<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR PERIOD ENDED December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________________TO__________________
COMMISSION FILE NUMBER 1-10125
BERKSHIRE HATHAWAY INC.
(Exact name of registrant as specified in its
charter)
Delaware 04 2254452
-------- ----------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification number)
1440 Kiewit Plaza, Omaha, Nebraska 68131
---------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (402) 346-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $5.00 Par Value New York Stock Exchange
- ----------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to the
filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant - $10,435,387,500*
Indicate number of shares outstanding of each
of the Registrant's classes of common stock:
March 30, 1994 -- common stock, $5 par value . . . . . . . . . 1,177,750 shares
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated In
-------- ---------------
Proxy Statement for Registrant's
Annual Meeting to be held April 25, 1994 Part III
* This aggregate value is computed at the last sale price of the common
stock on March 21, 1994. It does not include the value of 551,000 shares held
by Directors and Executive Officers of the Registrant and members of their
immediate families, some of whom may not constitute "affiliates" for purpose of
the Securities Exchange Act of 1934.
<PAGE> 2
Part I
ITEM 1. BUSINESS
Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged
in a number of diverse business activities. The most important of these is the
property and casualty insurance business conducted nationwide on a primary or
direct basis and worldwide on a reinsurance basis through a number of
subsidiaries collectively referred to in this report as the Berkshire Hathaway
Insurance Group.
Additionally, Berkshire Hathaway Inc. publishes the Buffalo News, a daily
and Sunday newspaper in upstate New York. Other business activities conducted
by non-insurance subsidiaries include publication and distribution of
encyclopedias and related educational and instructional material (World Book
and Childcraft products), manufacture and marketing of home cleaning systems
and related accessories (sold principally under the Kirby name), manufacture
and sale of boxed chocolates and other confectionery products (See's Candies),
retailing of home furnishings (Nebraska Furniture Mart), manufacture and
distribution of uniforms (Fechheimer Brothers Company) and manufacture, import
and distribution of footwear (H. H. Brown Shoe Company, Lowell Shoe, Inc. and
Dexter Shoe Company). Berkshire also owns a number of other businesses engaged
in a variety of activities, as identified herein.
Operating decisions for the various Berkshire businesses are made by
managers of the business units. Investment decisions and all other capital
allocation decisions are made for Berkshire and its subsidiaries by Warren E.
Buffett, in consultation with Charles T. Munger. Mr. Buffett is Chairman and
Mr. Munger is Vice Chairman of Berkshire's Board of Directors.
PROPERTY AND CASUALTY INSURANCE AND REINSURANCE BUSINESS
Berkshire's insurance and reinsurance business is conducted by 14
separate subsidiaries, the largest of which is National Indemnity Company
("National Indemnity") headquartered in Omaha, Nebraska.
The Berkshire Hathaway Insurance Group maintains capital strength at
unparalleled high levels, significantly higher than normal in the industry.
This strength differentiates Group members from their competitors. For example,
in each year since 1988 the Group's ratio of net premiums written to year-end
statutory surplus was 10% or less. The industry average net premiums-to-surplus
ratio from 1989 through 1992 was 140% or more. The obvious margins of safety
thus provided to insureds of the Group are particularly persuasive in marketing
of individually negotiated insurance and reinsurance contracts.
On a primary or direct basis (policies issued in the name of, and to the
insured party) several of the subsidiary members underwrite multiple lines of
principally casualty coverages nationwide for primarily commercial accounts.
The primary or direct business is written through insurance agents and brokers.
The traditional business of National Indemnity has been largely in providing
liability coverages for commercial truck and bus operators and related
commercial transportation activities that require specialized underwriting
knowledge and techniques. This business is referred to internally as the
National Indemnity Primary Group. The Commercial Casualty Division and the
Professional Liability and Special Risk Division, each with offices in
Stamford, Connecticut, solicit and underwrite especially large or unusual
risks. Other member companies market various commercial coverages for standard
risks to principally residents of a single state. These operations are
referred to as the "homestate" operations. Cypress Insurance Company, a
specialty carrier domiciled in California, provides workers' compensation
insurance to employers in that state.
Premium rates for the business peaked in 1986 and have generally
decreased annually thereafter. Because of the lower rates, National Indemnity
Primary Group members have written substantially less of this business since
1986. Similarly, writings by the Group's homestate operations have decreased
because of lower premium rates and the disciplined underwriting practices of
the members that causes their rejection of underpriced risks. The aggregate
amount of primary or direct insurance premiums written in recent years by these
Group members has stabilized, although at less than one quarter the amount
written in 1986.
1
<PAGE> 3
ITEM 1. BUSINESS (CONTINUED)
PROPERTY AND CASUALTY INSURANCE AND REINSURANCE BUSINESS (CONTINUED)
Generally, no improvement in prices is foreseen for 1994. Except for
modest increases in premium volume expected from continuing expansion of
homestate operations into additional states and refocused marketing efforts in
the California workers' compensation business, primary or direct business is
likely to be little changed from 1993.
At the end of 1992, Berkshire acquired 82% of Central States Indemnity
Co. of Omaha ("CSI"). CSI offers credit card insurance from its offices located
in Omaha, Nebraska. CSI insures the credit card debt of policyholders if the
policyholders become disabled or unemployed. The credit insurance is marketed
to individuals through credit card issuers nationwide.
The Reinsurance Division of National Indemnity in Stamford, Connecticut
provides excess of loss and quota share treaty reinsurance to other
property/casualty insurers and reinsurers. Minimal organizational resources,
but huge financial resources, are currently devoted to this business. In
contrast to the previously discussed trend of lower primary or direct insurance
underwriting activity, the amount of business derived from reinsurance activity
increased significantly. The increase in reinsurance assumed premiums began in
1985, when National Indemnity entered into a contract providing reinsurance
coverage to Fireman's Fund Insurance Companies ("FFIC"), for a period of four
years, for 7% of FFIC's entire book of business.
In recent years, non-traditional reinsurance products -- finite-risk
contracts -- have become increasingly significant in the property/casualty
insurance marketplace. Those terms refer to reinsurance agreements, whose terms
provide essentially traditional coverages but also may contractually establish
minimum and maximum payouts by the reinsurer. Minimum payout requirements may
originate in commutation clauses that call for repayments to the reinsureds, on
specified dates, of sums not otherwise paid out by the reinsurer as losses. The
amount of risk transferred, while significant, may be more limited than in the
more traditional contracts. The concept of time-value-of-money is a more
important element in the pricing and setting of terms for these contracts than
for more traditional contracts. Transaction amounts are likely to be larger
than for traditional transactions; for example, a single contract may relate to
loss occurrences in a number of lines of business that span a number of years.
Significant financial strength is a need of any prospective provider of the
non-traditional products and Berkshire meets that need. Several of the
reinsurance arrangements under which the Berkshire Hathaway Insurance Group
provided coverages since 1989 were through finite-risk type contracts.
Exemplary of such business, significant reinsurance assumed premiums were
earned in those years from contracts, sizeable in amounts of coverage provided,
but few in number, that indemnify other insurers and reinsurers against adverse
loss development of their own loss portfolios.
During 1990, Berkshire's Insurance Group management perceived declines to
be occurring in industry capacity and competition for catastrophe
excess-of-loss type reinsurance coverages and consequently National Indemnity
wrote coverages for a number of such risks. Management believes that in 1993
the Berkshire Hathaway Insurance Group was among the largest providers in the
world of this type of coverage. The contracts may provide sizeable amounts
(i.e., often in excess of $10 million) of indemnification per contract and a
single event may result in payments under several contracts. This business can
produce extreme volatility in reported periodic results. Accounting
consequences, however, do not influence decisions of Berkshire's management
with respect to this or any other business, and this fact plus the Insurance
Group's above-normal-for-the-industry financial strength are believed to be the
primary reasons why the Group has become a major provider of these coverages.
Recently there has been a substantial increase in catastrophe reinsurance
capacity for the industry. Most of the additional capacity has arisen from
equity capital raised by newly-formed entities. The increased capacity is not
likely to have an impact on the Group's business during 1994. However,
Berkshire management has evidence that catastrophe reinsurance prices are
beginning to deteriorate. If the price deterioration continues, it may result
in a reduced volume of business being written for 1995 and possibly subsequent
years.
2
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
PROPERTY AND CASUALTY INSURANCE AND REINSURANCE BUSINESS (CONTINUED)
The increases in reinsurance assumed business in recent years have
produced an exceptional increase in the amount of "float", an approximation of
the net investable policyholder funds, held by the Insurance Group. The term
denotes the sum of unpaid losses, unpaid loss adjustment expenses and unearned
premiums, less the aggregate of premium balances receivable, amounts
recoverable as reinsurance on paid and unpaid losses, deferred policy
acquisition costs and deferred charges re reinsurance. Given the length of the
claims payment period -- or tail -- that attaches to the reinsurance business,
the increased float plus the earnings it generates will result in meaningful
increases for several years in the level of the Insurance Group's investments
and investment income, with some part of such increases already evident.
Investment portfolios of insurance subsidiaries include equity securities
valued at approximately $12.3 billion at December 31, 1993. Included are
meaningful ownership percentages of other publicly traded companies (such as
approximately 48% of the outstanding capital stock of GEICO Corporation,
approximately 13% of the capital stock of Capital Cities/ABC, Inc.,
approximately 11% of the common stock of The Gillette Company, approximately 7%
of the capital stock of The Coca-Cola Company, approximately 15% of the capital
stock of The Washington Post Company, approximately 12% of the common stock of
Wells Fargo & Company, approximately 14% of the capital stock of General
Dynamics Corporation and common and convertible preferred stock of Salomon Inc
having approximately 15% of the total voting power of that company). Much
information about these publicly-owned companies is available, including that
released from time to time by the companies themselves.
NON-INSURANCE BUSINESSES OF BERKSHIRE
Registrant's seven non-insurance "reportable business segments" are
described below.
SHOES -- The size of this segment has increased dramatically since the
end of 1992. In addition to H. H. Brown Shoe Company ("H. H. Brown") which
was acquired in July 1991, this segment now includes Lowell Shoe, Inc.
("Lowell") acquired at the end of 1992, and Dexter Shoe Company ("Dexter"),
acquired in November 1993. A description of each of these businesses follows.
H. H. Brown manufactures, imports and markets work, safety, outdoor,
western and casual footwear. Approximately 70% of H. H. Brown's revenues are
derived from sales of a wide variety of work and safety shoes and boots. They
are manufactured under the H. H. Brown, Carolina, Double-H Boot and other brand
names as well as under private label. H. H. Brown is the leading domestic
producer of steel toe safety work shoes and maintains a significant share of
other markets in which it competes, namely the western boot and casual shoe
market.
In addition to manufacturing its products at three facilities located in
the United States and a facility in Canada, the company sources shoes and shoe
components offshore from several countries including China, Romania, India and
Mexico. The company markets its products entirely within the United States and
Canada through a direct sales force of just over 100. Its customer base is
primarily composed of small independent retailers and wholesalers who sell to
workers in a variety of industries including steel, construction, agriculture
and heavy manufacturing. A significant quantity of H. H. Brown's work and
military boots are sold to the United States and Canadian military, as well as
to military PX's. Additionally, much of its imported footwear is sold to mass
merchandisers such as K Mart, Wal Mart and Payless Shoe Co.
H. H. Brown competes in the mid-priced segment of the work boot and shoe
market. The consumer is typically a middle income industrial laborer who is
required by OSHA to wear a specific type of footwear. The company's
competitors in this market are typically small, domestic work boot
manufacturers. Management believes that its products are competitive in terms
of quality and pricing.
On December 30, 1992, Berkshire acquired for cash all of the capital
stock of Lowell and assets of certain entities formerly affiliated with Lowell
(including a manufacturing facility located in Puerto Rico). Lowell
manufactures and markets women's casual, service and nurses footwear. They
market these products under the brand names Soft Spots, Day Lights and Nurse
Mates.
3
<PAGE> 5
ITEM 1. BUSINESS (CONTINUED)
NON-INSURANCE BUSINESSES OF BERKSHIRE (CONTINUED)
On November 7, 1993 Berkshire Hathaway Inc. consummated a merger with
Dexter by reissuing 25,203 shares of its common stock held in treasury in
exchange for 100% of the outstanding common stock of Dexter. Dexter
manufactures and markets men's and women's casual footwear. All products are
manufactured and sold under the trademark Dexter. The company specializes in
the construction of Handsewns, Welts and Cements. The leather is purchased
from domestic tanneries, and many of the other components used in the
manufacturing process are made by Dexter.
Dexter has four manufacturing facilities in Maine and two located in
Puerto Rico. In addition to the manufacturing facilities, Dexter operates 77
factory outlet stores which are located in Maine, New Hampshire, Vermont, New
York, Florida, Alabama, Georgia, Tennessee, Nevada and Puerto Rico.
The customer base is composed of independent retailers and department
stores throughout the United States. Dexter's major customers are large
department stores, including J. C. Penney and Nordstroms, specialty retailers
such as Famous Footwear and military PX's. Additionally, Dexter exports its
products to numerous foreign countries. Dexter is recognized throughout the
United States for both its dress and casual footwear and the customer is
typically a middle income consumer.
ENCYCLOPEDIAS, OTHER REFERENCE MATERIALS -- World Book publishes
educational products for homes, schools, and libraries. Its chief products
include: The World Book Encyclopedia, the largest-selling encyclopedia in the
United States; Early World of Learning, a readiness program for preschoolers,
and Information Finder, a CD-ROM (compact disc read - only format) version of
the encyclopedia text. These and other educational materials are marketed in
the United States and Canada by a large direct-selling force. A newly
copyrighted edition of The World Book Encyclopedia is published each year.
Annual products such as The World Book Year Book, Science Year and The World
Book Health & Medical Annual are updating publications for owners of earlier
encyclopedia editions and are sold by direct mail. An international group
markets these and other specially created educational products in Australia,
the United Kingdom and Ireland with a commissioned sales force, and in 41 other
countries through 34 distributors.
There is significant competition in the business of publishing and
marketing encyclopedias in North America, World Book's principal geographic
market. World Book's selling prices are generally lower than those of its
principal competitor; World Book quality is thought to be superior to any
other.
A large portion of encyclopedia sales is made on an installment basis.
Wholly-owned Berkshire subsidiaries offer financing of domestic and certain
foreign consumer receivables.
HOME CLEANING SYSTEMS -- This segment of Berkshire's business is
principally represented by Kirby home cleaning systems and products, sold to
approximately 700 independent authorized factory distributors in the United
States and foreign countries. These factory distributors sell to the consumer
or to independent authorized area distributors who sell to the consumer. Sales
are made through in-the-home demonstrations by independent salespeople.
Substantially all of Kirby's sales to distributors are for cash. A
wholly-owned Berkshire subsidiary offers consumer financing to about 500
authorized distributors in the United States. The distributors independently
establish the prices at which they offer Kirby products. Kirby and its
distributors believe they offer a premium product, and it is believed that the
prices are generally higher than those of most of its four major competitors.
In 1992, Kirby completed the worldwide introduction of an improved model which
incorporates a power-assisted drive.
This segment also includes the Douglas Products business that
manufactures specialty vacuum cleaners such as electric hand held and cordless
vacuum cleaners. Channels of distribution for these products include retail
discount stores, catalogue showrooms, hardware stores and department stores.
Additionally, Cleveland Wood Products, a manufacturer of vacuum cleaner
brushes, is included in this segment.
4
<PAGE> 6
ITEM 1. BUSINESS (CONTINUED)
NON-INSURANCE BUSINESSES OF BERKSHIRE (CONTINUED)
CANDY -- See's produces boxed chocolates and other confectionery products
with an emphasis on quality in two large kitchens in California. See's
distributes its candies through its own retail stores - over 200 in number -
located in 12 western and midwestern states, including Hawaii. A meaningful
volume of candy business is also recorded for direct shipments made nationwide
from a seasonally-varying number of quantity order distribution centers.
Seasonality in this business is extreme. About 50% of each year's unit
sales volume is generated during the last two months of the year, when quantity
sales at reduced prices to businesses and other organizations augment the
extremely high December shop volume.
NEWSPAPER -- The Buffalo News, a division of Berkshire, publishes a Sunday
edition and seven editions each weekday. It is the only metropolitan newspaper
published daily within a ten county upstate New York distribution area that
comprises one of the 50 largest primary market areas in the United States.
Among newspapers published in those primary markets, The Buffalo News
claims the highest percentage of its area household coverage, 72% on weekdays
and 80% on Sundays. Berkshire management believes the "newshole" percentage
(portion of the paper devoted to news) of The Buffalo News to be greater than
any other dominant newspaper of its size or larger. During 1993 this
percentage was 55%.
RETAILING OF HOME FURNISHINGS -- The Nebraska Furniture Mart ("NFM")
operates a home furnishing retail business from a very large - over 200,000
square feet - retail outlet and sizable warehouse facilities in Omaha,
Nebraska. The business serves a trade area with a radius around Omaha of
approximately 300 miles. An important feature of the business is its ability
to control its costs and to produce a high business volume from offerings of
significant value to its customers, while realizing highly satisfactory
earnings. On December 31, 1992, NFM acquired a 360,000 square foot building and
ten acres of land located adjacent to its existing retail store and warehouse.
