Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK.B) is a conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years, while employing large amounts of capital, and minimal debt.[1] Berkshire Hathaway stock produced a total return of 76% from 2000–2010 versus a negative 11.3% return for the S&P 500.[2]
Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (paid premiums which are not held in reserves for reported claims and may be invested) 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 railroads, confectionery, retail, home furnishings, encyclopedias, manufacture of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.
Berkshire Hathaway Inc. (Berkshire) is a holding company owning subsidiaries engaged in a number of diverse business activities. Berkshire’s Insurance businesses are conducted on both a primary basis and a reinsurance basis. The Company also owns and operates number of other businesses engaged in a variety of activities. On February 12, 2010, Berkshire completed its acquisition of Burlington Northern Santa Fe, LLC (BNSF), formally Burlington Northern Santa Fe Corporation. At the end of 2010, The Berkshire Hathaway Reinsurance Group (BHRG) acquired the life reinsurance business of Sun Life Assurance Company of Canada. On April 23, 2010, McLane Company, Inc. (McLane) acquired Kahn Ventures, parent company of Empire Distributors and Empire Distributors of North Carolina.
Insurance and Reinsurance Businesses
Berkshire’s insurance and reinsurance business activities are conducted through approximately 70 domestic and foreign-based insurance entities. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks worldwide and also reinsure life, accident and health risks worldwide. Berkshire’s insurance underwriting operations consists of sub-groups: GEICO and its subsidiaries, General Re Corporation (General Re) and its subsidiaries, BHRG and Berkshire Hathaway Primary Group.
GEICO’s principal insurance subsidiaries include Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company and GEICO Casualty Company. These companies primarily offer private passenger automobile insurance to individuals in all 50 states and the District of Columbia. In addition, GEICO insures motorcycles, all-terrain vehicles, recreational vehicles and small commercial fleets and acts as an agent for other insurers who offer homeowners, boat and life insurance to individuals. GEICO markets its policies primarily through direct response methods in which applications for insurance are submitted directly to the companies, through the Internet or by telephone. General Re is the holding company of General Reinsurance Corporation (GRC) and its subsidiaries and affiliates. General Re subsidiaries conduct business activities in 56 cities and provide insurance and reinsurance coverages worldwide. General Re provides property/casualty insurance and reinsurance, life/health reinsurance and other reinsurance intermediary and risk management, underwriting management and investment management services.
Property/Casualty Reinsurance
General Re’s property/casualty reinsurance business in North America is conducted through GRC. Property/casualty operations are also conducted through 16 branch offices in the United States and Canada. Reinsurance activities are marketed directly to clients. General Re’s property/casualty business in North America also includes a few smaller specialty insurers. These specialty insurers underwrite primarily liability and workers’ compensation coverages on an excess and surplus basis and excess insurance for self-insured programs. General Re’s international property/casualty reinsurance business operations are conducted through internationally-based subsidiaries on a direct basis, through General Reinsurance AG, as well as other General Re subsidiaries in 26 countries, and through brokers (primarily through Faraday, which owns the managing agent of Syndicate 435 at Lloyd’s of London).
Life/Health Reinsurance
General Re’s North American and international life, health, long-term care and disability reinsurance coverages are written on an individual and group basis. The life/health business is marketed on a direct basis. Business activities are conducted through a group of subsidiary companies, led by National Indemnity Company (NICO) and Columbia Insurance Company (Columbia). BHRG provides principally excess and quota-share reinsurance to other property and casualty insurers and reinsurers. BHRG’s underwriting activities also include life reinsurance and life annuity business written through Berkshire Hathaway Life Insurance Company of Nebraska and financial guaranty insurance written through Berkshire Hathaway Assurance Corporation. BHRG writes catastrophe excess-of-loss treaty reinsurance contracts. BHRG also writes individual policies for primarily large or otherwise unusual discrete risks on both an excess direct and facultative reinsurance basis. BHRG underwrites non-catastrophe insurance and reinsurance coverages, which include multi-line business.
The Berkshire Hathaway Primary Group is a collection of primary insurance operations that provide a range of insurance coverages to insureds located principally in the United States. NICO and some affiliates underwrite motor vehicle and general liability insurance to commercial enterprises on both an admitted and excess and surplus basis. U.S. Investment Corporation (USIC), through its three subsidiaries led by United States Liability Insurance Company, is a specialty insurer that underwrites commercial, professional and personal lines of insurance on an admitted and excess and surplus basis. USIC companies underwrite and market approximately 95 specialty property and casualty insurance products.
Medical Protective Corporation (MedPro), through the Medical Protective Company, MedPro provides medical professional liability coverage and risk solutions to physicians, dentists, other healthcare providers and healthcare facilities. Other insurance operations include Berkshire Hathaway Homestate Companies. These companies market workers’ compensation, commercial auto and various other commercial coverages. Also included is Central States Indemnity Company, which provides credit and income protection insurance and related services marketed primarily to credit and debit card holders nationwide.
