and Financial Products $7,104 $8,901
Cost and expenses $166,568 $153,354
-Insurance and Other $130,075 $121,675
-Railroad, Utilities and Energy $31,756 $27,022
-Finance and Financial Results $4,737 $4,657
Earnings before income taxes $28,105 $28,796
Net earnings $20,170 $19,845
Comprehensive income $18,835 $36,416
Balance sheet data (in $ millions)
Total assets $526,186 $484,931
Total liabilities $283,159 $260,446
Total shareholders’ equity $243,027 $224,485
Common share data (in $)
Earnings per Common Share $8.06 $7.90
Cash flow data (in $ millions)
Net cash flows from operating activities $32,010 $27,704
Net cash flows from investing activities $(19,369) $(27,535)
Net cash flows from financing activities $2,731 $961
Cash and cash equivalents balance at beginning of year $48,186 $46,992
Cash and cash equivalents balance at end of year $63,269 $48,186

*Years Ended December 31

Source: “Berkshire Hathaway Inc. Form 10-K 2014”

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