Along with providing additional warehousing facilities, a portion of the
building is being used to operate a factory outlet store for manufacturers'
closeouts and discontinued product lines. A 100,000 square foot appliance and
electronics superstore, to be located adjacent to the main retail store, is
planned for opening in the third quarter of 1994. The new store will add such
products as music compact discs and an expanded computer software line to NFM's
already large selection of electronics and appliances.
UNIFORM MANUFACTURING AND DISTRIBUTION -- The Fechheimer Brothers Company
manufactures its products at plants in Kentucky, Ohio, Tennessee and Texas, for
marketing through about fifty company-operated retail distribution centers and
by independent distributors and dealers who together serve more than 200 major
metropolitan areas.
OTHER NON-INSURANCE ACTIVITIES not identified with Berkshire business
segments include the more than one dozen diverse manufacturing businesses
acquired with the 1986 purchase of The Scott & Fetzer Company. The largest
revenue producer of these businesses is Campbell Hausfeld/Scott Fetzer Company,
which manufactures and markets a variety of products related to transmission of
air and other fluids, such as air compressors and painting systems. In
addition, Berkshire has an 85% interest in a long established, high volume
retailer of fine jewelry, Borsheim's, in Omaha, Nebraska. The size of this
operation, like several of the Scott Fetzer operations, currently precludes its
classification as a "reportable business segment" of Berkshire. However, it
contributes meaningful added diversity to Berkshire's activities.
Berkshire Hathaway Inc. and subsidiaries employed approximately 22,000
persons on a full-time basis at December 31, 1993. In addition to that number
of full-time employees, up to 20,000 persons may act as World Book sales
representatives from time to time.
ADDITIONAL INFORMATION WITH RESPECT TO BERKSHIRE'S BUSINESSES
The amounts of revenue, operating profit and identifiable assets
attributable to each of the eight aforementioned business segments are included
in Note 15 to Registrant's consolidated financial statements contained in Item
8, Financial Statements and Supplementary Data. Additional information
regarding Registrant's investments in fixed maturity and marketable equity
securities is included in Notes 3 and 4 to Registrant's consolidated financial
statements.
5
<PAGE> 7
ITEM 2. PROPERTIES
The physical properties used by Registrant's significant business
segments are summarized below:
<TABLE>
<CAPTION>
Owned Approx.
or Square
Business Location Type of Property Leased Footage
- ----------------- ------------------------ --------------------- ------ -------
<S> <C> <C> <C> <C>
Company
Headquarters Omaha, NE Offices Leased 4,000
Insurance Omaha, NE Offices Owned 73,000
Omaha, NE & other locations
in Arizona, California,
Colorado, Kansas
& Connecticut Offices Leased 78,000
Candy Los Angeles, CA & South Plants/Warehouses/
San Francisco, CA Offices Owned 274,000
California Warehouses/Offices Leased 275,000
California & other Retail outlets and Leased 321,000
locations principally quantity order centers
in western states (216 locations)
Newspaper Buffalo, NY Offices Owned 195,000
Buffalo, NY Printing Plant Owned 150,000
New York &
Washington, D.C. Offices/Warehouses Leased 69,000
Home Omaha, NE Retail Store Owned 319,000
Furnishings Omaha, NE & Lincoln, NE Warehouses/Offices Owned 708,000
Encyclopedias, Elk Grove Village, IL &
Other Reference Addison, IL Offices/Warehouse Owned 100,000
Material Chicago, IL & vicinity Offices Leased 70,000
Australia Offices/Warehouses Leased 7,000
United Kingdom Offices Leased 18,000
Home Cleaning Cleveland, OH,
Systems Andrews, TX & Plants/Warehouses/ Owned 397,000
Walnut Ridge, AR Offices
Cleveland, OH Warehouse/Offices Leased 21,000
Canada & England Warehouses/Offices Leased 31,000
Uniforms Cincinnati, OH &
various other U.S. Plants/Warehouses/
locations Offices Owned 223,000
Hodgenville, KY & Plants/Warehouses/
various other U.S. locations Offices Leased 295,000
9 U.S. locations Retail Stores Owned 75,000
44 U.S. locations Retail Stores Leased 320,000
</TABLE>
6
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ITEM 2. PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
Owned Approx.
or Square
Business Location Type of Property Leased Footage
- ----------------- ------------------------ --------------------- ------ -------
<S> <C> <C> <C> <C>
Shoes Morganton, NC, Womelsdorf,
PA, Martinsburg, PA,
Hudson, NH, Dexter, ME & Plants/Warehouses/
Canada Offices Owned 1,503,000
Greenwich, CT, Commerce, CA,
Morganton, NC, Skowhegan,
ME, Newton, MA, Canada,
Puerto Rico & Plants/Warehouses/
Dominican Republic Offices Leased 887,000
50 U.S. locations Retail Stores Owned 337,000
25 U.S. & Puerto Rico locations Retail Stores Leased 90,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in litigation relating to the transactions in
which Salomon Inc ("Salomon") repurchased a significant block of its common
stock from a holder thereof and sold a new issue of preferred stock to the
Company. Twenty-one derivative action lawsuits have been filed against
Salomon's directors challenging these transactions and seeking damages; two of
these lawsuits (Ruby Resnik v. Dwayne O. Andreas, et al., Delaware Chancery No.
9300, filed September 30, 1987 and Rodney Shields v. John H. Gutfreund, et al.,
United States District Court for the Southern District of New York, No. 88 Civ.
1058, filed February 12, 1988) named the Company as an additional defendant.
The lawsuits allege that the Salomon directors breached their fiduciary duties
to Salomon and its shareholders in connection with these transactions, and the
two lawsuits naming the Company claim, in essence, that the Company
participated in such alleged breaches of duty. The complaints in these
lawsuits seek damages in unspecified amounts, a declaration that the sale of
preferred stock to the Company is illegal, null and void, an order requiring
that the preferred stock purchased by the Company be voted in the same manner
as the majority of Salomon's shares, and rescission of the transaction between
Salomon and the Company. Management does not expect the outcome of these
lawsuits to be materially adverse to the Company. Other litigation pending
against the Company and its subsidiaries is not considered material or is
ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF THE REGISTRANT
Following is a list of the Registrant's executive officers:
<TABLE>
<CAPTION>
Name Age Position with Registrant Since
- -------------------- --- ---------------------------- -----------
<S> <C> <C> <C>
Warren E. Buffett 63 Chairman of the Board 1970
Marc D. Hamburg 44 Vice President 1992
Charles T. Munger 70 Vice Chairman of the Board 1978
</TABLE>
Each executive officer serves, in accordance with the by-laws of the
Registrant, until the first meeting of the Board of Directors following the
next annual meeting of shareholders and until his respective successor is
chosen and qualified or until he sooner dies, resigns, is removed or becomes
disqualified. Mr. Buffett and Mr. Munger also serve as directors of the
Registrant.
7
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Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
MARKET INFORMATION
The Company's Common Stock is listed for trading on the New York Stock
Exchange, trading symbol: BRK. The following table sets forth the high and low
sales prices per share, as reported on the New York Stock Exchange Composite
List during the periods indicated:
<TABLE>
<CAPTION>
1993 High Low 1992 High Low
---- --- ---- ---
<S> <C> <C> <C> <C> <C>
First Quarter . . . . . . . . $13,200 $11,350 First Quarter . . . . . . . . . $9,000 $8,575
Second Quarter . . . . . . . 16,200 11,800 Second Quarter . . . . . . . . 9,300 8,850
Third Quarter . . . . . . . . 17,800 15,100 Third Quarter . . . . . . . . . 9,950 9,050
Fourth Quarter . . . . . . . 17,800 16,200 Fourth Quarter . . . . . . . . 11,750 9,150
</TABLE>
SHAREHOLDERS
The Company had approximately 7,600 record holders of its common stock at
March 8, 1994. Record owners included nominees holding at least 180,000 shares
on behalf of beneficial-but-not-of-record owners. Management believes that the
Company has more than 16,000 beneficial owners.
DIVIDENDS
Berkshire has not declared a cash dividend since 1967.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA FOR THE PAST FIVE YEARS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales and service revenues . . . . . . . $1,962,862 $1,774,436 $1,651,134 $1,580,074 $1,526,459
Insurance premiums earned . . . . . . . 656,341 664,293 776,413 591,540 394,279
Interest and dividend income . . . . . . 479,806 495,409 481,793 450,295 331,452
Realized investment gain . . . . . . . . 546,422 89,937 192,478 33,989 223,810
Sundry . . . . . . . . . . . . . . . . . 8,052 5,265 4,178 3,574 7,892
---------- ----------- ----------- ---------- ----------
Total revenues . . . . . . . . . . . . . $3,653,483 $3,029,340 $3,105,996 $2,659,472 $2,483,892
========== ========== ========== ========== ==========
EARNINGS:
Before realized investment gain and
cumulative effect of accounting change $ 402,403(1) $ 347,726 $ 315,753 $ 370,745 $ 299,902
Realized investment gain . . . . . . . . 356,702 59,559 124,155 23,348 147,575
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . (70,984) -- -- -- --
---------- ----------- ----------- ------------ -----------
Net earnings . . . . . . . . . . . . . . $ 688,121 $ 407,285 $ 439,908 $ 394,093 $ 447,477
========== ========== ========== =========== ==========
EARNINGS PER SHARE:
Before realized investment gain and
cumulative effect of accounting change $348.03 $303.29 $275.42 $323.39 $262.46
Realized investment gain . . . . . . . . 308.50 51.95 108.30 20.36 127.55
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . (61.39) -- -- -- --
------- -------- -------- -------- --------
Net earnings . . . . . . . . . . . . . . $595.14 $355.24 $383.72 $343.75 $390.01
======= ======= ======= ======= =======
YEAR-END DATA:
Total assets . . . . . . . . . . . . . . $19,520,469 $17,131,998 $14,461,902 $10,670,423 $9,459,594
Borrowings under investment agreements
and other debt (2) . . . . . . . . . 972,389 1,154,697 1,100,464 1,082,265 847,923
Shareholders' equity . . . . . . . . . . 10,428,374 8,896,331 7,379,918 5,287,454 4,925,126
Common shares outstanding,
in thousands . . . . . . . . . . . . 1,178 1,149 1,146 1,146 1,146
Shareholders' equity per
outstanding share . . . . . . . . . . $ 8,854 $ 7,745 $ 6,437 $ 4,612 $ 4,296
=========== =========== =========== =========== ==========
</TABLE>
(1) Includes a charge of $75,348 representing the effect of the change in
federal income tax rates on deferred taxes applicable to unrealized
appreciation.
(2) Excludes borrowings of commercial and consumer finance businesses.
8
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for each of the past three years are disaggregated in the
table that follows. Amounts are after deducting minority interests and taxes.
<TABLE>
<CAPTION>
(dollars in millions)
----------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Insurance Segment:
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.2 $(71.1) $(77.2)
Investment income . . . . . . . . . . . . . . . . . . . . . . . 321.3 305.8 285.1
Realized investment gain . . . . . . . . . . . . . . . . . . . 362.7 36.1 73.8
------ ------ ------
Total - Insurance Segment . . . . . . . . . . . . . . . . 703.2 270.8 281.7
Non-Insurance business segments . . . . . . . . . . . . . . . . . . 133.3 123.4 104.2
Other businesses . . . . . . . . . . . . . . . . . . . . . . . . . 32.8 30.7 27.6
Realized investment gain (loss) not included above . . . . . . . . (6.1) 23.4 50.3
All other except interest expense . . . . . . . . . . . . . . . . . 6.8 21.9 33.3
Interest expense * . . . . . . . . . . . . . . . . . . . . . . . . (35.6) (62.9) (57.2)
------ ------ ------
Earnings before effect of change in income tax rate
and cumulative effect of accounting change . . . . . . . . . 834.4 407.3 439.9
Effect of change in income tax rate on deferred taxes
applicable to unrealized appreciation ** . . . . . . . . . . (75.3) -- --
Cumulative effect of change in accounting for income taxes ** . . . (71.0) -- --
------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $688.1 $407.3 $439.9
====== ====== ======
</TABLE>
* Interest expense incurred by commercial and consumer finance businesses is
not reflected as "Interest expense" but instead is reflected in amounts
shown for "Other businesses".
** For a discussion regarding these items refer to Notes 1(b) and 6 to the
Consolidated Financial Statements.
The business segment data (Note 15 to the Consolidated Financial
Statements) should be read in conjunction with this discussion.
INSURANCE UNDERWRITING
The after-tax figures shown above for Insurance underwriting derive
from the following:
<TABLE>
<CAPTION>
(dollars in millions)
---------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Underwriting gain (loss):
Primary or direct insurance . . . . . . . . . . . . . . . . . . $ 12.7 $ 8.0 $ (2.5)
Reinsurance assumed . . . . . . . . . . . . . . . . . . . . . . 17.3 (117.0) (117.1)
------- ------- -------
Underwriting gain (loss) -- pre-tax . . . . . . . . . . . . 30.0 (109.0) (119.6)
Applicable income taxes . . . . . . . . . . . . . . . . . . . . (10.2) 37.7 42.2
Applicable minority interest . . . . . . . . . . . . . . . . . (0.6) 0.2 0.2
------- ------- -------
After-tax underwriting gain (loss) . . . . . . . . . . . . . . . . $ 19.2 $ (71.1) $ (77.2)
======= ======= =======
</TABLE>
The Berkshire Hathaway Insurance Group engages in both insurance and
reinsurance of property/casualty risks. In its insurance activities, as
distinguished from its reinsurance activities, its members assume risks of loss
from persons primarily and directly subject to the risks. In its reinsurance
activities, the members assume defined portions of similar or dissimilar risks
to which other insurers and reinsurers have subjected themselves in their own
insuring activities.
A significant marketing strategy followed by all Insurance Group
members is the maintenance of above average capital strength. Statutory
surplus as regards policyholders of the Berkshire Hathaway Insurance Group
increased to approximately $11.5 billion at year-end 1993. This extraordinary
capital strength creates opportunities for Berkshire Group members to negotiate
and enter into contracts of insurance specially designed to meet unique needs
of sophisticated insurance and reinsurance buyers.
9
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INSURANCE UNDERWRITING (CONTINUED)
For purposes of this Discussion, premiums and losses and loss
expenses amounts are stated net of reinsurance ceded.
Reinsurance Assumed
Underwriting results, stated on the basis of generally accepted
accounting principles ("GAAP"), with respect to the reinsurance assumed
business for the past three years are summarized in the following table.
<TABLE>
<CAPTION>
(dollars in millions)
-----------------------------------------------------------
1993 1992 1991
-------------- -------------- --------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Premiums written . . . . . . . . . . . . . . . . . . . $ 534.3 $ 607.2 $ 667.0
======= ======= =======
Premiums earned . . . . . . . . . . . . . . . . . . . . $ 448.0 100.0 $ 511.5 100.0 $ 635.4 100.0
------- ----- ------- ----- ------- -----
Losses and loss expenses . . . . . . . . . . . . . . . 356.3 79.5 589.7 115.3 731.9 115.2
Underwriting expenses . . . . . . . . . . . . . . . . . 74.4 16.6 38.8 7.6 20.6 3.2
------- ------ ------- ------ ------- -----
Total losses and expenses . . . . . . . . . . . . . . . 430.7 96.1 628.5 122.9 752.5 118.4
------- ===== ------- ===== ------- =====
Underwriting gain (loss) -- pre-tax . . . . . . . . . . $ 17.3 $(117.0) $(117.1)
======= ======= =======
</TABLE>
Disaggregated data follows for these activities.
<TABLE>
<CAPTION>
(dollars in millions)
---------------------------------------------------------------------------------
Premiums Earned Underwriting Gain (Loss) Year-End Reserves*
---------------------- ------------------------- --------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
------ ------ ------ ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retroactive reinsurance and
structured settlements . . . . . $ 43.8 $145.5 $363.2 $(64.3) $ (66.0) $ (49.0) $1,441.0 $1,498.0 $1,573.9
Other reinsurance . . . . . . . . 404.2 366.0 272.2 81.6 (51.0) (68.1) 1,026.7 917.2 708.3
------ ------ ------ ------ ------- ------- -------- -------- --------
$448.0 $511.5 $635.4 $ 17.3 $(117.0) $(117.1) $2,467.7 $2,415.2 $2,282.2
====== ====== ====== ====== ======= ======== ======== ======== ========
</TABLE>
* Net unpaid losses and loss adjustment expenses
Premiums Earned
Premiums earned from retroactive reinsurance -- coverages of past
loss events -- amounted to $21 million in 1993, $144 million in 1992 and $362
million in 1991. These contracts were few in number but produced sizable
premiums. Increasing competition in the retroactive reinsurance markets
resulted in fewer opportunities to write such business during 1993 and 1992. In
1993, premiums earned from structured settlement contracts totalled about $22
million, reflecting increased marketing efforts which began early in the year.
Premiums earned from other reinsurance activities are principally
derived from excess of loss contracts, including catastrophe policies, and
quota share contracts. The increase in premiums earned in 1992 over 1991 was
largely attributed to increased amounts earned under catastrophe excess of loss
contracts. The increase in premiums earned in 1993 over 1992 was primarily
attributed to amounts earned under quota share treaties.
Underwriting Gain/Loss
The underwriting loss from retroactive reinsurance coverages
amounted to $41 million for 1993, $44 million for 1992 and $26 million for
1991, reflecting principally the amortization of deferred charges re
reinsurance assumed. See Note 1(g) to the Consolidated Financial Statements for
information with respect to these charges. Underwriting losses from structured
settlement activities were between $22 and $23 million for each of the past
three years. These losses reflect accounting procedures which employ
time-value-of-money concepts -- amortization of deferred charges re reinsurance
assumed and accretion of discounted structured settlement liabilities. The
amortization and accretion are reported as losses incurred, and thus, because
there is no related premium income, as underwriting losses. Amortization and
accretion charges of about $65 million are expected in 1994.