Railroad Business
The Company operates its railroad business through BNSF. BNSF, through BNSF Railway Company, operates railroad systems in North America. In serving the Midwest, Pacific Northwest, Western, Southwestern and Southeastern regions and ports of the country, BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Over half of the freight revenues of BNSF are covered by contractual agreements of varying durations. BNSF’s primary routes, including trackage rights, allow it to access cities and ports in the western and southern United States, as well as Canadian and Mexican traffic. In addition to cities and ports, BNSF serves many smaller markets by working closely with approximately 200 shortline partners. BNSF has also entered into marketing agreements with other rail carriers, expanding the marketing reach for each railroad and their customers.
Utilities and Energy Businesses
As of December 31, 2010, Berkshire owned an 89.8% interest in MidAmerican Energy Holdings Company (MidAmerican), which is an international energy company. MidAmerican’s businesses are managed as separate operating units. MidAmerican’s domestic regulated energy interests consists of two regulated utility companies serving more than three million retail customers and two interstate natural gas pipeline companies with approximately 17,000 miles of pipeline and a design capacity of approximately 7.4 billion cubic feet of natural gas per day. Its United Kingdom electricity distribution subsidiaries serve about 3.8 million electricity end-users. In addition, MidAmerican’s interests include a diversified portfolio of domestic independent power projects, a hydroelectric facility in the Philippines and the residential real estate brokerage firm in the United States.
PacifiCorp is a regulated electric utility company serving regulated retail electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. In addition to retail sales, PacifiCorp sells electricity to other utilities, municipalities and energy marketing companies on a wholesale basis. As a vertically integrated electric utility, PacifiCorp owns approximately 10,600 net megawatts of generation capacity.
MidAmerican Energy Company (MEC) is a regulated electric and natural gas utility company serving regulated retail electric and natural gas customers primarily in Iowa and also in portions of Illinois, South Dakota and Nebraska. MEC has a diverse customer base consisting of residential, agricultural and a variety of commercial and industrial customer groups. In addition to retail sales and natural gas transportation, MEC sells regulated electricity to markets operated by regional transmission organizations and regulated electricity and natural gas to other utilities, municipalities and energy marketing companies on a wholesale basis, and sells non-regulated electricity and natural gas services in deregulated markets.
Northern Natural Gas Company (Northern Natural) owns natural gas pipeline systems in the United States reaching from southern Texas to Michigan’s Upper Peninsula. Northern Natural’s pipeline system consists of approximately 15,000 miles of natural gas pipelines. Northern Natural has access to supplies from every mid-continent basin and provides transportation services to utilities and numerous other customers. Northern Natural also operates three underground natural gas storage facilities and two liquefied natural gas storage peaking units. Kern River Gas Transmission Company (Kern River) owns an interstate natural gas pipeline system that extends from the supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River’s pipeline system consists of approximately 1,700 miles of natural gas pipelines.
MidAmerican, through Northern Electric Distribution Limited (Northern Electric) and Yorkshire Electricity Distribution plc (Yorkshire Electricity), owns a substantial United Kingdom electricity distribution network that delivers electricity to customers in northeast England in an area covering approximately 10,000 square miles. MidAmerican also owns HomeServices of America, Inc. (HomeServices), which is a service residential real estate brokerage firm in the United States. HomeServices also offers integrated real estate services, including mortgage originations through a joint venture and closing services, property and casualty insurance, home warranties, relocation services and other home-related services. It operates under 22 residential real estate brand names with over 15,000 sales associates and nearly 300 broker offices in 20 states.
Manufacturing, Service and Retailing Businesses
Berkshire’s operates its diverse manufacturing, service and retailing businesses, through Marmon Holdings, Inc. (Marmon) and McLane. Marmon consists of approximately 130 manufacturing and service businesses that operate within eleven diverse, stand-alone business sectors. These sectors include Building Wire, Construction Services, Distribution Services, Engineered Wire and Cable, Flow Products, Food Service Equipment, Highway Technologies, Industrial Products, Retail Store Fixtures, Transportation Services and Engineered Products and Water Treatment.
Building Wire provides copper electrical building wire for residential, commercial and industrial construction. Construction Services provides the leasing and operation of mobile cranes primarily to the energy, mining and petrochemical markets. Distribution Services supplies specialty metal pipe and tubing, bar and sheet products to markets including construction, industrial, aerospace and many others. Engineered Wire and Cable provides electrical and electronic wire and cable for energy related markets and other industries. Flow Products produce copper, aluminum and brass products and materials for the plumbing, heating, air conditioning, refrigeration, construction, automotive and industrial markets. Food Service Equipment supplies commercial food preparation equipment for restaurants and shopping carts for retail stores.
Highway Technologies primarily serves the heavy-duty highway transportation industry with trailers, fifth wheel coupling devices and undercarriage products, such as brake parts and suspension systems, and also serving the light vehicle aftermarkets with clutches and related products. Industrial Products consists of metal fasteners for the building, furniture, cabinetry, industrial and other markets, safety products, such as gloves for industrial markets, portable lighting equipment for mining and safety markets, and overhead electrification equipment for mass transit systems, custom-machined brass, aluminum and copper forgings for the construction, valve and other industries. Retail Store Fixtures provides shelving and other merchandising displays and related services for retail stores worldwide.