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INSURANCE UNDERWRITING (CONTINUED)
Reinsurance Assumed (continued)
In each of the past three years, the net underwriting results from
other reinsurance activities were significantly influenced by the magnitude of
losses incurred under catastrophe excess of loss contracts. In 1993,
catastrophe losses incurred totalled about $14 million (deriving from a variety
of loss events occurring in prior years). In 1992 and 1991, catastrophe losses
incurred were about $125 million (Hurricane Andrew) and about $38 million
(Typhoon Mireille), respectively. As a result, this business generated an
underwriting gain of about $110 million during 1993 as compared to nearly
breakeven results in the prior two years.
Little comfort should be gained from either (a) the lack of
catastrophe losses in 1993 as compared with 1992 or 1991 or (b) the current
expectation that the January 1994 Los Angeles earthquake will only produce a
nominal loss. The underwriting gains produced by this business in any given
year can be easily exceeded by losses in the next. Thus periodic underwriting
results were and are expected to be subject to substantial volatility.
Berkshire's management, however, is willing to accept such volatility, provided
that the prospect of long term profitability is favorable.
The non-catastrophe reinsurance business produced an underwriting
loss of about $28 million for 1993. In 1992 and 1991, the preponderance of net
underwriting losses reported as "other reinsurance" derived from
non-catastrophe contracts. Underwriting results from other reinsurance for
1991 are net of credits for favorable development totalling about $30 million
with respect to liabilities under pre-1990 quota share reinsurance contracts.
Underwriting results in 1993 and 1992 reflect relatively minor amounts of loss
development.
In pricing most non-catastrophe reinsurance contracts, the concept
of the time-value-of-money is an important consideration due to the anticipated
extended claim payment period -- or "tail". This is especially true with
respect to pricing reinsurance of certain casualty or liability coverages, the
premiums for which are based in significant part on time discounting of
expected losses. Losses and loss expenses are established for these contracts
on an undiscounted basis, thus resulting in underwriting losses for financial
reporting purposes. This business is accepted, nonetheless, because of the
large amounts of investable policyholder funds (or "float") that it produces.
The estimated liability for unpaid losses and loss expenses from
reinsurance assumed businesses, as shown in the preceding table, totalled about
$2.5 billion at the end of 1993, an increase of about $1.0 billion since the
end of 1990. Subsequent loss development with respect to a liability of this
magnitude is another factor which may cause substantial volatility in future
periodic earnings.
Primary or Direct Insurance Underwriting
A summary follows of the combined underwriting results, stated on a
GAAP basis, of the Berkshire Hathaway Insurance Group's primary or direct
insurance operations.
<TABLE>
<CAPTION>
(dollars are in millions)
----------------------------------------------------------
1993 1992 1991
---------------- -------------- ---------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Premiums written . . . . . . . . . . . . . $208.4 $132.4 $135.5
====== ====== ======
Premiums earned . . . . . . . . . . . . . . $208.3 100.0 $152.8 100.0 $141.0 100.0
------ ----- ------ ----- ------ -----
Losses and loss expenses . . . . . . . . . 99.8 47.9 98.0 64.1 95.2 67.5
Underwriting expenses . . . . . . . . . . . 95.8 46.0 46.8 30.7 48.3 34.3
------ ----- ------- ----- ------ -----
Total losses and expenses . . . . . . . . . 195.6 93.9 144.8 94.8 143.5 101.8
------ ===== ------ ===== ------ =====
Underwriting gain (loss) -- pre-tax . . . . $ 12.7 $ 8.0 $ (2.5)
====== ====== ======
</TABLE>
Favorable loss development, discussed on the following pages, of
beginning-of-the-year loss reserves represented respectively, 20.0%, 23.8% and
16.9% of premiums earned in 1993, 1992 and 1991. Without such credits, total
losses and expenses as a percentage of premiums earned were: 1993 -- 113.9%,
1992 -- 118.6%, and 1991 -- 118.7%.
11
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INSURANCE UNDERWRITING (CONTINUED)
Primary or Direct Insurance Underwriting (continued)
Primary or direct insurance underwriting results for 1993 include
Central States Indemnity Co. of Omaha ("CSI"). Berkshire acquired 82% of CSI
at the end of 1992. CSI, which underwrites credit card credit insurance for
individuals, produced premiums earned of $68.5 million and a net underwriting
gain of $4.9 million for 1993.
CSI's business differs substantially from the insurance business
underwritten by the other members of the Insurance Group. CSI's premiums
derive from a high volume of small dollar premium transactions generated
through credit card issuers. CSI's underwriting expenses are normally much
greater than underwriting expenses of the other Insurance Group members. On
the other hand, CSI's losses and loss expenses incurred, as percentages of
premiums earned are substantially lower than for the other primary or direct
underwriting units. Overall, periodic underwriting results from this business
are anticipated to be less volatile than the other primary or direct insurance
operations.
Premiums earned by Berkshire's other primary or direct insurance
businesses totalled $140 million, $153 million and $141 million for 1993, 1992
and 1991, respectively. Those businesses produced net underwriting gains of
about $8 million for 1993 and 1992 compared to a loss of $2.5 million in 1991.
The other primary or direct insurance activities include the
"traditional" business, directed from National Indemnity Company's Omaha
offices. This business represents principally casualty coverages for
commercial accounts. The commercial casualty/professional liability/specialty
risk operations located in Stamford, Connecticut, enter into "tailored"
insurance contracts for insureds presenting risks unusual in nature and/or
especially large in amount. The homestate companies underwrite various
commercial coverages for standard risks located predominantly in their home
states -- Nebraska, Kansas and Colorado. In 1992, the homestate units began to
expand their operations by underwriting similar risks located outside their
home states. Additional expansion of the homestate business is planned in 1994.
Cypress Insurance Company, a specialty carrier, underwrites workers'
compensation risks in a highly competitive market environment in California.
Each of the units employ disciplined underwriting approaches.
Members are encouraged to reject underpriced risks without regard to volume
considerations. As a result of this strategy, during periods of abundant
industry insuring capacity, as has prevailed since 1986, competitors write
increasing amounts of primary or direct insurance by charging lower prices than
those of the Group. Historically, these lower prices have led competitors to
exit the markets as a result of incurring unacceptable losses. Management
believes this situation will recur at an unpredictable future time, leading to
increases of primary or direct insurance offerings to the Group. However,
management does not foresee any significant changes in current market
conditions which would soon reverse the current trend of lower premium volume.
Summarized below is loss and loss expense data from primary or
direct insurance underwriting:
<TABLE>
<CAPTION>
(dollars in millions)
-------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Unpaid losses and loss expenses at beginning of year . . . . $563.2 $566.9 $586.6
------ ------ ------
Incurred losses recorded:
Current year occurrences . . . . . . . . . . . . . . . . . 141.4 134.4 119.0
All prior years' occurrences . . . . . . . . . . . . . . . (41.6) (36.4) (23.8)
------ ------ ------
99.8 98.0 95.2
------ ------ ------
Payments with respect to:
Current year occurrences . . . . . . . . . . . . . . . . . 32.6 42.1 23.3
All prior years' occurrences . . . . . . . . . . . . . . . 101.2 86.1 91.6
------ ------ ------
133.8 128.2 114.9
------ ------ ------
Unpaid losses and loss expenses at end of year . . . . . . . $529.2 $536.7* $566.9
====== ====== ======
</TABLE>
* Excludes unpaid losses and loss expenses of Central States Indemnity Co. of
Omaha -- acquired by Berkshire at the end of 1992.
12
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INSURANCE UNDERWRITING (CONTINUED)
Primary or Direct Insurance Underwriting (continued)
Credits against incurred losses were recorded in each of the
last three years for "all prior year occurrences." They are corrections of
estimation error that are credited or charged to earnings in the year made.
Relating these credits for each year to the related estimated unpaid amounts at
the beginning of the respective year, the "savings" were: 1993 -- 7.4%, 1992 --
6.4%, and 1991 -- 4.1%. The favorable development recorded in each of the most
recent three years related principally to the traditional commercial automobile
business of the National Indemnity Primary Group. While the trend of favorable
development recognized in recent years is encouraging, the nature of estimating
losses is inherently imprecise, particularly with respect to losses which are
reported and settled over lengthy periods of time. In the future, additional
information will be revealed, including reports of additional cases of an
unknown number and magnitude for pre-1994 losses. A provision for late
reported cases is included in the 1993 year-end estimates of unpaid losses and
loss expenses which in the aggregate is subject to favorable or unfavorable
development recognizable in future years.
INSURANCE SEGMENT INVESTMENT INCOME
Following is a summary of Insurance Group net investment
income for the past three years.
<TABLE>
<CAPTION>
(dollars in millions)
----------------------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Investment income before taxes . . . . . . . . . $375.9 $355.1 $331.8
Applicable income taxes . . . . . . . . . . . . . 51.3 46.5 43.8
Applicable minority interest . . . . . . . . . . 3.3 2.8 2.9
------ ------ ------
Investment income after taxes and minority interest $321.3 $305.8 $285.1
====== ====== ======
</TABLE>
Invested assets increased in each of the past three years.
In the three year period, Berkshire contributed over $200 million additional
capital to the Group. Reinvested earnings of the Group for that period amounted
to approximately $1 billion. That figure excludes charges related to changes
in accounting for income taxes. See Note 6 to Consolidated Financial
Statements for additional information about the nature of these charges.
Contributing to a further increase in invested assets was about a $1.1 billion
increase during the past three year period in the amount of "float" from
policyholder funds. That term denotes the sum of unpaid losses, unpaid loss
adjustment expenses and unearned premiums, less the aggregate of agents'
balances receivable, amounts recoverable as reinsurance on paid and unpaid
losses, deferred policy acquisition costs and deferred charges re reinsurance
assumed. The net amount of float was approximately $1.63 billion at the end of
1990, $2.07 billion at the end of 1991, $2.51 billion at the end of 1992 and
$2.76 billion at the end of 1993. A factor which offsets the increase in
amounts of invested assets was the disposal of certain high yield bond
investments during 1993 and 1992.
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NON-INSURANCE BUSINESS SEGMENTS
A summary follows of results to Berkshire from these
identified business segments for the past three years.
<TABLE>
<CAPTION>
(dollars in millions)
------------------------------------------------------------
1993 1992 1991
-------------- -------------- ---------------
Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $1,443.1 100.0 $1,284.5 100.0 $1,204.8 100.0
Cost and expenses . . . . . . . . . . . . . . . . . 1,218.3 84.4 1,074.6 83.7 1,028.7 85.4
-------- ----- -------- ----- -------- -----
Operating profit . . . . . . . . . . . . . . . . . 224.8 15.6 209.9 16.3 176.1 14.6
Income taxes . . . . . . . . . . . . . . . . . . . 87.8 6.1 83.2 6.5 69.0 5.7
Minority Interest . . . . . . . . . . . . . . . . . 3.7 0.3 3.3 0.2 2.9 0.2
--------- ----- --------- ----- --------- -----
Contribution to net earnings . . . . . . . . . . . $ 133.3 9.2 $ 123.4 9.6 $ 104.2 8.7
======== ===== ======== ===== ======== =====
</TABLE>
A comparison of revenues and operating profits between 1993, 1992 and
1991 for each of the seven identifiable non-insurance business segments
follows.
<TABLE>
<CAPTION>
(dollars in millions)
------------------------------------------------------
Operating Profit
Revenues Operating Profits as a % of Revenues
---------------------------- ----------------------- ----------------------
Segment 1993 1992 1991 1993 1992 1991 1993 1992 1991
- ------- -------- ------ ------- ------ ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Candy . . . . . . . . . . . . . . . $ 201.2 $ 197.2 $ 196.0 $ 40.3 $ 41.4 $ 41.4 20.0 21.0 21.1
Encyclopedias, other reference material 198.8 246.1 311.5 19.4 28.2 22.2 9.8 11.5 7.1
Home cleaning systems . . . . . . . . . 193.9 190.1 192.0 40.9 37.7 37.3 21.1 19.8 19.4
Home furnishings . . . . . . . . . . . 209.1 186.1 171.0 21.1 16.7 13.9 10.1 9.0 8.2
Newspaper . . . . . . . . . . . . . . . 145.5 139.7 130.3 50.4 47.3 36.6 34.6 33.8 28.0
Shoes . . . . . . . . . . . . . . . . . 372.1 215.0 104.0 40.0 25.6 12.5 10.7 11.9 12.0
Uniforms . . . . . . . . . . . . . . . 122.5 110.3 100.0 12.7 13.0 12.2 10.4 11.8 12.2
-------- -------- -------- ------ ------ ------
$1,443.1 $1,284.5 $1,204.8 $224.8 $209.9 $176.1
======== ======== ======== ====== ====== ======
</TABLE>
1993 compared to 1992
Revenues from the seven identifiable non-insurance business
segments of $1,443.1 million increased $158.6 million (12.3%) from the prior
year. The overall operating profit from these business segments of $224.8
million increased $14.9 million (7.1%). The "shoes" segment and the
"encyclopedias, other reference material" segment experienced the most
significant variations in comparative results between 1993 and 1992. The
following discussion will focus primarily on those segments comparative
results.
Shoes
As reflected in the preceding table, the most significant
revenue increase occurred within this segment. Much of the increase arose as a
result of two significant acquisitions. Just prior to the end of 1992 this
segment was comprised solely of H. H. Brown Shoe Company, Inc. ("H. H. Brown"),
a manufacturer and distributor of work, safety and casual footwear. In
December 1992, the acquisition for cash of Lowell Shoe, Inc. ("Lowell") was
completed. Lowell manufactures and markets women's casual, service and nurses'
footwear. Lowell accounted for almost $90 million of the revenue increase
between years.
A second, larger acquisition was completed on November 7,
1993, when Berkshire consummated a merger with the Dexter Shoe Companies
("Dexter"). Dexter is a manufacturer of men's and women's dress, casual and
athletic footwear. In addition, Dexter operates seventy-seven retail outlet
stores located primarily in the northeastern United States. Dexter's shoes are
produced at five production facilities in Maine as well as two plants located
in Puerto Rico. The merger was accounted for as a purchase and Dexter's
results of operations have been included from the date of the merger,
accounting for approximately $30 million of the increase in comparative
revenues.
H. H. Brown accounted for the remainder of the increase in the
shoe segment revenues. Revenues increased approximately 17% as compared to the
prior year. Much of the increase can be attributed to the popularity of work
shoes, as this business continues to benefit from reduced demand for athletic
shoes. In 1994, it is expected that the combined revenues from the three
businesses now comprising this segment will exceed $550 million.
14
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NON-INSURANCE BUSINESS SEGMENTS (continued)
1993 compared to 1992 (continued)
Shoes (continued)
Operating profit as a percentage of sales declined between
years. This decline resulted from non-recurring charges recorded by Lowell,
primarily in connection with the implementation of more stringent inventory
control procedures. Excluding these charges of approximately $3.8 million,
operating profit as a percentage of revenues was relatively unchanged between
years.
Encyclopedias, Other Reference Material
During 1993, revenues from the "encyclopedias, other reference
material" segment declined $47.3 million (19.2%). The decline is primarily a
result of the continuation of a reduction, which began in 1989, in World Book
and Childcraft unit sales. Since 1989, unit sales of these products have
declined almost 50%. Management cannot predict whether or not unit sales will
rebound. Management is dealing with the causes that they believe have
contributed to the decline. The entire printed encyclopedia industry has
experienced substantial reductions in unit sales during this period. However,
it has been widely reported that CD-ROM technology has contributed to the
reduced demand for printed encyclopedias. Over the last few years the number
of home computers equipped with CD-ROM hardware has increased dramatically and
this increase is expected to continue. At the same time, several CD-ROM
versions of encyclopedias have been introduced. A CD-ROM version of World Book
was developed in 1989 and has since been marketed on a limited basis. It is
expected that an enhanced version of this product will be marketed, beginning
in April 1994, both in conjunction with printed World Book products as well as
on a stand alone basis. What impact this new product will have on future
business cannot be stated with any degree of certainty.
This segment's 1993 operating profits are net of a
non-recurring charge of approximately $3.3 million related to a decision to
vacate space currently under lease by the encyclopedia publishing group. This
group will relocate to available space in a building currently utilized by the
encyclopedia sales division. Excluding this charge, operating profits in 1993
declined 19.5%. Such decline is largely attributable to the aforementioned
decline in unit sales of encyclopedias.
Other Non-Insurance Business Segments
Revenues from the home furnishings segment increased in 1993
by $23.0 million (12.4%) over the prior year. Increases were achieved in all
major product categories. Revenues during the last eight months of 1993 also
benefitted from the opening of a factory outlet store adjacent to the Nebraska
Furniture Mart ("NFM") for manufacturers' closeouts and discontinued product
lines. A 100,000 square foot appliance and electronics superstore, also to be
located adjacent to the NFM, is planned for opening during the third quarter of
1994. The new store will add such products as music compact discs and an
expanded computer software line to NFM's already large selection of electronics
and appliances. It is expected that NFM's revenues will increase rather
significantly beginning in the fourth quarter of 1994 as a result of this
addition. However, it is also anticipated that this lower margin business will
cause future overall operating profits as a percentage of sales to decline
somewhat as NFM plans to dramatically increase its market share through
aggressive pricing.