Transportation Services and Engineered Products include manufacturing, leasing and maintenance of railroad tank cars, leasing of intermodal tank containers, in-plant rail services, manufacturing of bi-modal railcar movers, wheel, axle and gear sets for light rail transit and gear products for locomotives, manufacturing of steel tank heads, and services, equipment and technology for processing and distributing sulfur. Water Treatment, equipment include residential water softening, purification and refrigeration filtration systems, treatment systems for industrial markets, including power generation, oil and gas, chemical, and pulp and paper, gear drives for irrigation systems and cooling towers, and air-cooled heat exchangers. Marmon operates more than 250 manufacturing, distribution and service facilities that are primarily located in North America, Europe and China.
McLane provides wholesale distribution and logistics services in all 50 states and internationally in Brazil to customers that include discount retailers, convenience stores, wholesale clubs, quick service restaurants, drug stores and military bases. Operations are divided into five business units: grocery distribution, foodservice distribution, beverage distribution, international logistics and software development. During 2010, the grocery and foodservice units consisted 98% of the total revenues of the Company. McLane’s grocery operations provide products to more than 36,000 retail locations nationwide, including Wal-Mart. McLane’s grocery distribution unit operates 22 facilities in 18 states. McLane’s foodservice distribution unit, based in Carrollton, Texas, focuses on serving the quick service restaurant industry. Operations are conducted through 18 facilities in 16 states. The foodservice distribution unit services more than 18,000 chain restaurants nationwide. Its other manufacturing, service and retailing businesses include apparel manufacturing, building products manufacturing, managed home furnishings and jewelry operations.
Finance and Financial Products
Clayton Homes, Inc. (Clayton) is a vertically integrated manufactured housing company. As of December 31, 2010, Clayton operated 34 manufacturing plants in 12 states. Clayton’s homes are marketed in 48 states through a network of 1,462 retailers, including 354 Company-owned home centers. Financing is offered through its finance subsidiaries to purchasers of Clayton’s manufactured homes, as well as those purchasing homes from selected independent retailers. Retail sales are facilitated by Clayton’s offering of various finance and insurance programs. Finance programs include home note and mortgage originations supporting Company-owned home centers and select independent retailers. Clayton also provides inventory financing to certain independent retailers and services housing contracts and mortgages that were not purchased or originated.
XTRA Corporation (XTRA) is a transportation equipment lessor operating under the XTRA Lease brand name. XTRA manages a diverse fleet of approximately 88,000 units located at 66 facilities throughout the United States and four facilities in Canada. The fleet includes over-the-road and storage trailers, chassis, temperature controlled vans and flatbed trailers. XTRA is a lessor of over-the-road trailers in North America.
The Company competes with Union Pacific Railroad Company.
In the early 1990s Berkshire continued its trend of buying complementary companies and large blocks of stock: the acquisition of H.H. Brown Shoe Company; 31.2 million shares of Guinness PLC; and 82 percent of Central States Indemnity in 1991; Lowell Shoe Company for H.H. Brown, and 14.1 percent of General Dynamics Corp. in 1992. In a related though somewhat surprising move in 1991, Buffett was appointed interim chairman of Salomon Inc. (in which the company still owned stock). After serving 10 months and effecting a turnaround, Buffett was happily back at the helm of Berkshire Hathaway full-time, although both Buffett and Munger joined the board of the ailing USAir in 1992.
The following year, H.H. Brown added Dexter Shoe to its holdings, Buffett sold 10 million shares of Capital Cities/ABC, and net earnings posted a spectacular surge from 1992's $407.3 million (down from 1991's $439.9 million) to $688.1 million. In 1994, Berkshire added major stock holdings of two companies to its portfolio (4.9 percent of Gannett Co., Inc. and 8.3 percent of PNC Bank Corp.) and Buffett admitted to two expensive gaffes: a $222.5 million faux pas from unloading 10 million Cap Cities shares for $64 each when prices topped $85, and taking a $268.5 million writedown for its questionable USAir stock (both Buffett and Munger stepped down from the airline's board after a year). Though Buffett was perhaps too optimistic with USAir and a bit pessimistic about Cap Cities, neither setback made more than a tiny ripple in Berkshire's bottom line.
During the mid-1990s Berkshire Hathaway imperceptibly changed course from a strategic long-term investment conglomerate to one still very much interested in investing but leaning more heavily towards acquiring and actually operating these investment opportunities. As early as 1993 in its annual solicitation for attractive acquisitions, Berkshire had raised the stakes by including the statement "We would be likely to make an acquisition in the $2-3 billion range." By 1995, after the company acquired Helzberg's Diamond Shops and R.C. Willey Home Furnishings through stock swaps, the stakes had risen further--up to the $3-5 billion range. Meanwhile, as Berkshire's "permanent four" (Capital Cities/ABC, Coca-Cola, GEICO, and Washington Post) lost a hint of their luster in 1995, the retailing segment more than offset this slip with Borsheim's, Kirby, Nebraska Furniture Mart, and Scott Fetzer (which posted exceptional numbers for the entire decade) exceeding expectations.
Late in 1995 Berkshire began the process of taking GEICO, the seventh largest auto insurer in the nation, private. Buffett's long history (45 years) with GEICO came full circle--after years of mentoring from Ben Graham and Lorimer Davidson, 43 years after selling his original 350 shares, and 15 years since Berkshire paid $45.7 million for a 33.3 percent stake of GEICO (which grew to 50 percent in the ensuing years)--the company spent $2.3 billion to make GEICO its own. With the GEICO deal completed in January 1996, Berkshire Hathaway's insurance segment mushroomed in both float and potential earnings, becoming more stalwart as the company's core segment. Number-wise, Berkshire finished 1995 with $29.9 billion in assets, a good-sized leap from the previous year's $21.3 billion, while Berkshire stock traded at $36,000 per share, over three-and-a-half times higher than 1992's mere $10,000 a share.
News in 1996 was the planned issuance of $100 million in new Class "B" stock (the company's original shares were now designated Class "A" stock), valued at one-thirtieth the price of its predecessor. The recapitalization was done in part, Buffett explained in the 1995 annual report, to discourage brokers from marketing unit trusts and seducing clients with the Berkshire name. Since most small investors found Berkshire's per share cost prohibitive, Buffett was attempting to make the company's stock available at a lower price without going through "expense-laden unit trusts" pretending to be Berkshire "clones." Yet what folks needed to remember, according to Buffett, was not book value, but intrinsic value. By measuring intrinsic value, an economic indicator rather than an accounting concept, investors had a better handle on worth and whether or not something was a good long-term risk. In these terms, Buffett hoped to double Berkshire's per-share intrinsic value (of Class A stock) every five years, which was still a rather daunting task. Yet if anyone could do it, it was Warren Buffett, Charlie Munger, and Berkshire Hathaway.
As no one foretold the riches Berkshire had gained in just the last 10 years, few would hazard a guess of where the company would be by the year 2000. In this case, however, saying the sky was the limit would not be portentous. As for Chairman Buffett's future, when asked by a Harvard Business School student when he planned to retire, Buffett quipped "About five to ten years after I die." Such was the singular spirit and humor of the man--perhaps the world's most celebrated and successful businessman and investor--running Berkshire Hathaway.
Principal Subsidiaries: BHR; Berskhire Hathaway Credit Corporation; Berkshire Hathaway Life Insurance Co.; Blue Chip Stamps; Borsheim's; H.H. Brown Shoe Co.; Buffalo News; Campbell Haufeld; Carefree; Dexter Shoe Companies; Fechheimer Bros. Co.; France; Halex; Helzberg's Diamond Shops; K & W Products; Meriem; Mrs. B's Clearance and Factory Outlet Warehouse; Nebraska Furniture Mart; Northland; Powerwinch; Precision Steel Products; Quikut; ScottCare; Scott Fetzer Company; Scott Fetzer Financial Group; Scot Labs; Stahl; See's Candies; Wayne; Wesco Financial; Western Enterprises; Western Plastics; R.C. Willey Home Furnishings; and World Book; Columbia Insurance Co.; Continental Divide Insurance Co.; Cornhusker Casualty Co.; Cypress Insurance Co.; Kansas Fire & Casualty Co.; National Indemnity Co.; National Indemnity Co. of Florida; National Indemnity Co. of Minnesota; National Fire & Marine Insurance Co.; National Liability & Fire Insurance Co.; Redwood Fire & Casualty Co.; Wesco Financial Corp.
OVERALL
Beta: 0.46
Market Cap (Mil.): $205,803.59
Shares Outstanding (Mil.): 1.65
Annual Dividend: --
Yield (%): --
FINANCIALS
BRKa Industry Sector
P/E (TTM): 15.72 2.85 26.26
EPS (TTM): 52.83 -- --
ROI: -- 0.09 4.64
ROE: 8.99 1.76 9.12
Statistics:
Public Company
Incorporated: 1889 as Berkshire Cotton Manufacturing Company
Employees: 35,000 (1996)
Assets: $35.5 billion (est. 1996)
Stock Exchanges: New York
SICs: 2711 Newspaper Publishing & Printing; 2731 Book Publishing & Printing; 6331 Fire, Marine & Casualty Insurance; 6719 Holding Companies, Not Elsewhere Classified
Name Age Since Current Position
Buffett, Warren 80 1970 Chairman of the Board, Chief Executive Officer
Munger, Charles 87 1978 Vice Chairman of the Board
Hamburg, Marc 61 2008 Senior Vice President
Olson, Ronald 70 1997 Director
Buffett, Howard 56 1993 Director
Scott, Walter 79 1988 Independent Director
Keough, Donald 84 2003 Independent Director
Murphy, Thomas 85 2003 Independent Director
Gottesman, David 84 2003 Independent Director
Guyman, Charlotte 54 2003 Independent Director
Gates, William 55 2005 Independent Director
Decker, Susan 48 2007 Independent Director
Burke, Stephen 52 2009 Independent Director
Address:
1440 Kiewit Plaza
Omaha, Nebraska 68131
U.S.A.
Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (paid premiums which are not held in reserves for reported claims and may be invested) 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 railroads, confectionery, retail, home furnishings, encyclopedias, manufacture of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.
Berkshire Hathaway Inc. (Berkshire) is a holding company owning subsidiaries engaged in a number of diverse business activities. Berkshire’s Insurance businesses are conducted on both a primary basis and a reinsurance basis. The Company also owns and operates number of other businesses engaged in a variety of activities. On February 12, 2010, Berkshire completed its acquisition of Burlington Northern Santa Fe, LLC (BNSF), formally Burlington Northern Santa Fe Corporation. At the end of 2010, The Berkshire Hathaway Reinsurance Group (BHRG) acquired the life reinsurance business of Sun Life Assurance Company of Canada. On April 23, 2010, McLane Company, Inc. (McLane) acquired Kahn Ventures, parent company of Empire Distributors and Empire Distributors of North Carolina.
Insurance and Reinsurance Businesses
Berkshire’s insurance and reinsurance business activities are conducted through approximately 70 domestic and foreign-based insurance entities. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks worldwide and also reinsure life, accident and health risks worldwide. Berkshire’s insurance underwriting operations consists of sub-groups: GEICO and its subsidiaries, General Re Corporation (General Re) and its subsidiaries, BHRG and Berkshire Hathaway Primary Group.
GEICO’s principal insurance subsidiaries include Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company and GEICO Casualty Company. These companies primarily offer private passenger automobile insurance to individuals in all 50 states and the District of Columbia. In addition, GEICO insures motorcycles, all-terrain vehicles, recreational vehicles and small commercial fleets and acts as an agent for other insurers who offer homeowners, boat and life insurance to individuals. GEICO markets its policies primarily through direct response methods in which applications for insurance are submitted directly to the companies, through the Internet or by telephone. General Re is the holding company of General Reinsurance Corporation (GRC) and its subsidiaries and affiliates. General Re subsidiaries conduct business activities in 56 cities and provide insurance and reinsurance coverages worldwide. General Re provides property/casualty insurance and reinsurance, life/health reinsurance and other reinsurance intermediary and risk management, underwriting management and investment management services.
Property/Casualty Reinsurance
General Re’s property/casualty reinsurance business in North America is conducted through GRC. Property/casualty operations are also conducted through 16 branch offices in the United States and Canada. Reinsurance activities are marketed directly to clients. General Re’s property/casualty business in North America also includes a few smaller specialty insurers. These specialty insurers underwrite primarily liability and workers’ compensation coverages on an excess and surplus basis and excess insurance for self-insured programs. General Re’s international property/casualty reinsurance business operations are conducted through internationally-based subsidiaries on a direct basis, through General Reinsurance AG, as well as other General Re subsidiaries in 26 countries, and through brokers (primarily through Faraday, which owns the managing agent of Syndicate 435 at Lloyd’s of London).
Life/Health Reinsurance
General Re’s North American and international life, health, long-term care and disability reinsurance coverages are written on an individual and group basis. The life/health business is marketed on a direct basis. Business activities are conducted through a group of subsidiary companies, led by National Indemnity Company (NICO) and Columbia Insurance Company (Columbia). BHRG provides principally excess and quota-share reinsurance to other property and casualty insurers and reinsurers. BHRG’s underwriting activities also include life reinsurance and life annuity business written through Berkshire Hathaway Life Insurance Company of Nebraska and financial guaranty insurance written through Berkshire Hathaway Assurance Corporation. BHRG writes catastrophe excess-of-loss treaty reinsurance contracts. BHRG also writes individual policies for primarily large or otherwise unusual discrete risks on both an excess direct and facultative reinsurance basis. BHRG underwrites non-catastrophe insurance and reinsurance coverages, which include multi-line business.
The Berkshire Hathaway Primary Group is a collection of primary insurance operations that provide a range of insurance coverages to insureds located principally in the United States. NICO and some affiliates underwrite motor vehicle and general liability insurance to commercial enterprises on both an admitted and excess and surplus basis. U.S. Investment Corporation (USIC), through its three subsidiaries led by United States Liability Insurance Company, is a specialty insurer that underwrites commercial, professional and personal lines of insurance on an admitted and excess and surplus basis. USIC companies underwrite and market approximately 95 specialty property and casualty insurance products.
Medical Protective Corporation (MedPro), through the Medical Protective Company, MedPro provides medical professional liability coverage and risk solutions to physicians, dentists, other healthcare providers and healthcare facilities. Other insurance operations include Berkshire Hathaway Homestate Companies. These companies market workers’ compensation, commercial auto and various other commercial coverages. Also included is Central States Indemnity Company, which provides credit and income protection insurance and related services marketed primarily to credit and debit card holders nationwide.