The newspaper segment's 1993 revenues of $145.5 million
increased $5.8 million (4.1%) over the prior year. Both advertising and
circulation revenues increased modestly between years. Operating profits
increased $3.1 million (6.6%) when compared to the prior year. The favorable
comparative results arose largely because in 1992 a special charge of $2.9
million was recorded relating to the buy out of employees with lifetime job
guarantees. During 1993, the Buffalo News began to derive benefits from the
buy outs which had taken place during each of the past two years. However,
somewhat offsetting this favorable development were increased costs per
employee for health care and other employee benefits. The Buffalo News results
also continued to be favorably impacted by newsprint costs which for the past
several years have declined or remained relatively unchanged.
15
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1993 compared to 1992 (continued)
Other Non-Insurance Business Segments (continued)
Revenues from the home cleaning systems segment were $3.8
million (2.0%) above the prior year. Domestic unit sales of Kirby home
cleaning systems increased 5% as compared to the prior year while foreign unit
sales declined about 14%. Offsetting the effect on revenues of the decline in
foreign unit sales was the fact that the Generation III model system, with its
added features and higher price, accounted for all foreign sales in 1993
whereas during 1992 the model was not available in all foreign markets for the
full year.
The candy segment experienced a slight decrease in volume
during 1993 as pounds of candy sold decreased 1% from the prior year. A 3%
price increase at the beginning of the year more than offset the effect of
reduced volume on revenues. During 1993, See's intensified its marketing
efforts in its mail order and quantity order programs. The expanded
distribution of its competitive mail order catalog and other marketing efforts
resulted in an improvement in mail orders and quantity order sales during 1993.
The uniform segment's revenue increased $12.2 million (11.1%)
in 1993. The increased revenues are largely attributable to acquisitions
during the second half of 1992 of ten additional retail locations and a
manufacturer of specialty uniforms. Thus, results for 1993 reflect a full year
for these businesses as compared to a partial year in 1992.
1992 compared to 1991
Revenues from the non-insurance business segments increased
$79.7 million (6.6%) in 1992 as compared to 1991. The acquisition of H. H.
Brown in July 1991, more than accounts for the increase as full year 1992
results are being compared to six month results for 1991. H. H. Brown's 1992
revenues of $215.0 million exceeded 1991 half year revenues by $111.0 million.
Offsetting this increase was a reduction in World Book revenues of $65.4
million (21.0%). World Book's reduced revenues resulted in part from a
significant decline in unit sales. (See preceding section regarding
comparative 1993 vs 1992 results for a discussion regarding the decline in
World Book unit sales.) Reduced revenues of the "encyclopedias, other
reference material" segment also arose from the discontinuance during December
1991 of the syndication business. This business consisted of direct mail
marketing of primarily non-educational products. Revenues from Berkshire's
other five reportable segments were $823.4 million during 1992 compared to
$789.3 million during 1991. None of the five segments had revenue increases
in excess of 10.5% and only the home cleaning systems segment with a
decline of 1% had lower revenues in 1992 as compared to 1991. Operating profits
of $209.9 million during 1992 were $33.8 million (19.2%) greater than in 1991.
The inclusion of H. H. Brown results for a full year in 1992 vs only six months
of 1991 accounts for almost 40% of the change between years. Favorable
comparative operating profit results were also achieved by all of the other
reportable segments except for See's where comparative operating profits were
roughly unchanged between years.
BUSINESS OTHER THAN IDENTIFIED SEGMENTS
<TABLE>
<CAPTION>
(dollars in millions)
-------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . $595.5 $567.7 $524.4
====== ====== ======
Operating profit . . . . . . . . . . $ 54.8 $ 54.3 $ 49.3
Income taxes . . . . . . . . . . . 20.8 21.8 19.3
Minority interest . . . . . . . . . 1.2 1.8 2.4
------ ------ ------
Contribution to net earnings . . . . $ 32.8 $ 30.7 $ 27.6
====== ====== ======
</TABLE>
The above represent aggregate data for businesses that
numbered 23 in 1993. Berkshire management believes that narrative discussion of
the results of the constituent businesses would not yield significant benefit
to investors or others, particularly in view of the relative consistency of the
year-to-year aggregate data.
16
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTEREST EXPENSE
In January 1993, the redemption of Berkshire's Zero Coupon
Convertible Subordinated Notes was completed. Including redemptions of other
term debt which occurred during 1992, outstanding term debt has been reduced by
about $650 million from the level which existed at December 31, 1991. Somewhat
offsetting these reductions are increases in outstanding borrowings under
investment agreements which have increased approximately $520 million during
the same period. The resulting lower interest costs from reduced levels of
borrowings along with the fact that interest expense for 1992 includes premiums
paid to redeem term debt of $16.2 million and a charge of $6.3 million
representing the writeoff of deferred financing costs related to the
aforementioned Zero Coupon Convertible Subordinated Notes account for the
decline in 1993 interest expense as compared to the prior year.
REALIZED INVESTMENT GAIN
During the fourth quarter of 1993, an insurance subsidiary of
the Company sold one million common shares of its investment in Capital
Cities/ABC, Inc. ("Capital Cities") in connection with that Company's offer to
buy from its shareholders up to two million of its common shares. Prior to the
sale and since 1986, Berkshire subsidiaries owned three million shares of
Capital Cities or approximately 18% of that Company's outstanding stock.
Berkshire's pre-tax gain from this transaction was $457.5 million.
Realized investment gain has been a recurring element in
Berkshire's net earnings for many years. The amount -- recorded when
appreciated securities are sold -- tends to fluctuate significantly from period
to period, with a meaningful effect upon Berkshire's consolidated net earnings.
But, the amount of realized investment gain for any given period has no
predictive value, and variations in amount from period to period have no
practical analytical value, particularly in view of the unrealized price
appreciation now existing in Berkshire's consolidated investment portfolio.
LIQUIDITY AND CAPITAL RESOURCES
Berkshire's Consolidated Balance Sheet as of December 31,
1993, reflects continuing capital strength. In the past three years, Berkshire
shareholders' equity has increased from approximately $5.3 billion at December
31, 1990 to approximately $10.4 billion at December 31, 1993. In that
three-year period, realized and unrealized securities gains increased equity
capital by approximately $3.6 billion, and reinvested earnings, other than
realized securities gains, were about $1.0 billion.
17
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Berkshire Hathaway Inc.
We have audited the accompanying consolidated balance sheets of Berkshire
Hathaway Inc. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, and cash flows for each of the
three years in the period ended December 31, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Berkshire Hathaway Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes and investments
to conform with recent pronouncements of the Financial Accounting Standards
Board.
DELOITTE & TOUCHE
Omaha, Nebraska
March 7, 1994
18
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,838,103 $ 1,127,996
Investments:
Obligations with fixed maturities . . . . . . . . . . . . . . . . . . . . 2,108,602 2,033,681
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . 12,540,197 11,652,654
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,285 608,352
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,386 282,141
Properties and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,736 224,510
Assets of commercial and consumer finance businesses . . . . . . . . . . . . . 840,744 442,671
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,029,416 759,993
----------- -----------
$19,520,469 $17,131,998
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . $ 3,128,809 $ 3,151,607
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,750 231,813
Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . 738,897 627,296
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,030,189 2,517,186
Borrowings under investment agreements and other debt . . . . . . . . . . . . . 972,389 1,154,697
Liabilities of commercial and consumer finance businesses . . . . . . . . . . . 723,782 423,545
----------- -----------
8,909,816 8,106,144
----------- -----------
Minority shareholders' interests . . . . . . . . . . . . . . . . . . . . . . . 182,279 129,523
----------- -----------
Shareholders' equity:
Common stock of $5 par value. Authorized 1,500,000 shares;
Issued 1,381,308 shares in 1993; 1,377,364 shares in 1992 . . . . . . . . 6,907 6,887
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . 656,074 182,264
Unrealized appreciation of marketable equity securities, net . . . . . . . . 5,412,652 5,047,219
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,390,375 3,702,254
----------- -----------
10,466,008 8,938,624
Less common stock in treasury, at cost
(203,558 shares in 1993; 228,761 shares in 1992) . . . . . . . . . . . . . . 37,634 42,293
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 10,428,374 8,896,331
----------- -----------
$19,520,469 $17,131,998
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
19
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Sales and service revenues . . . . . . . . . . . . . . . . . $1,962,862 $1,774,436 $1,651,134
Insurance premiums earned . . . . . . . . . . . . . . . . . 656,341 664,293 776,413
Interest and dividend income . . . . . . . . . . . . . . . . 479,806 495,409 481,793
Realized investment gain . . . . . . . . . . . . . . . . . . 546,422 89,937 192,478
Sundry income . . . . . . . . . . . . . . . . . . . . . . . 8,052 5,265 4,178
---------- ---------- ----------
3,653,483 3,029,340 3,105,996
---------- ---------- ----------
COST AND EXPENSES:
Cost of products and services sold . . . . . . . . . . . . . 1,180,642 1,049,721 939,011
Insurance losses and loss adjustment expenses . . . . . . . 456,098 687,625 827,169
Insurance underwriting expenses . . . . . . . . . . . . . . 169,367 85,628 68,837
Selling, general and administrative expenses . . . . . . . . 576,909 531,253 556,146
Interest expense . . . . . . . . . . . . . . . . . . . . . . 80,749 124,496 121,847
---------- ---------- ----------
2,463,765 2,478,723 2,513,010
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . . . . . . 1,189,718 550,617 592,986
Income taxes -
Other than effect of change in income tax rate
on deferred taxes applicable to unrealized
appreciation . . . . . . . . . . . . . . . . . . . . . 345,302 138,089 142,058
Effect of change in income tax rate on deferred
taxes applicable to unrealized appreciation . . . . . . 75,348 -- --
Minority interest . . . . . . . . . . . . . . . . . . . . . . 9,963 5,243 11,020
----------- ----------- ----------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . 759,105 407,285 439,908
Cumulative effect of change in accounting for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . (70,984) -- --
---------- ---------- ----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . $ 688,121 $ 407,285 $ 439,908
========== ========== ==========
Average shares outstanding . . . . . . . . . . . . . . . . . 1,156,243 1,146,492 1,146,441
========= ========== ==========
EARNINGS PER SHARE:
Before cumulative effect of accounting change . . . . . . . . $656 $355 $384
Cumulative effect of change in accounting for income
taxes . . . . . . . . . . . . . . . . . . . . . . . (61) -- --
---- ----- -----
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $595 $355 $384
==== ==== ====
</TABLE>
See accompanying Notes to Consolidated Financial Statements
20
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992 1991
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 688,121 $ 407,285 $ 439,908
Adjustments to reconcile net income to cash flows
from operating activities:
Cumulative effect of accounting change . . . . . . . . . 70,984 -- --
Effect of change in income tax rate on deferred taxes
applicable to unrealized appreciation . . . . . . . 75,348 -- --
Depreciation and amortization . . . . . . . . . . . . . 50,180 41,074 37,175
Realized investment gain . . . . . . . . . . . . . . . . (546,422) (89,937) (192,478)
Minority interests . . . . . . . . . . . . . . . . . . . 9,963 5,243 11,020
Changes in assets and liabilities before effects from
business acquisitions:
Losses and loss adjustment expenses . . . . . . . . . (22,798) 102,789 798,784
Deferred charges re reinsurance assumed . . . . . . . 16,171 46,931 (178,328)
Unearned premiums . . . . . . . . . . . . . . . . . . 83,937 75,274 26,109
Receivables . . . . . . . . . . . . . . . . . . . . . 134,077 239,428 (177,043)
Accounts payable, accruals and other liabilities . . . 34,996 150,615 (6,067)
Income taxes . . . . . . . . . . . . . . . . . . . . . 107,931 29,004 (41,039)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 23,681 (10,521) (8,868)
---------- ---------- ---------
Net cash flows from operating activities . . . . . . 726,169 997,185 709,173
---------- ---------- ---------
Cash flows from investing activities:
Purchases of fixed maturity investments . . . . . . . . . . (272,249) (258,617) (377,332)
Purchases of marketable equity securities . . . . . . . . . (858,879) (913,037) (809,633)
Proceeds from sales of fixed maturity investments . . . . . -- 284,301 292,010
Proceeds from redemptions and maturities of fixed
maturity investments . . . . . . . . . . . . . . . . . . 318,881 371,514 399,120
Proceeds from sales of marketable equity securities . . . . 1,188,510 100,270 522,701
Acquisition of businesses . . . . . . . . . . . . . . . . . -- (119,948) (161,043)
Loans and investments originated in finance businesses . . . (866,843) (160,261) (163,803)
Principal collection on loans and investments
originated in finance businesses . . . . . . . . . . . . 269,345 127,913 124,760
Other . . . . . . . . . . . . . . . . . . . . . . . . . 19,578 (5,294) (11,266)
---------- ---------- ---------
Net cash flows from investing activities . . . . . . (201,657) (573,159) (184,486)
---------- ---------- ---------
Cash flows from financing activities:
Proceeds from borrowings of finance businesses . . . . . . . 591,853 38,862 811
Proceeds from other borrowings . . . . . . . . . . . . . . . 1,264,972 961,565 455,972
Repayments of borrowings of finance businesses . . . . . . . (316,318) (84,792) (2,625)
Repayments of other borrowings . . . . . . . . . . . . . . . (1,399,901) (906,964) (462,288)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (2,860) (2,334) (1,581)
---------- ---------- --------
Net cash flows from financing activities . . . . . . 137,746 6,337 (9,711)
---------- ---------- --------
Increase in cash and cash equivalents . . . . . . . 662,258 430,363 514,976
Cash and cash equivalents at beginning of year . . . . . . . . 1,192,363 762,000 247,024
---------- ---------- ---------
Cash and cash equivalents at end of year* . . . . . . . . . . $1,854,621 $1,192,363 $ 762,000
========== ========== ==========
* Cash and cash equivalents at end of year are comprised of
the following:
Commercial and consumer finance businesses . . . . . . $ 16,518 $ 64,367 $ 32,658
Other . . . . . . . . . . . . . . . . . . . . . . . . 1,838,103 1,127,996 729,342
---------- ---------- -----------
$1,854,621 $1,192,363 $ 762,000
========== ========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
21
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(1) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Basis of consolidation
The accompanying Consolidated Financial Statements include the
accounts of Berkshire Hathaway Inc. (the "Company" or
"Berkshire") consolidated with accounts of all its subsidiaries.
Intercompany accounts and transactions have been eliminated.
(b) Accounting changes and reclassifications
In the accompanying Consolidated Balance Sheet as of December 31,
1992, reclassifications have been made when required to conform
to current year presentation. In particular, individual assets
and individual liabilities of commercial and consumer finance
businesses have been reclassified for presentation in aggregate
totals. Other reclassifications relate to provisions of Statement
of Financial Accounting Standards No. 113 "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts" which was adopted by the Company effective January 1,
1993.
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 changes
the Company's method of accounting for income taxes from the
"deferred method" to the "asset and liability method".
Previously the Company deferred the past tax effects of timing
differences between financial reporting and taxable income. Under
the asset and liability method of SFAS 109, deferred tax assets
and liabilities are recognized for future tax consequences
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. The provisions of SFAS 109 require that the effect on
deferred taxes of a change in tax rates be recognized in income
in the period that includes the enactment date. See note 6.
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS
115"). As permitted under the statement, the Company has elected
to adopt the statement's provisions as of December 31, 1993.
Among its provisions, the statement requires a change in the
accounting for marketable equity securities held by non-insurance
entities. Prior to the adoption of SFAS 115, such securities were
carried at the lower of aggregate cost or market. Under the
provisions of SFAS 115, these securities are now carried at
market and accounted for in the same manner as marketable equity
securities held by the Company's insurance subsidiaries. See
notes 1(d), 4 and 8.
(c) Cash equivalents
Cash equivalents consist of funds invested in money market accounts
and in investments with a maturity of three months or less when
purchased.
(d) Investments
Management determines the appropriate classifications of investments
in obligations with fixed maturities and marketable equity
securities at the time of purchase and reevaluates such
designations as of each balance sheet date. At December 31, 1993,
all investments in obligations with fixed maturities are
classified as held-to-maturity. Obligations with fixed maturities
are deemed to be held-to-maturity securities when the Company has
the ability and positive intent to hold them to maturity.
Held-to-maturity securities are carried at amortized cost.
Marketable equity securities are classified as available-
for-sale. Available-for-sale securities are stated at fair value,
with unrealized gains and losses, net of tax, reported in a
separate component of shareholders' equity. Realized gains and
losses on sales of investments, as determined on a specific
identification basis, are included in the Consolidated Statements
of Earnings.
(e) Goodwill and negative goodwill of acquired businesses
The difference between purchase cost and the fair value of the net
assets of acquired businesses is amortized on a straight line
basis over forty years. The net unamortized balance is carried in
other assets.
(f) Insurance premium acquisition costs
For financial reporting purposes, certain costs of acquiring
insurance premiums are deferred, subject to ultimate
recoverability, and charged to income as the premiums are earned.
Generally, the ultimate recoverability of premium acquisition
costs is determined without regard to investment income.
22
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Continued)
(g) Deferred charges re reinsurance assumed
The excess of estimated liabilities for claims and claim costs
ultimately payable by the Insurance Group over consideration
received with respect to retroactive property/casualty
reinsurance contracts that provide for indemnification of
insurance risk, other than structured settlements, is established
as a deferred charge at inception of such contracts. The deferred
charges are subsequently amortized using the interest method over
the expected settlement periods of the claim liabilities. At
December 31, 1993 and 1992, deferred charges re reinsurance
assumed in the amounts of $466.0 million and $482.2 million
respectively are included in other assets.
(h) Losses and loss adjustment expenses
Liability for losses and loss adjustment expenses represents the
aggregate of such obligations of members of the Insurance Group
with respect to: (i) prospective property/casualty insurance and
reinsurance contracts, (ii) retroactive property/casualty
reinsurance contracts that provide for indemnification of
insurance risk, other than structured settlements, and (iii)
reinsurance contracts providing for periodic payments with
respect to settled claims ("structured settlements"). Except for
structured settlement liabilities which are stated at discounted
present values, the liability for losses and loss adjustment
expenses is at the aggregate of estimated ultimate payment
amounts.
Ultimate payment amounts with respect to prospective contracts are
determined from (i) individual case estimates, (ii) estimates of
incurred but not reported losses, based on past experience, and
(iii) reports of losses from ceding insurers.
Ultimate payment amounts with respect to retroactive reinsurance
contracts that provide for indemnification of insurance risk,
other than structured settlements, are established for financial
reporting purposes at maximum limits of indemnification under the
contracts. This liability at December 31, 1993 was $1.181 billion
and at December 31, 1992 was $1.232 billion. (See also 1(g) above
for amounts related to deferred charges re reinsurance assumed.)
For statutory reporting purposes, liabilities under these
contracts are established, not at worst-case maximum loss limits,
but at best estimates of claims and claim costs ultimately
payable thereunder. These "best estimates" yielded respectively
as of December 31, 1993 and December 31, 1992 liabilities of
$919.8 million and $939.6 million. Underwriting losses reported
with respect to these contracts in the accompanying financial
statements were $41 million for 1993, $44 million for 1992 and
$26 million for 1991, whereas for statutory reporting purposes
the corresponding figures were a $10 million gain in 1993, and
losses of $89 million and $184 million in 1992 and 1991,
respectively.
Liabilities under structured settlement contracts are established
when the contracts are entered into, at the then present value of
the actuarially determined ultimate payment amount discounted at
the prevailing market interest rate. Thereafter, annual
accretions to the liabilities are charged to losses incurred. The
aggregate of these liabilities for financial reporting purposes
at December 31, 1993 was $259.8 million. For statutory reporting
purposes, where the liabilities are determined using discount
rates mandated by Insurance Regulatory authorities (5% for
contracts incepting after 1986 and 7% with respect to contracts
dated prior to 1987), the aggregate of structured settlement
liabilities was $343.4 million.
(j) Insurance premiums
Insurance premiums for prospective insurance and non-property
catastrophe reinsurance policies are recognized as revenues
ratably over their terms with unearned premiums computed on a
monthly or daily pro rata basis. Premiums for catastrophe excess
of loss reinsurance contracts are deferred until the earlier of a
loss occurrence or policy expiration. Consideration received for
indemnification of risk under retroactive reinsurance contracts
and structured settlements is accounted for as premiums earned at
the inception of the contracts. Premiums earned are stated net of
amounts ceded to reinsurers. See note 15.
(k) Reinsurance
Provisions for losses and loss adjustment expenses are reported in
the accompanying Consolidated Statements of Earnings after
deducting estimates of recoveries under reinsurance contracts.
Such recoveries totalled $34 million, $90 million and $26 million
for 1993, 1992 and 1991, respectively. Reinsurance contracts do
not relieve the Insurance Group Members of their obligations to
indemnify policyholders with respect to the underlying insurance
and reinsurance contracts. Estimates of losses and loss expenses
recoverable under reinsurance contracts are included in
receivables.
23
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) DEXTER SHOE COMPANIES MERGER
On November 7, 1993, the Company consummated a merger with the privately
held Dexter Shoe Companies ("Dexter") by reissuing 25,203 shares of its common
stock held in treasury in exchange for 100% of the outstanding common stock of
Dexter. Dexter manufactures and distributes men's and women's dress, casual and
athletic shoes. The merger was accounted for by the purchase method of
accounting and, accordingly, Dexter's operating results are included in the
Company's consolidated results of operations from the effective date of the
merger. Had the results of Dexter been included commencing with operations in
1992, the reported results would not have been materially affected.
(3) INVESTMENTS IN OBLIGATIONS WITH FIXED MATURITIES
The amortized cost and estimated market values as of December 31, 1993
and 1992, of investments in obligations with fixed maturities are as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, 1993 Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies . . . $ 9,286 $ 131 $ (4) $ 9,413
Obligations of states, municipalities
and political subdivisions . . . . . . . . . . 653,884 50,552 (810) 703,626
Redeemable preferred stocks . . . . . . . . . . . . 1,381,882 190,188 (90,060) 1,482,010
Mortgage-backed securities* . . . . . . . . . . . . 63,550 1,635 (7) 65,178
---------- ---------- ---------- ----------
$2,108,602 $ 242,506 $ (90,881) $2,260,227
========== ========== ========== ==========
December 31, 1992 Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ----------- ----------- ------------
Bonds:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies . . . $ 39,084 $ 887 $ (30) $ 39,941
Obligations of states, municipalities
and political subdivisions . . . . . . . . . . 453,277 56,432 (350) 509,359
Corporate bonds . . . . . . . . . . . . . . . . . 133,566 30,317 -- 163,883
Redeemable preferred stocks . . . . . . . . . . . . 1,368,648 65,357 (89,701) 1,344,304
Mortgage-backed securities* . . . . . . . . . . . . 39,106 1,624 (34) 40,696
---------- ---------- ---------- ----------
$2,033,681 $ 154,617 $ (90,115) $2,098,183
========== ========== ========== ==========
</TABLE>
* Excludes mortgage-backed securities held by commercial and consumer
finance businesses. See note 5.
Shown below are the amortized cost and estimated market values of the
above obligations at December 31, 1993, by contractual maturity dates. Actual
maturities will differ from contractual maturities because issuers of certain
of the obligations retain early call or prepayment rights. Amounts are in
thousands.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
------------- ------------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . $ 33,196 $ 33,789
Due after one year through five years . . . . . . . . . . . . . . . . . 1,126,710 1,305,057
Due after five years through ten years . . . . . . . . . . . . . . . . 878,094 848,527
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . 7,052 7,676
------------ ------------
2,045,052 2,195,049
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . 63,550 65,178
----------- -----------
$2,108,602 $2,260,227
========== ==========
</TABLE>
Gross gains and gross losses realized on sales and redemptions of
obligations with fixed maturities were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Gross realized gains . . . . . . . . . . . . . . . . . . . $40,109 $80,076 $139,700
Gross realized losses . . . . . . . . . . . . . . . . . . . (174) (563) --
</TABLE>
24
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) INVESTMENTS IN MARKETABLE EQUITY SECURITIES
Aggregate data with respect to the consolidated investment in marketable
equity securities are shown below (in thousands):
December 31, 1993
<TABLE>
<CAPTION>
Unrealized Carrying (a)
Cost Gain Market Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Common stock of:
Capital Cities/ABC, Inc. (b) . . . . . . . $ 345,000 $ 894,000 $ 1,239,000 $ 1,239,000
The Coca-Cola Company . . . . . . . . . . 1,023,920 3,144,055 4,167,975 4,167,975
GEICO Corporation (c) . . . . . . . . . . 45,713 1,713,881 1,759,594 1,759,594
The Gillette Company . . . . . . . . . . 600,000 831,000 1,431,000 1,431,000
All other marketable equity securities . . . 2,303,125 1,639,503(d) 3,942,628 3,942,628
---------- ---------- ----------- -----------
$4,317,758 $8,222,439 $12,540,197 $12,540,197
========== ========== =========== ===========
</TABLE>
December 31, 1992
<TABLE>
<CAPTION>
Unrealized Carrying
Cost Gain Market Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Common stock of:
Capital Cities/ABC, Inc. (b) . . . . . . . $ 517,500 $1,005,750 $ 1,523,250 $ 1,506,487
The Coca-Cola Company . . . . . . . . . . 1,023,920 2,887,205 3,911,125 3,903,918
GEICO Corporation (c) . . . . . . . . . . 45,713 2,180,537 2,226,250 2,226,250
The Gillette Company . . . . . . . . . . 600,000 765,000 1,365,000 1,365,000
All other marketable equity securities . . . 1,893,162 1,040,410(e) 2,933,572 2,650,999
---------- ---------- ----------- -----------
$4,080,295 $7,878,902 $11,959,197 $11,652,654
========== ========== =========== ===========
</TABLE>
(a) As discussed in Note 1(b), the Company adopted SFAS 115 as of December
31, 1993. Therefore, all marketable equity securities are carried at
market value as of December 31, 1993. The cumulative effect of adopting
this statement as of December 31, 1993, was to increase the ending
balance in shareholders' equity by $171,775 to reflect the unrealized
appreciation of marketable equity securities held by the Company and by
its non-insurance subsidiaries, net of related income taxes and minority
interest. Prior year financial statements have not been restated.
(b) Common shares of Capital Cities/ABC, Inc. ("Capital Cities") owned by
Berkshire subsidiaries possessed approximately 13% of the voting rights
of all Capital Cities shares outstanding at December 31, 1993. The shares
are held subject to an Agreement, the terms of which grant to Capital
Cities a right of first refusal to purchase the shares and otherwise
govern until January 3, 1997, the manner by which the shares may be sold
or transferred. Also, Berkshire and its subsidiaries have delivered to
Capital Cities irrevocable proxies with respect to these shares in favor
of Thomas S. Murphy or Daniel B. Burke, so long as either shall be the
chief executive officer of Capital Cities, to vote the shares at any and
all meetings of shareholders of Capital Cities. The proxies expire on
January 2, 1997, or at the earlier date when neither of such persons is
chief executive officer of Capital Cities.
(c) Subsidiaries of Berkshire owned shares of common stock of GEICO
Corporation that possessed approximately 48% of the voting rights of all
GEICO shares outstanding at December 31, 1993. Berkshire maintains an
independent proxy arrangement for voting of the shares as required by
Order of GEICO's domiciliary insurance supervisory authority. The Order,
dating from Berkshire subsidiaries' major purchase of the shares in 1976,
prohibits Berkshire from seeking or causing to change the independent
proxy. Also, under the Order, no officer or director of Berkshire or of
any affiliate or subsidiary of Berkshire is permitted to serve as a
director of GEICO. Because the Order divests Berkshire of its voting
rights with respect to the shares, Berkshire does not use the equity
method of accounting for its investment in GEICO.
(d) Represents gross unrealized gains $1,732,295, less gross unrealized
losses $92,792.
(e) Represents gross unrealized gains $1,101,039, less gross unrealized
losses $60,629.
Gross realized gains and losses on sales of marketable equity securities
were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . $518,347 * $ 10,595 $ 62,050
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . (11,860) (171) (9,272)
</TABLE>
* During the fourth quarter of 1993, a subsidiary of the Company sold
1,000,000 common shares of its investment in Capital Cities in connection
with that Company's offer to buy from its shareholders up to 2,000,000 of
its common shares. Prior to the sale and since 1986, Berkshire subsidiaries
owned 3,000,000 shares of Capital Cities or approximately 18% of that
Company's outstanding stock. Berkshire's gross realized gain from this
transaction was $457.5 million.
25
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) ASSETS AND LIABILITIES OF COMMERCIAL AND CONSUMER FINANCE BUSINESSES
Assets and liabilities of Berkshire's commercial and consumer finance
businesses are summarized below (in thousands):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 16,518 $ 64,367
Installment loans receivable . . . . . . . . . . . . . . . . . . . 163,827 167,609
Real estate loans (a) . . . . . . . . . . . . . . . . . . . . . . . -- 101,887
Mortgages and mortgage-backed securities (b) . . . . . . . . . . . 656,311 68,933
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,088 39,875
---------- ---------
$840,744 $442,671
======== ========
LIABILITIES
8.125% Notes, payable in 1996 . . . . . . . . . . . . . . . . . . . $120,000 $120,000
Borrowings under investment agreements (c) . . . . . . . . . . . . 551,909 8,862
Savings accounts (a) . . . . . . . . . . . . . . . . . . . . . . . -- 250,612
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,873 44,071
--------- ---------
$723,782 $423,545
======== ========
</TABLE>
(a) During 1993, a federal savings bank assumed Mutual Savings and Loan
Association's savings account liabilities, offset substantially by
real estate loans, cash and certain other assets of Mutual.
(b) At December 31, 1993, mortgage-backed securities of $534,352 were
included in this caption. Such securities consist of obligations of U.
S. government corporations and agencies and corporate obligations
collateralized by mortgages and other financial instruments. Each of
these securities has received the highest rating from at least two
rating agencies. At December 31, 1993, these securities had an average
reported maturity, taking into account estimates for early repayments,
of less than two years. The purchases of these securities were
financed from proceeds of short-term borrowings under investment
agreements with corresponding maturities. Estimated market values and
gross unrealized gains and losses as of December 31, 1993 and 1992,
are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Cost Gain Loss Market
-------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
1993 . . . . . . . . . $656,311 $1,375 $(1,660) $656,026
1992 . . . . . . . . . 68,933 1,197 (46) 70,084
</TABLE>
(c) Borrowings under investment agreements are made pursuant to contracts
with terms generally ranging from six months to twenty years calling
for interest payable, normally semiannually, at fixed rates ranging
from 2.5% to 6.0% per annum. Payments of amounts outstanding at
December 31, 1993, are expected to be required no earlier than as
follows (in thousands):
<TABLE>
<S> <C>
1994 . . . . . . . . . . . . . .$422,003
1995 . . . . . . . . . . . . . . 62,994
1996 . . . . . . . . . . . . . . 26,210
1997 . . . . . . . . . . . . . . 345
1998 . . . . . . . . . . . . . . 484
After 1998 . . . . . . . . . . . 39,873
</TABLE>
26
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) INCOME TAXES
The liability for income taxes as reflected in the accompanying
Consolidated Balance Sheets represent estimates of liabilities as follows (in
thousands):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1993 1992
----------- -----------
<S> <C> <C>
Payable currently . . . . . . . . . . . . . . . . . . . . $ 289,686 $ 92,534
Deferred . . . . . . . . . . . . . . . . . . . . . . . . 2,740,503 2,424,652
----------- -----------
$3,030,189 $2,517,186
========== ==========
</TABLE>
As discussed in Note 1(b), the Company adopted SFAS 109 as of January 1,
1993. The cumulative effect of adopting SFAS 109 on the Company's financial
statements was to decrease 1993 net income by about $71 million. This amount is
reflected in the 1993 Consolidated Statement of Earnings as the cumulative
effect of change in accounting principle. It primarily represents the impact of
adjusting deferred taxes related to unrealized appreciation of marketable
equity securities which arose prior to 1987 to reflect the then current capital
gain tax rate of 34% as opposed to the 28% rate which was in effect when the
deferred taxes originated. The effect of the accounting change on 1993 earnings
before income taxes and cumulative effect adjustment was not material. Prior
year financial statements have not been restated.
During 1993, the federal corporate income and capital gain tax rate was
increased from 34% to 35% retroactive to January 1, 1993. Accordingly, as
required under SFAS 109, the Company recorded a charge to 1993 earnings of
approximately $75 million. Most of this charge relates to the impact of
adjusting deferred taxes applicable to unrealized appreciation of marketable
equity securities.
The Consolidated Statements of Earnings reflect charges for income taxes
as shown below (in thousands):
<TABLE>
<CAPTION>
1993* 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . $320,419 $110,276 $120,121
State . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,857 24,430 20,281
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . 4,026 3,383 1,656
-------- -------- --------
$345,302 $138,089 $142,058
======== ======== ========
Current . . . . . . . . . . . . . . . . . . . . . . . . . . $400,762 $183,248 $152,563
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . (55,460) (45,159) (10,505)
-------- -------- --------
$345,302 $138,089 $142,058
======== ======== ========
</TABLE>
* Excludes the cumulative effect of change in accounting for income taxes
($70,984) and the effect of the change in federal income tax rate on
deferred taxes applicable to unrealized appreciation of marketable equity
securities ($75,348).
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at December 31,
1993 are shown below (in thousands):
<TABLE>
<CAPTION>
1993
----------
<S> <C>
Deferred tax liabilities:
Relating to unrealized appreciation of
marketable equity securities . . . . . . . . . . . . . . $2,848,681
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,638
----------
2,922,319
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . (181,816)
----------
Net deferred tax liability . . . . . . . . . . . . . . . . . . $2,740,503
==========
</TABLE>
For the years ended December 31, 1992 and 1991, deferred income tax
benefit results from the timing differences in the recognition of income and
expense for income tax and financial reporting purposes. The sources and
effects of those timing differences are presented below (in thousands):
<TABLE>
<CAPTION>
Applicable to: 1992 1991
----------- -----------
<S> <C> <C>
Deferred insurance premium acquisition costs . . . . . . . . . . . . . . . . $ 7,371 $ 3,392
Losses and loss adjustment expenses, net . . . . . . . . . . . . . . . . . . (61,522) (4,940)
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,309) (5,414)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,301 (3,543)
--------- --------
$(45,159) $(10,505)
======== ========
</TABLE>
27
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) INCOME TAXES (Continued)
Charges for income taxes are reconciled to hypothetical amounts computed
at the federal statutory rate in the table shown below (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---------- -------- --------
<S> <C> <C> <C>
Net earnings before income taxes . . . . . . . . . . . . . $1,189,718 $550,617 $592,986
========== ======== ========
Hypothetical amounts applicable to above
computed at the federal statutory rate . . . . . . . . . $ 416,401 $187,210 $201,615
Decreases, resulting from:
Tax-exempt interest income . . . . . . . . . . . . . . . (15,020) (14,727) (18,637)
Dividends received deduction . . . . . . . . . . . . . . (68,333) (62,085) (54,923)
State income taxes, less federal income tax benefit . . . . 13,557 16,128 13,385
Net other differences . . . . . . . . . . . . . . . . . . . (1,303) 11,563 618
---------- -------- --------
Total income taxes . . . . . . . . . . . . . . . . . . . . $ 345,302* $138,089 $142,058
========== ======== ========
</TABLE>
* Excludes the cumulative effect of change in accounting for income taxes
and the effect of the change in federal income tax rates on deferred
taxes applicable to unrealized appreciation of marketable equity
securities.