Railroad Business
The Company operates its railroad business through BNSF. BNSF, through BNSF Railway Company, operates railroad systems in North America. In serving the Midwest, Pacific Northwest, Western, Southwestern and Southeastern regions and ports of the country, BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Over half of the freight revenues of BNSF are covered by contractual agreements of varying durations. BNSF’s primary routes, including trackage rights, allow it to access cities and ports in the western and southern United States, as well as Canadian and Mexican traffic. In addition to cities and ports, BNSF serves many smaller markets by working closely with approximately 200 shortline partners. BNSF has also entered into marketing agreements with other rail carriers, expanding the marketing reach for each railroad and their customers.
Utilities and Energy Businesses
As of December 31, 2010, Berkshire owned an 89.8% interest in MidAmerican Energy Holdings Company (MidAmerican), which is an international energy company. MidAmerican’s businesses are managed as separate operating units. MidAmerican’s domestic regulated energy interests consists of two regulated utility companies serving more than three million retail customers and two interstate natural gas pipeline companies with approximately 17,000 miles of pipeline and a design capacity of approximately 7.4 billion cubic feet of natural gas per day. Its United Kingdom electricity distribution subsidiaries serve about 3.8 million electricity end-users. In addition, MidAmerican’s interests include a diversified portfolio of domestic independent power projects, a hydroelectric facility in the Philippines and the residential real estate brokerage firm in the United States.
PacifiCorp is a regulated electric utility company serving regulated retail electric customers in portions of Utah, Oregon, Wyoming, Washington, Idaho and California. In addition to retail sales, PacifiCorp sells electricity to other utilities, municipalities and energy marketing companies on a wholesale basis. As a vertically integrated electric utility, PacifiCorp owns approximately 10,600 net megawatts of generation capacity.
MidAmerican Energy Company (MEC) is a regulated electric and natural gas utility company serving regulated retail electric and natural gas customers primarily in Iowa and also in portions of Illinois, South Dakota and Nebraska. MEC has a diverse customer base consisting of residential, agricultural and a variety of commercial and industrial customer groups. In addition to retail sales and natural gas transportation, MEC sells regulated electricity to markets operated by regional transmission organizations and regulated electricity and natural gas to other utilities, municipalities and energy marketing companies on a wholesale basis, and sells non-regulated electricity and natural gas services in deregulated markets.
Northern Natural Gas Company (Northern Natural) owns natural gas pipeline systems in the United States reaching from southern Texas to Michigan’s Upper Peninsula. Northern Natural’s pipeline system consists of approximately 15,000 miles of natural gas pipelines. Northern Natural has access to supplies from every mid-continent basin and provides transportation services to utilities and numerous other customers. Northern Natural also operates three underground natural gas storage facilities and two liquefied natural gas storage peaking units. Kern River Gas Transmission Company (Kern River) owns an interstate natural gas pipeline system that extends from the supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River’s pipeline system consists of approximately 1,700 miles of natural gas pipelines.
MidAmerican, through Northern Electric Distribution Limited (Northern Electric) and Yorkshire Electricity Distribution plc (Yorkshire Electricity), owns a substantial United Kingdom electricity distribution network that delivers electricity to customers in northeast England in an area covering approximately 10,000 square miles. MidAmerican also owns HomeServices of America, Inc. (HomeServices), which is a service residential real estate brokerage firm in the United States. HomeServices also offers integrated real estate services, including mortgage originations through a joint venture and closing services, property and casualty insurance, home warranties, relocation services and other home-related services. It operates under 22 residential real estate brand names with over 15,000 sales associates and nearly 300 broker offices in 20 states.
Manufacturing, Service and Retailing Businesses
Berkshire’s operates its diverse manufacturing, service and retailing businesses, through Marmon Holdings, Inc. (Marmon) and McLane. Marmon consists of approximately 130 manufacturing and service businesses that operate within eleven diverse, stand-alone business sectors. These sectors include Building Wire, Construction Services, Distribution Services, Engineered Wire and Cable, Flow Products, Food Service Equipment, Highway Technologies, Industrial Products, Retail Store Fixtures, Transportation Services and Engineered Products and Water Treatment.
Building Wire provides copper electrical building wire for residential, commercial and industrial construction. Construction Services provides the leasing and operation of mobile cranes primarily to the energy, mining and petrochemical markets. Distribution Services supplies specialty metal pipe and tubing, bar and sheet products to markets including construction, industrial, aerospace and many others. Engineered Wire and Cable provides electrical and electronic wire and cable for energy related markets and other industries. Flow Products produce copper, aluminum and brass products and materials for the plumbing, heating, air conditioning, refrigeration, construction, automotive and industrial markets. Food Service Equipment supplies commercial food preparation equipment for restaurants and shopping carts for retail stores.
Highway Technologies primarily serves the heavy-duty highway transportation industry with trailers, fifth wheel coupling devices and undercarriage products, such as brake parts and suspension systems, and also serving the light vehicle aftermarkets with clutches and related products. Industrial Products consists of metal fasteners for the building, furniture, cabinetry, industrial and other markets, safety products, such as gloves for industrial markets, portable lighting equipment for mining and safety markets, and overhead electrification equipment for mass transit systems, custom-machined brass, aluminum and copper forgings for the construction, valve and other industries. Retail Store Fixtures provides shelving and other merchandising displays and related services for retail stores worldwide.
Transportation Services and Engineered Products include manufacturing, leasing and maintenance of railroad tank cars, leasing of intermodal tank containers, in-plant rail services, manufacturing of bi-modal railcar movers, wheel, axle and gear sets for light rail transit and gear products for locomotives, manufacturing of steel tank heads, and services, equipment and technology for processing and distributing sulfur. Water Treatment, equipment include residential water softening, purification and refrigeration filtration systems, treatment systems for industrial markets, including power generation, oil and gas, chemical, and pulp and paper, gear drives for irrigation systems and cooling towers, and air-cooled heat exchangers. Marmon operates more than 250 manufacturing, distribution and service facilities that are primarily located in North America, Europe and China.
McLane provides wholesale distribution and logistics services in all 50 states and internationally in Brazil to customers that include discount retailers, convenience stores, wholesale clubs, quick service restaurants, drug stores and military bases. Operations are divided into five business units: grocery distribution, foodservice distribution, beverage distribution, international logistics and software development. During 2010, the grocery and foodservice units consisted 98% of the total revenues of the Company. McLane’s grocery operations provide products to more than 36,000 retail locations nationwide, including Wal-Mart. McLane’s grocery distribution unit operates 22 facilities in 18 states. McLane’s foodservice distribution unit, based in Carrollton, Texas, focuses on serving the quick service restaurant industry. Operations are conducted through 18 facilities in 16 states. The foodservice distribution unit services more than 18,000 chain restaurants nationwide. Its other manufacturing, service and retailing businesses include apparel manufacturing, building products manufacturing, managed home furnishings and jewelry operations.
Finance and Financial Products
Clayton Homes, Inc. (Clayton) is a vertically integrated manufactured housing company. As of December 31, 2010, Clayton operated 34 manufacturing plants in 12 states. Clayton’s homes are marketed in 48 states through a network of 1,462 retailers, including 354 Company-owned home centers. Financing is offered through its finance subsidiaries to purchasers of Clayton’s manufactured homes, as well as those purchasing homes from selected independent retailers. Retail sales are facilitated by Clayton’s offering of various finance and insurance programs. Finance programs include home note and mortgage originations supporting Company-owned home centers and select independent retailers. Clayton also provides inventory financing to certain independent retailers and services housing contracts and mortgages that were not purchased or originated.
XTRA Corporation (XTRA) is a transportation equipment lessor operating under the XTRA Lease brand name. XTRA manages a diverse fleet of approximately 88,000 units located at 66 facilities throughout the United States and four facilities in Canada. The fleet includes over-the-road and storage trailers, chassis, temperature controlled vans and flatbed trailers. XTRA is a lessor of over-the-road trailers in North America.
The Company competes with Union Pacific Railroad Company.
In the early 1990s Berkshire continued its trend of buying complementary companies and large blocks of stock: the acquisition of H.H. Brown Shoe Company; 31.2 million shares of Guinness PLC; and 82 percent of Central States Indemnity in 1991; Lowell Shoe Company for H.H. Brown, and 14.1 percent of General Dynamics Corp. in 1992. In a related though somewhat surprising move in 1991, Buffett was appointed interim chairman of Salomon Inc. (in which the company still owned stock). After serving 10 months and effecting a turnaround, Buffett was happily back at the helm of Berkshire Hathaway full-time, although both Buffett and Munger joined the board of the ailing USAir in 1992.
The following year, H.H. Brown added Dexter Shoe to its holdings, Buffett sold 10 million shares of Capital Cities/ABC, and net earnings posted a spectacular surge from 1992's $407.3 million (down from 1991's $439.9 million) to $688.1 million. In 1994, Berkshire added major stock holdings of two companies to its portfolio (4.9 percent of Gannett Co., Inc. and 8.3 percent of PNC Bank Corp.) and Buffett admitted to two expensive gaffes: a $222.5 million faux pas from unloading 10 million Cap Cities shares for $64 each when prices topped $85, and taking a $268.5 million writedown for its questionable USAir stock (both Buffett and Munger stepped down from the airline's board after a year). Though Buffett was perhaps too optimistic with USAir and a bit pessimistic about Cap Cities, neither setback made more than a tiny ripple in Berkshire's bottom line.
During the mid-1990s Berkshire Hathaway imperceptibly changed course from a strategic long-term investment conglomerate to one still very much interested in investing but leaning more heavily towards acquiring and actually operating these investment opportunities. As early as 1993 in its annual solicitation for attractive acquisitions, Berkshire had raised the stakes by including the statement "We would be likely to make an acquisition in the $2-3 billion range." By 1995, after the company acquired Helzberg's Diamond Shops and R.C. Willey Home Furnishings through stock swaps, the stakes had risen further--up to the $3-5 billion range. Meanwhile, as Berkshire's "permanent four" (Capital Cities/ABC, Coca-Cola, GEICO, and Washington Post) lost a hint of their luster in 1995, the retailing segment more than offset this slip with Borsheim's, Kirby, Nebraska Furniture Mart, and Scott Fetzer (which posted exceptional numbers for the entire decade) exceeding expectations.