(7) BORROWINGS UNDER INVESTMENT AGREEMENTS AND OTHER DEBT
Liabilities reflected for this balance sheet caption are as follows (in
thousands):
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1993 1992
----------- ----------
<S> <C> <C>
Borrowings under investment agreements . . . . . . . . . . . . . . . . $ 915,079 $ 640,483
Zero Coupon Convertible Subordinated Notes . . . . . . . . . . . . . . -- 451,945
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,310 62,269
---------- ----------
$ 972,389 $1,154,697
=========== ==========
</TABLE>
Borrowings under investment agreements are made pursuant to contracts
with terms generally ranging from three months to forty years and calling for
interest payable, normally semiannually, at fixed rates ranging from 3.0% to
9.0% per annum. The borrowings are senior unsecured debt obligations of the
Company.
The Zero Coupon Convertible Subordinated Notes, originally issued in
1989, were redeemed in 1993. Each note was convertible at any time prior to
redemption into 0.4515 shares of common stock. Prior to the redemption, certain
note holders exercised their right to convert their notes into shares of
Berkshire common stock. The Company issued 2,162 shares to holders electing to
convert during 1992 and an additional 3,944 shares to holders electing
conversion subsequent to December 31, 1992. On January 4, 1993, holders not
electing to convert received $404.75 million in redemption proceeds for all
remaining outstanding notes.
No materially restrictive covenants are included in any of the various
debt agreements.
Payments of amounts outstanding at December 31, 1993, are expected to be
required no earlier than as follows (in thousands):
<TABLE>
<S> <C>
1994 . . . . . . . . . . . . . .$106,264
1995 . . . . . . . . . . . . . . 25,602
1996 . . . . . . . . . . . . . . 26,528
1997 . . . . . . . . . . . . . . 31,882
1998 . . . . . . . . . . . . . . 29,216
After 1998 . . . . . . . . . . . 752,897
</TABLE>
28
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) SHAREHOLDERS' EQUITY ACCOUNTS
Changes in Shareholders' Equity accounts during the most recent three
years were as follows (dollars in thousands except per share amounts):
<TABLE>
<CAPTION>
Common Capital
Stock of $5 in excess Net Unrealized Retained Treasury
Par Value of par value Appreciation Earnings Stock
----------- ------------ -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1990 . . . . . . . . . . . . . $6,876 $157,377 $2,310,433 $2,855,061 $42,293
Increase during 1991 in unrealized appreciation
included in carrying value of marketable equity
securities . . . . . . . . . . . . . . . . . . . 2,526,248
Change during 1991 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . (858,969)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . (14,723)
Net earnings 1991 . . . . . . . . . . . . . . . . . 439,908
------ -------- ---------- ---------- -------
Balance December 31, 1991 . . . . . . . . . . . . . 6,876 157,377 3,962,989 3,294,969 42,293
Increase during 1992 in unrealized appreciation
included in carrying value of marketable equity
securities . . . . . . . . . . . . . . . . . . . 1,644,810
Change during 1992 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . (559,235)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . (1,345)
Common stock (2,162 shares) issued upon conversion
of Zero Coupon Convertible Subordinated Notes. . 11 24,887
Net earnings 1992 . . . . . . . . . . . . . . . . . 407,285
------ -------- ---------- ---------- -------
Balance December 31, 1992 . . . . . . . . . . . . . 6,887 182,264 5,047,219 3,702,254 42,293
Common stock (3,944 shares) issued upon conversion
of Zero Coupon Convertible Subordinated Notes 20 45,457
Common stock (25,203 shares) issued in connection
with acquisition of Dexter Shoe Companies . . . 428,353 (4,659)
Increase during 1993 in unrealized appreciation
included in carrying value of marketable equity
securities . . . . . . . . . . . . . . . . . . . 316,002
Change during 1993 in deemed applicable income
taxes . . . . . . . . . . . . . . . . . . . . . (119,843)
Increase in minority shareholders' interest in
unrealized appreciation . . . . . . . . . . . . (2,501)
Net earnings 1993 . . . . . . . . . . . . . . . . . 688,121
Cumulative effect of adoption on December 31,
1993, of SFAS 115 (See notes 1[b] and 4) . . . . 171,775
------ -------- ---------- ---------- -------
Balance December 31, 1993 . . . . . . . . . . . . . $6,907 $656,074 $5,412,652 $4,390,375 $37,634
====== ======== ========== ========== =======
</TABLE>
(9) INTEREST AND DIVIDEND INCOME
Interest and dividend income for each of the past three years were
comprised of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
Interest earned by:
<S> <C> <C> <C>
Commercial and consumer finance businesses . . . . . . $ 55,958 $ 62,042 $ 62,839
Insurance businesses . . . . . . . . . . . . . . . . . 78,394 74,053 98,740
Other . . . . . . . . . . . . . . . . . . . . . . . . 22,597 56,898 59,713
Dividends earned by:
Insurance businesses . . . . . . . . . . . . . . . . . 306,725 287,464 244,702
Other . . . . . . . . . . . . . . . . . . . . . . . . 16,132 14,952 15,799
-------- -------- --------
Interest and dividend income . . . . . . . . . . . . . $479,806 $495,409 $481,793
======== ======== ========
</TABLE>
29
<PAGE> 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(10) INTEREST EXPENSE
Interest expense for 1992 and 1991 includes premiums paid and related
costs to permit redemption prior to maturity date of certain term debt.
Premiums paid and related costs for such redemptions were $22.5 million for
1992 and $5.7 million for 1991. Interest expense is comprised of interest on
debt, including the aforementioned early redemption premiums and related costs,
plus interest on savings accounts of Mutual Savings and Loan Association
("Mutual") as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- ---------
<S> <C> <C> <C>
Debt of commercial and consumer finance businesses . . . $ 18,412 $ 13,867 $ 14,286
Other debt and borrowings . . . . . . . . . . . . . . . . 56,545 98,643 89,250
Savings accounts of Mutual* . . . . . . . . . . . . . . . 5,792 11,986 18,311
-------- -------- --------
$ 80,749 $124,496 $121,847
======== ======== ========
</TABLE>
* See note 5(a).
(11) DIVIDEND RESTRICTIONS - INSURANCE SUBSIDIARIES
Payments of dividends by Insurance Group members are restricted by
insurance statutes and regulations. Without prior regulatory approval in 1994,
Berkshire can receive up to approximately $223 million as dividends from
insurance subsidiaries.
Combined shareholders' equity of insurance subsidiaries determined
pursuant to statutory accounting rules (Statutory Surplus as Regards
Policyholders) was approximately $11.5 billion at December 31, 1993. This
amount exceeded by approximately $2.1 billion the corresponding amount
determined on the basis of generally accepted accounting principles; the
difference principally represents deferred income tax assets and liabilities
recognized for financial reporting purposes but not for statutory reporting
purposes.
(12) FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires certain fair value
disclosures. Fair value disclosures are required for most investment securities
as well as other contractual assets and liabilities. Certain financial
instruments, including insurance contracts, were excluded from SFAS 107
disclosure requirements due to perceived difficulties in measuring fair value.
Accordingly, an estimation of fair value was not made with respect to the
Company's liabilities for unpaid losses and loss expenses.
In determining fair value, the Company used quoted market prices when
available. For instruments where quoted market prices were not available, the
Company used independent pricing services or appraisals by the Company's
management. Those services and appraisals reflected the estimated present
values utilizing current risk adjusted market rates of similar instruments.
Considerable judgement is necessarily required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value.
The carrying values of cash and cash equivalents, receivables and
accounts payable, accruals and other liabilities are deemed to be reasonable
estimates of their fair values. The estimated fair values of the Company's
other financial instruments as of December 31, 1993 and 1992, are as follows
(in thousands):
<TABLE>
<CAPTION>
Carrying Value Estimated Fair Value
-------------- --------------------
1993 1992 1993 1992
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Investments in obligations with fixed
maturities . . . . . . . . . . . . . . $ 2,108,602 $ 2,033,681 $ 2,260,227 $ 2,098,133
Investments in marketable equity
securities . . . . . . . . . . . . . . 12,540,197 11,652,654 12,540,197 11,959,197
Assets of commercial and consumer
finance businesses . . . . . . . . . . 840,744 442,671 859,199 463,998
Borrowings under investment agreements and
other debt . . . . . . . . . . . . . . 972,389 1,154,697 1,048,623 1,180,518
Liabilities of commercial and consumer
finance businesses . . . . . . . . . . 723,782 423,545 730,426 423,637
</TABLE>
30
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(13) SUPPLEMENTAL CASH FLOW INFORMATION
A summary of supplemental cash flow information is presented in the
following table (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Non-cash investing and financing activities:
Liabilities assumed in connection with acquisition of businesses $ 26,093 $ 45,735 $ 11,390
Common shares issued upon conversions of Zero Coupon
Convertible Subordinated Notes . . . . . . . . . . . . . 45,477 24,898 --
Common shares issued in connection with acquisition of
Dexter Shoe Companies . . . . . . . . . . . . . . . . . . 433,012 -- --
Cash paid during the year for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 235,015 121,027 183,097
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 70,629 95,730 93,951
</TABLE>
(14) QUARTERLY DATA
A summary of revenues and earnings by quarter for each of the last two
years is presented in the following table. This information is unaudited.
Dollars are in thousands, except per share amounts.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1993 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $725,827 $703,698 $744,127 $1,479,831
-------- -------- -------- ----------
Earnings:
Excluding realized investment gain and
cumulative effect of accounting change . . . . . . $ 84,105 $103,836 $ 12,389* $ 202,073
Realized investment gain . . . . . . . . . . . . . . 16,630 8,127 10,405 321,540**
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . (70,984) -- -- --
--------- ---------- ---------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . . $ 29,751 $111,963 $ 22,794 $ 523,613
======== ======== ======== ==========
Earnings per share:
Before realized investment gain and
cumulative effect of accounting change . . . . . . $72.97 $90.09 $10.75 $173.10
Realized investment gain . . . . . . . . . . . . . . 14.43 7.05 9.03 275.45
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . (61.59) -- -- --
------ ------ ------ -------
Net earnings . . . . . . . . . . . . . . . . . . . . $25.81 $97.14 $19.78 $448.55
====== ====== ====== =======
</TABLE>
* Includes a non-recurring charge of $75,348 ($65.38/share) representing
the effect of the change in federal income tax rates on deferred taxes
applicable to unrealized appreciation. See note 6.
** Includes $297,375 ($254.75/share), net of taxes, related to sale of
1,000,000 shares of Capital Cities/ABC, Inc. common stock. See note 4.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1992 Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $640,778 $655,876 $827,734 $904,952
-------- -------- -------- --------
Earnings:
Excluding realized investment gain . . . . . . . . . $ 66,682 $ 98,619 $ 26,247 $156,178
Realized investment gain . . . . . . . . . . . . . . 747 (575) 12,086 47,301
--------- -------- -------- --------
Net earnings . . . . . . . . . . . . . . . . . . . . $ 67,429 $ 98,044 $ 38,333 $203,479
======== ======== ======== ========
Earnings per share:
Before realized investment gain . . . . . . . . . . . $58.17 $86.02 $22.90 $136.20
Realized investment gain . . . . . . . . . . . . . . 0.65 (0.50) 10.54 41.25
------ ------ ------ -------
Net earnings . . . . . . . . . . . . . . . . . . . . $58.82 $85.52 $33.44 $177.45
====== ====== ====== =======
</TABLE>
See's Candies' sales peak at Easter and more notably so in the fourth
quarter when more than one-half of annual revenues for that business are
normally recorded. A non-seasonal factor that may influence Berkshire's interim
consolidated financial statements is that estimation error, inherent to the
process of determining liabilities for unpaid losses of insurance subsidiaries,
can be relatively more significant to results of interim periods than to
results for a full year. Variations in amount and timing of realized securities
gains or losses cause significant variations in periodic net earnings.
31
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(15) BUSINESS SEGMENT DATA
Berkshire identified eight business segments for purposes of 1993
reporting pursuant to Statement of Financial Accounting Standards No. 14.
These include the property and casualty insurance and reinsurance business (The
Insurance Segment) plus seven separately conducted non- insurance businesses as
follows:
<TABLE>
<CAPTION>
Business
identity and headquarters Product Activity
------------------------- ------- --------
<S> <C> <C>
See's Candies Candy Manufacture and distribution at retail
South San Francisco, CA and by catalog solicitation
World Book Encyclopedias and Publication and marketing,
Chicago, IL other reference materials principally by the direct sales method
Kirby, Douglas and
Cleveland Wood Divisions
of The Scott Fetzer Company Home cleaning systems Manufacture and sale principally to distributors
Cleveland, OH
Nebraska Furniture Mart Home furnishings Retailing
Omaha, NE
Buffalo News Newspaper Publication of a daily and Sunday newspaper
Buffalo, NY
H. H. Brown Shoe Co.,
Lowell Shoe, Inc. and
Dexter Shoe Companies Shoes Manufacture, importing and distribution at wholesale
Greenwich, CT, Hudson, and retail
NH and Dexter, ME
Fechheimer Bros. Co. Uniforms Manufacture and distribution at wholesale and retail
Cincinnati, OH
</TABLE>
The business segments identified above were responsible in 1993 for 83%
of Berkshire's consolidated revenues. Other businesses activities that
contributed for 1993, in the aggregate, 16% of Berkshire's consolidated
revenues, were as follows:
<TABLE>
<CAPTION>
Business identity Product/Service/Activity
------------------ ------------------------
<S> <C>
Adalet Conduit fittings, explosion proof junction boxes, couplings and terminators
BHR Real estate management
Berkshire Hathaway
Credit Corporation Commercial financing
Blue Chip Stamps Marketing motivational services
Borsheim's Retailing fine jewelry
Campbell Hausfeld Air compressors, air tools and painting systems
Carefree Sun and shade control products and accessories for RVs
France Appliance controls, ignition and sign transformers
Halex Zinc die cast electrical fittings
K&W Products Automotive compounds
Meriam Pressure and flow measurement devices
Northland Fractional horsepower motors
Powerwinch Boat winches, windlasses
Precision Steel service center
Quikut Cutlery
ScottCare Cardiopulmonary rehabilitation and monitoring equipment
Scott Fetzer Financial Group Commercial and consumer finance companies
Scot Labs Cleaning and maintenance chemicals
Stahl Custom steel service bodies and tool boxes for trucks
Wayne Furnace burners; sump, utility and sewage pumps
Wesco Financial Real estate management
Western Enterprises Compressed gas fittings and regulators
Western Plastics Molded plastic components
</TABLE>
32
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(15) BUSINESS SEGMENT DATA (Continued)
A disaggregation of Berkshire's consolidated data for each of the three
most recent years is presented in the tables which follow on this and the
following page. Amounts are in thousands.
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT BEFORE TAXES
1993 1992 1991 1993 1992 1991
---------- ---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Identified Segments:
Insurance . . . . . . . . . . . . $1,597,328 $1,078,419 $1,230,608 $ 961,774 $298,715 $323,006
Non-insurance businesses . . . . 1,443,079 1,284,523 1,204,755 224,795 209,871 176,134
---------- --------- ---------- ---------- -------- --------
3,040,407 2,362,942 2,435,363 1,186,569 508,586 499,140
Other than identified segments . . . 613,076 666,398 670,633 59,694 140,674 183,096
Interest expense * . . . . . . . . . (56,545) (98,643) (89,250)
---------- -------- --------
Aggregate consolidated total $3,653,483 $3,029,340 $3,105,996 $1,189,718 $550,617 $592,986
========== ========== ========== ========== ======== ========
</TABLE>
* Amounts of interest expense represent those for borrowings under
investment agreements and other debt exclusive of that of commercial and
consumer finance businesses. See note 10.
<TABLE>
<CAPTION>
INSURANCE SEGMENT REVENUES OPERATING PROFIT BEFORE TAXES
-----------------
1993 1992 1991 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Premiums earned: *
Primary or direct . . . . . . . . $ 249,585 $ 179,441 $ 175,882
Reinsurance assumed . . . . . . . 448,040 530,525 637,512
Reinsurance ceded . . . . . . . . (41,284) (45,673) (36,981)
---------- ---------- ----------
656,341 664,293 776,413
Underwriting . . . . . . . . . . . . $ 29,960 $(108,961) $(119,593)
Investment income . . . . . . . . . 385,119 361,517 343,442 375,946 355,067 331,846
Realized investment gain . . . . . . 555,868 52,609 110,753 555,868 52,609 110,753
---------- ---------- ---------- -------- --------- ---------
$1,597,328 $1,078,419 $1,230,608 $961,774 $298,715 $323,006
========== ========== ========== ======== ======== ========
</TABLE>
* Premiums written were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Primary or direct . . . . . . . . $247,173 $153,177 $169,120
Reinsurance assumed . . . . . . . 534,383 626,159 669,148
Reinsurance ceded . . . . . . . . (38,854) (39,769) (35,746)
--------- --------- ---------
$742,702 $739,567 $802,522
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NON-INSURANCE BUSINESS SEGMENTS REVENUES OPERATING PROFIT BEFORE TAXES
-------------------------------
1993 1992 1991 1993 1992 1991
---------- ---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Candy . . . . . . . . . . . . . . . . . $ 201,243 $ 197,186 $ 195,978 $ 40,270 $ 41,382 $ 41,416
Encyclopedias, other reference material 198,807 246,107 311,509 19,375 28,228 22,232
Home cleaning systems . . . . . . . . . 193,891 190,072 192,001 40,944 37,744 37,332
Home furnishings . . . . . . . . . . . . 209,134 186,096 171,002 21,094 16,665 13,939
Newspaper . . . . . . . . . . . . . . . 145,470 139,764 130,259 50,390 47,291 36,527
Shoes . . . . . . . . . . . . . . . . . 372,064 215,006 104,045 40,003 25,586 12,464
Uniforms . . . . . . . . . . . . . . . . 122,470 110,292 99,961 12,719 12,975 12,224
---------- ---------- ---------- -------- -------- --------
$1,443,079 $1,284,523 $1,204,755 $224,795 $209,871 $176,134
========== ========== ========== ======== ======== ========
</TABLE>
33
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
BERKSHIRE HATHAWAY INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(15) BUSINESS SEGMENT DATA (Continued)
<TABLE>
<CAPTION>
OTHER THAN IDENTIFIED SEGMENTS REVENUES OPERATING PROFIT BEFORE TAXES
------------------------------
1993 1992 1991 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Other businesses . . . . . . . . . . . . $595,513 $567,719 $524,395 $ 54,808 $ 54,321 $ 49,355
Not identified with specific businesses:
Interest and dividend income . . . . 26,608 61,011 63,686 26,608 61,011 63,686
Realized investment gain (loss) . . . (9,444) 37,328 81,725 (9,444) 37,328 81,725
All other except interest expense . . 399 340 827 (12,278) (11,986) (11,670)
-------- --------- --------- -------- -------- --------
$613,076 $666,398 $670,633 $ 59,694 $140,674 $183,096
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DEPREC. & AMORT.
CAPITAL EXPENDITURES * OF TANGIBLE ASSETS
1993 1992 1991 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Insurance . . . . . . . . . . . . . . . $ 1,207 $ 1,071 $ 1,437 $ 812 $ 840 $ 992
Candy . . . . . . . . . . . . . . . . . 6,531 4,167 4,687 4,116 4,061 3,882
Encyclopedias, other reference material 736 184 3,107 1,449 1,379 1,449
Home cleaning systems . . . . . . . . . 1,470 769 1,104 5,259 4,942 5,092
Home furnishings . . . . . . . . . . . . 5,254 8,528 2,552 2,663 2,210 1,613
Newspaper . . . . . . . . . . . . . . . 3,602 3,370 817 1,855 2,373 2,949
Shoes . . . . . . . . . . . . . . . . . 4,407 2,171 1,050 5,201 3,027 1,580
Uniforms . . . . . . . . . . . . . . . . 1,041 2,660 1,482 1,836 1,833 1,411
Other . . . . . . . . . . . . . . . . . 12,962 8,881 13,648 17,321 14,692 14,094
------- ------- ------- ------- ------- -------
$37,210 $31,801 $29,884 $40,512 $35,357 $33,062
======= ======= ======= ======= ======= =======
</TABLE>
* Expenditures which were part of business acquisitions are excluded.
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
AT YEAR-END
--------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Insurance . . . . . . . . . . . . . . . . . . . . . . . $16,163,378 $14,788,237 $12,406,654
Candy . . . . . . . . . . . . . . . . . . . . . . . . . 70,201 65,880 68,300
Encyclopedias, other reference material . . . . . . . . 74,676 83,778 94,927
Home cleaning systems . . . . . . . . . . . . . . . . . 48,703 50,692 51,929
Home furnishings . . . . . . . . . . . . . . . . . . . . 101,147 88,331 76,396
Newspaper . . . . . . . . . . . . . . . . . . . . . . . 45,402 43,751 44,061
Shoes . . . . . . . . . . . . . . . . . . . . . . . . . 641,548 208,218 157,902
Uniforms . . . . . . . . . . . . . . . . . . . . . . . . 87,546 85,392 74,190
Other . . . . . . . . . . . . . . . . . . . . . . . . . 2,287,868 1,717,719 1,487,543
---------- ----------- -----------
$19,520,469 $17,131,998 $14,461,902
=========== =========== ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
Part III
Except for the information set forth under the caption "Executive
Officers of the Registrant" in Part I hereof, information required by this Part
(Items 10, 11, 12, and 13) is incorporated by reference from the Registrant's
definitive proxy statement, filed pursuant to Regulation 14A, for the Annual
Meeting of Shareholders of the Registrant to be held on April 25, 1994, which
meeting will involve the election of directors.
34
<PAGE> 36
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
--------------------
The following consolidated financial statements, as well as the
Independent Auditors' Report, are included in Part II Item 8 of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report 18
Consolidated Balance Sheets at December 31, 1993 and 1992 19
Consolidated Statements of Earnings for the years ended
1993, 1992 and 1991 20
Consolidated Statements of Cash Flows for the years ended
1993, 1992 and 1991 21
Notes to Consolidated Financial Statements 22
</TABLE>
<TABLE>
<CAPTION>
(a) 2. Financial Statement Schedules PAGE
----------------------------- ----
<S> <C>
Independent Auditors' Report on Schedules 37
Schedule I -- Summary of Investments 38
- Other than Affiliates, at December 31, 1993
Schedule III -- Parent Company 39
Condensed Balance Sheets as of December 31, 1993
and 1992 and Condensed Statements of Earnings and
Cash Flows for the years ended 1993, 1992, and 1991.
Schedule X -- Supplementary Income Statement Information, 41
for the years ended 1993, 1992, and 1991
</TABLE>
Other schedules are omitted because they are not required,
information required therein is not applicable, or is reflected in the
Financial Statements or notes thereto.
(a) 3. Exhibits
--------
See the "Exhibit Index" at page 42.
(b) Reports on Form 8-K
--------------------
None
35
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BERKSHIRE HATHAWAY INC.
Date: March 30, 1994 /s/ Marc D. Hamburg
----------------------------
Marc D. Hamburg
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Warren E. Buffett Chairman of the Board March 30, 1994
- -------------------------- of Directors - Chief --------------
Warren E. Buffett Executive Officer Date
/s/ Charles T. Munger Vice Chairman of the March 30, 1994
- -------------------------- Board of Directors --------------
Charles T. Munger Date
/s/ Malcolm G. Chace, III Director March 30, 1994
- -------------------------- --------------
Malcolm G. Chace, III Date
/s/ Walter Scott, Jr. Director March 30, 1994
- -------------------------- --------------
Walter Scott, Jr. Date
/s/ Marc D. Hamburg Vice President - March 30, 1994
- -------------------------- Principal Financial --------------
Marc D. Hamburg Officer Date
/s/ Daniel J. Jaksich Controller March 30, 1994
- -------------------------- --------------
Daniel J. Jaksich Date
36
<PAGE> 38
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
To the Board of Directors and Shareholders
Berkshire Hathaway Inc.
We have audited the consolidated financial statements of Berkshire
Hathaway Inc. and subsidiaries as of December 31, 1993 and 1992, and for each
of the three years in the period ended December 31, 1993, and have issued our
report thereon dated March 7, 1994, which report includes an explanatory
paragraph regarding changes in accounting methods for income taxes and
investments; such report is included elsewhere in this Form 10-K. Our audits
also included the consolidated financial statement schedules of Berkshire
Hathaway Inc. and subsidiaries, listed in Item 14. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE
Omaha, Nebraska
March 7, 1994
37
<PAGE> 39
Berkshire Hathaway Inc. and Subsidiaries
Summary of Investments
December 31, 1993
Schedule I
<TABLE>
<CAPTION>
000's Omitted
Number of Cost Balance
shares or or Sheet
par value Adjusted Market Carrying
of bonds Cost Value Value
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Obligations with Fixed Maturities:
Bonds:
U.S. Government and U.S. Government
agencies . . . . . . . . . . . . . . . . . . . 9,180 $ 9,286 $ 9,413 $ 9,286
States, municipalities and political
subdivisions . . . . . . . . . . . . . . . . . 654,366 653,884 703,626 653,884
Mortgage backed securities
various issuers **** . . . . . . . . . . . . . 63,900 63,550 65,178 63,550
Redeemable preferred stocks -
Salomon Inc* . . . . . . . . . . . . . . . . . . 700 700,000 875,000** 700,000
Various issuers . . . . . . . . . . . . . . . . *** 681,882 607,010 681,882
---------- ---------- ----------
Total Obligations with Fixed Maturities . . . $2,108,602 $2,260,227 $2,108,602
========== ========== ==========
Marketable Equity Securities:
Common Stocks:
Banks and insurance companies:
GEICO Corporation* . . . . . . . . . . . . . . 34,250 $ 45,713 $ 1,759,594 $ 1,759,594
Wells Fargo & Company* . . . . . . . . . . . . 6,791 423,680 878,614 878,614
Others . . . . . . . . . . . . . . . . . . . . *** 171,631 222,078 222,078
Industrial and miscellaneous:
Capital Cities/ABC, Inc.* . . . . . . . . . . 2,000 345,000 1,239,000 1,239,000
The Coca-Cola Company* . . . . . . . . . . . . 93,400 1,023,920 4,167,975 4,167,975
Federal Home Loan Mortgage Assn.* . . . . . . 13,655 307,505 681,023 681,023
General Dynamics Corporation* . . . . . . . . 4,350 94,938 401,287 401,287
The Gillette Company* . . . . . . . . . . . . 24,000 600,000 1,431,000 1,431,000
The Washington Post Company* . . . . . . . . . 1,728 9,731 440,148 440,148
Others . . . . . . . . . . . . . . . . . . . . *** 953,647 864,779 864,779
Nonredeemable preferred stocks -
Various issuers . . . . . . . . . . . . . . . . *** 341,993 454,699 454,699
---------- ----------- -----------
Total Marketable Equity Securities . . . . . . $4,317,758 $12,540,197 $12,540,197
========== =========== ===========
</TABLE>
* These issues are stated separately in accordance with note 2(ii)(1) to
Rule 12-02 of Regulation S-X.
** There is no regular trading market for this security. The market
value is based upon fair value as determined by the valuation
committee of Registrant's Board of Directors.
*** Not meaningful
**** Excludes mortgage backed securities of various issuers held by
commercial and consumer finance businesses. At December 31, 1993, the
aggregate cost and carrying value of such securities was $534,352 and
the aggregate market value was $533,010.
38
<PAGE> 40
BERKSHIRE HATHAWAY INC.
(Parent Company)
Condensed Financial Information
(Dollars in thousands)
Schedule III
This Schedule includes the accounts of the Buffalo News Division, an
autonomous division of Registrant. Its business is the publishing of a daily
and Sunday newspaper in Buffalo, New York.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1993 1992
---------- ----------
<S> <C> <C>
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 359,938 $ 595,255
Investments in consolidated subsidiaries . . . . . . . . . . . . . . . . 11,074,971 9,310,343
Investments - other than consolidated subsidiaries . . . . . . . . . . . 144,102 127,087
Other assets (includes identifiable assets of the
Buffalo News Division of $45,402 and $43,751 at
December 31, 1993 and 1992 respectively) . . . . . . . . . . . . . . 52,735 54,938
----------- -----------
$11,631,746 $10,087,623
=========== ===========
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . $ 28,905 $ 26,286
Borrowings under investment agreements and other debt . . . . . . . . . 925,079 1,103,205
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,388 61,801
----------- -----------
1,203,372 1,191,292
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . 10,428,374 8,896,331
----------- -----------
$11,631,746 $10,087,623
=========== ===========
</TABLE>
<TABLE>
STATEMENTS OF EARNINGS
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Income items:
From consolidated subsidiaries:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 735 $ 499 $ 163
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,664 313,398 168,109
Undistributed earnings . . . . . . . . . . . . . . . . . . . . 528,535 79,926 231,300
-------- -------- --------
698,934 393,823 399,572
Interest and dividends - other investments . . . . . . . . . . . . 14,832 48,907 50,877
Realized investment gain (loss) . . . . . . . . . . . . . . . . . (9,446) 37,328 67,816
Revenues of Buffalo News Division . . . . . . . . . . . . . . . . 145,470 139,764 130,259
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 254 544
--------- --------- ---------
850,189 620,076 649,068
-------- -------- --------
Cost and expense items:
Costs and expenses of Buffalo News Division . . . . . . . . . . . 95,080 92,473 93,732
General and administrative . . . . . . . . . . . . . . . . . . . . 5,566 5,784 6,783
Interest and finance charges . . . . . . . . . . . . . . . . . . . 50,611 90,613 81,310
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . 10,811 23,921 27,335
--------- --------- ---------
162,068 212,791 209,160
-------- -------- --------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $688,121 $407,285 $439,908
======== ======== ========
</TABLE>
See Note to Condensed Financial Information on following page.
39
<PAGE> 41
BERKSHIRE HATHAWAY INC.
(Parent Company)
Condensed Financial Information
(Dollars in thousands)
Schedule III (continued)
See headnote on preceding page.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $688,121 $407,285 $439,908
Adjustments to reconcile net income to
cash flows from operating activities:
Undistributed current earnings of subsidiaries . . . . . (528,535) (79,926) (231,300)
Realized investment (gain) loss . . . . . . . . . . . . 9,446 (37,328) (67,816)
Increase (decrease) in income taxes payable . . . . . . 187,587 57,896 (28,772)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (1,216) 45,856 3,016
-------- -------- --------
Net cash flows from operating activities . . . . . . . . . 355,403 393,783 115,036
-------- -------- --------
Cash flows from investing activities:
Investments in and advances to consolidated
subsidiaries . . . . . . . . . . . . . . . . . . . . . . (298,575) (197,212) (128,496)
Purchases of investments . . . . . . . . . . . . . . . . . (162,789) (39,146) (139,865)
Proceeds on sales of investments . . . . . . . . . . . . . 2,757 160,264 330,024
--------- -------- --------
Net cash flows from investing activities . . . . . . . . . (458,607) (76,094) 61,663
-------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings . . . . . . . . . . . . . . . . . 1,259,798 952,901 434,688
Repayment of borrowings . . . . . . . . . . . . . . . . . . (1,391,911) (879,109) (439,495)
---------- -------- --------
Net cash flows from financing activities . . . . . . . . . (132,113) 73,792 (4,807)
---------- -------- --------
Increase (decrease) in cash and cash equivalents . . . . . . . (235,317) 391,481 171,892
Cash and cash equivalents at beginning of year . . . . . . . . 595,255 203,774 31,882
--------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . $ 359,938 $595,255 $203,774
========== ======== ========
Other cash flow information:
Income taxes paid . . . . . . . . . . . . . . . . . . . . . $ 212,313 $105,592 $168,438
Interest paid . . . . . . . . . . . . . . . . . . . . . . . 47,007 63,659 55,573
</TABLE>
NOTE TO CONDENSED FINANCIAL INFORMATION
Principal repayments of the Registrant's borrowings under investment
agreements and other debt outstanding at December 31, 1993 are expected to be
required no earlier than as follows:
<TABLE>
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . $102,013
1995 . . . . . . . . . . . . . . . . . . . . . . . 24,793
1996 . . . . . . . . . . . . . . . . . . . . . . . 25,775
1997 . . . . . . . . . . . . . . . . . . . . . . . 31,087
1998 . . . . . . . . . . . . . . . . . . . . . . . 27,418
After 1998 . . . . . . . . . . . . . . . . . . . . 713,993
</TABLE>
For additional information regarding Registrant's borrowings under
investment agreements and other debt, see Note 7 to the Consolidated Financial
Statements on page 28.
40
<PAGE> 42
Berkshire Hathaway Inc. and Subsidiaries
Supplementary Income Statement Information
(Dollars in thousands)
Schedule X
Certain items of expense that exceeded 1% of revenues in the
Consolidated Statement of Earnings were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * * $31,686
</TABLE>
* Item did not exceed 1% of revenues
41
<PAGE> 43
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
3 Restated Certificate of Incorporation
3.1 By-Laws
4 Form of Indenture dated as of December 1, 1987 between
Berkshire Hathaway Inc. and The First National Bank of
Boston, as trustee, with respect to 9 3/4% Debentures due
January 15, 2018. Incorporated by reference to Exhibit 4 to
Registration Statement No. 33-19000 filed on Form S-3
OTHER INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS OF
LONG-TERM DEBT OF REGISTRANT AND ITS SUBSIDIARIES ARE NOT
BEING FILED SINCE THE TOTAL AMOUNT OF SECURITIES AUTHORIZED
BY ALL OTHER SUCH INSTRUMENTS DOES NOT EXCEED 10% OF THE
TOTAL ASSETS OF THE REGISTRANT AND ITS SUBSIDIARIES ON A
CONSOLIDATED BASIS AS OF DECEMBER 31, 1993. THE REGISTRANT
HEREBY AGREES TO FURNISH TO THE COMMISSION UPON REQUEST A
COPY OF ANY SUCH DEBT INSTRUMENT TO WHICH IT IS A PARTY.