Late in 1995 Berkshire began the process of taking GEICO, the seventh largest auto insurer in the nation, private. Buffett's long history (45 years) with GEICO came full circle--after years of mentoring from Ben Graham and Lorimer Davidson, 43 years after selling his original 350 shares, and 15 years since Berkshire paid $45.7 million for a 33.3 percent stake of GEICO (which grew to 50 percent in the ensuing years)--the company spent $2.3 billion to make GEICO its own. With the GEICO deal completed in January 1996, Berkshire Hathaway's insurance segment mushroomed in both float and potential earnings, becoming more stalwart as the company's core segment. Number-wise, Berkshire finished 1995 with $29.9 billion in assets, a good-sized leap from the previous year's $21.3 billion, while Berkshire stock traded at $36,000 per share, over three-and-a-half times higher than 1992's mere $10,000 a share.
News in 1996 was the planned issuance of $100 million in new Class "B" stock (the company's original shares were now designated Class "A" stock), valued at one-thirtieth the price of its predecessor. The recapitalization was done in part, Buffett explained in the 1995 annual report, to discourage brokers from marketing unit trusts and seducing clients with the Berkshire name. Since most small investors found Berkshire's per share cost prohibitive, Buffett was attempting to make the company's stock available at a lower price without going through "expense-laden unit trusts" pretending to be Berkshire "clones." Yet what folks needed to remember, according to Buffett, was not book value, but intrinsic value. By measuring intrinsic value, an economic indicator rather than an accounting concept, investors had a better handle on worth and whether or not something was a good long-term risk. In these terms, Buffett hoped to double Berkshire's per-share intrinsic value (of Class A stock) every five years, which was still a rather daunting task. Yet if anyone could do it, it was Warren Buffett, Charlie Munger, and Berkshire Hathaway.
As no one foretold the riches Berkshire had gained in just the last 10 years, few would hazard a guess of where the company would be by the year 2000. In this case, however, saying the sky was the limit would not be portentous. As for Chairman Buffett's future, when asked by a Harvard Business School student when he planned to retire, Buffett quipped "About five to ten years after I die." Such was the singular spirit and humor of the man--perhaps the world's most celebrated and successful businessman and investor--running Berkshire Hathaway.
Principal Subsidiaries: BHR; Berskhire Hathaway Credit Corporation; Berkshire Hathaway Life Insurance Co.; Blue Chip Stamps; Borsheim's; H.H. Brown Shoe Co.; Buffalo News; Campbell Haufeld; Carefree; Dexter Shoe Companies; Fechheimer Bros. Co.; France; Halex; Helzberg's Diamond Shops; K & W Products; Meriem; Mrs. B's Clearance and Factory Outlet Warehouse; Nebraska Furniture Mart; Northland; Powerwinch; Precision Steel Products; Quikut; ScottCare; Scott Fetzer Company; Scott Fetzer Financial Group; Scot Labs; Stahl; See's Candies; Wayne; Wesco Financial; Western Enterprises; Western Plastics; R.C. Willey Home Furnishings; and World Book; Columbia Insurance Co.; Continental Divide Insurance Co.; Cornhusker Casualty Co.; Cypress Insurance Co.; Kansas Fire & Casualty Co.; National Indemnity Co.; National Indemnity Co. of Florida; National Indemnity Co. of Minnesota; National Fire & Marine Insurance Co.; National Liability & Fire Insurance Co.; Redwood Fire & Casualty Co.; Wesco Financial Corp.
OVERALL
Beta: 0.46
Market Cap (Mil.): $205,803.59
Shares Outstanding (Mil.): 1.65
Annual Dividend: --
Yield (%): --
FINANCIALS
BRKa Industry Sector
P/E (TTM): 15.72 2.85 26.26
EPS (TTM): 52.83 -- --
ROI: -- 0.09 4.64
ROE: 8.99 1.76 9.12
Statistics:
Public Company
Incorporated: 1889 as Berkshire Cotton Manufacturing Company
Employees: 35,000 (1996)
Assets: $35.5 billion (est. 1996)
Stock Exchanges: New York
SICs: 2711 Newspaper Publishing & Printing; 2731 Book Publishing & Printing; 6331 Fire, Marine & Casualty Insurance; 6719 Holding Companies, Not Elsewhere Classified
Name Age Since Current Position
Buffett, Warren 80 1970 Chairman of the Board, Chief Executive Officer
Munger, Charles 87 1978 Vice Chairman of the Board
Hamburg, Marc 61 2008 Senior Vice President
Olson, Ronald 70 1997 Director
Buffett, Howard 56 1993 Director
Scott, Walter 79 1988 Independent Director
Keough, Donald 84 2003 Independent Director
Murphy, Thomas 85 2003 Independent Director
Gottesman, David 84 2003 Independent Director
Guyman, Charlotte 54 2003 Independent Director
Gates, William 55 2005 Independent Director
Decker, Susan 48 2007 Independent Director
Burke, Stephen 52 2009 Independent Director
Address:
1440 Kiewit Plaza
Omaha, Nebraska 68131
U.S.A.