10.1 Agreement with Capital Cities Communications, Inc.
dated January 2, 1986. Incorporated by reference to Exhibit
10.1 to the Registrant's 1990 Annual Report on Form 10-K.
10.15 Letter Agreement between Berkshire Hathaway Inc. and
Capital Cities/ABC, Inc. dated October 29, 1993 relating to
Capital Cities/ABC, Inc.'s offer to purchase from its
shareholders up to 2,000,000 shares of Common Stock.
10.2 Written Description of Agreement with Michael A.
Goldberg re Annual Bonus Compensation dated March 25, 1991.
Incorporated by reference to Exhibit 10.2 to the
Registrant's 1990 Annual Report on Form 10-K.
10.3 Letter Agreements between Berkshire Hathaway Inc. and
Salomon Inc dated September 27, 1987 and September 28, 1987
relating to the purchase by Registrant of an Issue of
Series A Cumulative Convertible Preferred Stock of Salomon
Inc and Certificate of Designation of said Preferred Stock.
Incorporated by reference to Exhibit 10.3 to Registrant's
1992 Annual Report on Form 10-K.
10.4 Letter Agreement dated September 1, 1986 between
Berkshire Hathaway Inc. and Trustee under indenture
covering debt securities issued by Scott Fetzer Financial
Group, Inc., formerly World Book Finance, Inc. Incorporated
by reference to Exhibit 10.4 to the Registrant's 1991 Annual
Report on Form 10-K.
10.5 Investment Agreement dated July 1, 1986, between
Berkshire Hathaway Inc. and Scott Fetzer Financial Group,
Inc., formerly World Book Finance, Inc. and Amendment
thereto dated August 31, 1986. Incorporated by reference to
Exhibit 10.5 to the Registrant's 1991 Annual Report on Form
10-K.
12 Statement of computation of ratio of earnings to fixed
charges
22 Subsidiaries of the Registrant
23 Independent Auditors' Consent
</TABLE>
42
<PAGE> 1
Reg S-K
Item 601
Exhibit 3
Page 1 of 4
RESTATED CERTIFICATE OF INCORPORATION
OF
BERKSHIRE HATHAWAY INC.
Berkshire Hathaway Inc., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), hereby certifies as follows:
1. The name of the Corporation is Berkshire Hathaway Inc.
Berkshire Hathaway Inc. was originally incorporated under the
name of Hathdel Inc., and the original Certificate of
Incorporation was filed with the Secretary of State of the State
of Delaware on March 12, 1973.
2. This Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 245 of
the General Corporation Law of the State of Delaware by the Board
of Directors of the Corporation without a vote of the
stockholders of the Corporation. This Restated Certificate of
Incorporation only restates and integrates and does not further
amend the provisions of the Corporation's Certificate of
Incorporation as heretofore amended or supplemented, and there is
no discrepancy between those provisions and this Restated
Certificate of Incorporation except that provisions whose
omission is not deemed a further amendment under Section 245(c)
of the General Corporation Law of the State of Delaware have been
omitted.
3. The text of the Restated Certificate of Incorporation
as heretofore amended or supplemented is hereby restated to read
in its entirety as follows:
FIRST: The name of the Corporation is Berkshire Hathaway
Inc.
SECOND: The registered office of the Corporation in the
State of Delaware is located at No. 1209 Orange Street in the
City of Wilmington, County of New Castle. The name and address
of its registered agent is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authorized is one million five
<PAGE> 2
Page 2 of 4
hundred thousand (1,500,000) shares of Common Stock, each of
which shall have a par value of Five Dollars ($5.00).
The shares of Common Stock may be issued by the Corporation
from time to time for such consideration, having a value not less
than par value, as may be fixed from time to time by the Board of
Directors of the Corporation. Any and all shares so issued for
which the consideration so fixed has been paid or delivered to
the Corporation shall be deemed fully paid stock and shall not be
liable to any further call or assessment thereon, and the holders
of said shares shall not be liable for any further payments in
respect of such shares.
Each holder of Common stock shall be entitled to one vote
for each share of Common Stock standing in his name on the books
of the Corporation.
FIFTH: Omitted.
SIXTH: The following additional provisions are in
furtherance and not limitation of any power, privilege or purpose
conferred or permitted by law, this certificate or the by-laws:
1. Except as may be otherwise expressly required by law,
or the provisions of this Certificate or the by-laws,
the Board of Directors of the Corporation shall have
and may exercise, transact, manage, promote and carry
on all of the powers, authorities, businesses,
objectives and purposes of the Corporation.
2. The election of directors need not be by ballot unless
the by-laws so require.
3. The Board of Directors of the Corporation is authorized
and empowered to make, alter, amend and repeal the
By-laws of the Corporation in any manner not
inconsistent with the laws of the State of Delaware.
4. The Board of Directors may fix from time to time the
compensation of its members.
5. The Corporation may indemnify or insure or both
indemnify and insure any person who is or was a
director, officer, employee or agent of the Corporation
or, at its request, of another corporation,
partnership, joint venture, trust or other enterprise,
to the full extent provided or permitted by its
by-laws, as from time to time amended, and to the full
extent to which those indemnified may now or hereafter
be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise.
<PAGE> 3
Page 3 of 4
SEVENTH: No contract or other transaction between the
Corporation and any other corporation, and no act of the
Corporation shall in any way be affected or invalidated by the
fact that any of the directors of the Corporation are pecuniarily
or otherwise interested in or are directors or officers of such
other corporation. Any director individually, or any firm of
which such director may be a member, may be a party to or may be
pecuniarily or otherwise interested in any contract or
transaction of the Corporation, provided that the fact that he or
such firm is so interested shall be disclosed or shall have been
known to the Board of Directors, or a majority thereof; and any
director of the Corporation, who is also a director or officer of
such other corporation, or is so interested, may be counted in
determining the existence of a quorum at any meeting of the Board
of Directors of the Corporation which shall authorize such
contract or transaction, and may vote thereat to authorize any
such contract or transaction, with like force and effect, as if
he were not such director or officer of such other corporation or
not so interested.
EIGHTH: Any action which would otherwise be required or
permitted to be taken by the vote of stockholders at a meeting
thereof may instead be taken by the written consent of
stockholders who would be entitled to vote upon such action if
such a meeting were held having not less than the percentage of
the total number of votes which would have been required to take
such action at such a meeting.
NINTH: Omitted.
TENTH: No director of this Corporation shall have
personal liability to the Corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director.
The foregoing provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware or (iv)
for any transaction from which the director derived an improper
personal benefit. In the event that the General Corporation Law
of the State of Delaware is amended after approval of this
Article by the stockholders so as to authorize corporate action
further eliminating or limiting the liability of directors, the
liability of a director of this Corporation shall thereupon be
eliminated or limited to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended
from time to time. The provisions of this Article shall not be
deemed to limit or preclude indemnification of a director by the
Corporation for any liability of a director which has not been
eliminated by the provisions of this Article.
<PAGE> 4
Page 4 of 4
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation has been signed by the Company this 21st day of
December, 1993.
Berkshire Hathaway Inc.
By: /s/ Marc D. Hamburg
--------------------------
Marc D. Hamburg
Vice President
Attest:
/s/ Forrest N. Krutter
- ---------------------------
Forrest N. Krutter
Secretary
<PAGE> 1
Reg S-K
Item 601
Exhibit 3.1
Page 1 of 16
BY-LAWS
OF
BERKSHIRE HATHAWAY INC.
(as amended through April 29, 1991)
SECTION 1
Certification of Incorporation
1.1. The nature of the business or purposes of the corpo-
ration shall be as set forth in its certificate of incorporation.
These by-laws, the powers of the corporation and of its directors
and stockholders, and all matters concerning the management of
the business and conduct of the affairs of the corporation shall
be subject to such provisions in regard thereto, if any, as are
set forth in the certificate of incorporation; and the certifi-
cate of incorporation is hereby made a part of these by-laws. In
these by-laws, references to the certificate of incorporation
mean the provisions of the certificate of incorporation (as that
term is defined in the General Corporation Law of Delaware) of
the corporation as from time to time in effect, and references to
these by-laws or to any requirement or provision of law mean
these by-laws or such requirement or provision of law as from
time to time in effect.
SECTION 2
Offices
2.1. Registered Office. The registered office of the
corporation shall be in the City of Wilmington, County of New
Castle, Delaware.
2.2. Other Offices. The corporation may also have an
office or offices at such other place or places, either within or
without the State of Delaware, as the Board of Directors of the
corporation from time to time may determine or as the business of
the corporation may require.
<PAGE> 2
Page 2 of 16
SECTION 3
Stockholders
3.1. Annual Meeting. The annual meeting of the stockhold-
ers shall be held at nine-thirty o'clock in the forenoon on the
last Monday in April in each year, unless that day be a legal
holiday at the place where the meeting is to be held, in which
case the meeting shall be held at the same hour on the next
succeeding day not a legal holiday, or at such other date and
time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business
as may be required by law or these by-laws or as may be specified
by the chairman of the board or by a majority of the directors
then in office or by vote of the board of directors and of which
notice was given in the notice of the meeting. Notwithstanding
the foregoing, the first annual meeting of the corporation shall
be held in the year 1974.
3.2. Special Meeting in Place of Annual Meeting. If the
election for directors shall not be held on the day designated by
these by-laws, the directors shall cause the election to be held
as soon thereafter as convenient, and to that end, if the annual
meeting is omitted on the day herein provided therefor or if the
election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted
meeting or election, and any business transacted or election held
at such special meeting shall have the same effect as if trans-
acted or held at the annual meeting, and in such case all refer-
ences in these by-laws to the annual meeting of the stockholders,
or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting
shall be called, and the purposes thereof shall be specified in
the call, as provided in Section 3.3.
3.3. Special Meetings. A special meeting of the stock-
holders may be called at any time by the chairman of the board or
by the board of directors. A special meeting of the stockhold-
ers shall be called by the secretary, or in the case of the
death, absence, incapacity or refusal of the secretary, by an
assistant secretary or some other officer, upon application of a
majority of the directors or of one or more stockholders who are
entitled to vote and who hold at least fifty percent of the
capital stock issued and outstanding. Any such application shall
state the purpose or purposes of the proposed meeting. Any such
call shall state the place, date, hour, and purposes of the
meeting.
<PAGE> 3
Page 3 of 16
3.4. Place of Meeting. All meetings of the stockholders
for the election of directors or for any other purpose shall be
held at such place within or without the State of Delaware as may
be determined from time to time by the chairman of the board or
the board of directors. Any adjourned session of any meeting of
the stockholders shall be held at the place designated in the
vote of adjournment.
3.5. Notice of Meetings. Except as otherwise provided by
law, a written notice of each meeting of stockholders stating the
place, day and hour thereof and, in the case of a special meet-
ing, the purposes for which the meeting is called, shall be given
not less than ten nor more than sixty days before the meeting, to
each stockholder entitled to vote thereat; and to each stockhold-
er who, by law, by the certificate of incorporation or by these
by-laws, is entitled to notice, by leaving such notice with him
or at his residence or usual place of business, or by depositing
it in the United States mail, postage prepaid, and addressed to
such stockholder at his address as it appears in the records of
the corporation. Such notice shall be given by the secretary, or
by an officer or person designated by the board of directors, or
in the case of a special meeting by the officer calling the
meeting. As to any adjourned session of any meeting of stock-
holders, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more
than thirty days or if after the adjournment a new record date is
set for the adjourned session, notice of any such adjourned
session of the meeting shall be given in the manner heretofore
described. No notice of any meeting of stockholders or any
adjourned session thereof need be given to a stockholder if a
written waiver of notice, executed before or after the meeting or
such adjournment session by such stockholder is filed with the
records of the meeting or if the stockholder attends such meeting
without objecting at the beginning of the meeting to the transac-
tion of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the stockholders or any adjourned
session thereof need be specified in any written waiver of
notice.
3.6. Quorum of Stockholders. At any meeting of the
stockholders, whether the same be an original or an adjourned
session, a quorum shall consist of a majority in interest of all
stock issued and outstanding and entitled to vote at the meeting,
except in any case where a larger quorum is required by law, by
the certificate of incorporation or by these by-laws. Any
meeting may be adjourned from time to time by a majority of the
votes properly cast upon the question, whether or not a quorum is
present.
<PAGE> 4
Page 4 of 16
3.7. Action by Vote. When a quorum is present at any
meeting, whether the same be an original or an adjourned session,
a plurality of the votes properly cast for election to any office
shall elect to such office and a majority of the votes properly
cast upon any question other than an election to an office shall
decide the question, except when a larger vote is required by
law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to
vote in the election.
3.8. Action without Meetings. Unless otherwise provided
in the certificate of incorporation, any action required or
permitted to be taken by stockholders for or in connection with
any corporate action may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were
present and voted.
If action is taken by unanimous consent of stockholders, the
writing or writings comprising such unanimous consent shall be
filed with the records of the meetings of stockholders.
If action is taken by less than unanimous consent of stock-
holders and in accordance with the foregoing, there shall be
filed with the records of the meetings of stockholders the
writing or writings comprising such less than unanimous consent
and a certificate signed and attested to by the secretary that
prompt notice was given to all stockholders of the taking of such
action without a meeting and by less than unanimous written
consent.
In the event that the action which is consented to is such
as would have required the filing of a certificate under any of
the provisions of the General Corporation Law of Delaware, if
such action had been voted upon by the stockholders at a meeting
thereof, the certificate filed under such provision shall state
that written consent has been given under Section 228 of said
General Corporation Law, in lieu of stating that the stockholders
have voted upon the corporate action in question, if such last
mentioned statement is required thereby.
3.9. Proxy Representation. Every stockholder may autho-
rize another person or persons to act for him by proxy in all
matters in which a stockholder is entitled to participate,
whether by waiving notice of any meeting, objecting to or voting
or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder
or by his attorney-in-fact or be authorized by such other means
as is provided in
<PAGE> 5
Page 5 of 16
Section 212 of the Delaware General Corporation
Law. No proxy shall be voted or acted upon after three years
from its date unless such proxy provides for a longer period. A
duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest
with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a
proxy may but need not be limited to specified action, provided,
however, that if a proxy limits its authorization to a meeting or
meetings of stockholders, unless otherwise specifically provided
such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjourn-
ment thereof.
3.10. Votes Per Share. Unless otherwise provided in the
certificate of incorporation, each stockholder shall be entitled
to one vote for each share of capital stock having voting power
held by such stockholder.
3.11. List of Stockholders. The officer who has charge of
the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in his name.
Such list shall be open to examination by any stockholder, for
any purpose germane to the meeting, during ordinary business
hours, for at least ten days prior to the meeting either at the
place within the city where the meeting is to be held, which
place should be specified in the notice of such meeting, or at
the place where such meeting is to be held, and shall also be
produced at the time and place of the meeting during the whole
time thereof and subject to the inspection of any stockholder who
may be present. The stock ledger shall be the only evidence as
to who are stockholders entitled to examine such list or to vote
in person or by proxy at such meeting.
SECTION 4
Board of Directors
4.1. Number. The Board of Directors shall consist of one
or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. Directors need not
be stockholders.
4.2. Tenure. Except as otherwise provided by law, by the
certificate of incorporation or by these by-laws, each director
shall hold office until his successor is elected and qualified,
or until he sooner dies, resigns, is removed or becomes disquali-
fied.
<PAGE> 6
Page 6 of 16
4.3. Powers. The business of the corporation shall be managed by the
board of directors who shall have and may exercise all the power of the
corporation and do all such lawful acts and things as are not by law, the
certificate of incorporation or these by-laws directed or required to be
exercised or done by the stockholders.
4.4. Vacancies. Vacancies and any newly created directorships
resulting from any increase in the number of directors may be filled by vote of
the stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at
a future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other action.
4.5. Committees. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, including the
power to authorize the seal of the corporation to be affixed to all papers
which require it and the power and authority to declare dividends, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware; excepting,
however, such powers which by law, by the certificate of incorporation or by
these by-laws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his alternate, if any, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Except as the board of directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of the business by the board of
<PAGE> 7
Page 7 of 16
directors. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors upon request.
4.6. Regular Meetings. Regular meetings of the board of
directors may be held without call or notice at such place within
or without the State of Delaware and at such times the board may
from time to time determine, provided that notice of the first
regular meeting following any such determination shall be given
to absent directors. A regular meeting of the directors may be
held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.7. Special Meetings. Special meetings of the board of
directors may be held at any time and at any place within or
without the State of Delaware designated in the notice of the
meeting, when called by the chairman of the board, or by one-
third or more in number of the directors, reasonable notice
thereof being given to each director by the secretary or by the
chairman of the board or any one of the directors calling the
meeting.
4.8. Notice. It shall be reasonable and sufficient notice
to a director to send notice by mail at least forty-eight hours
or by telegram at least twenty-four hours before the meeting
addressed to him at his usual or last known business or residence
address or to give notice to him in person or by telephone at
least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice,
executed by him before or after the meeting, is filed with the
records of the meeting, or to any director who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a
waiver of a notice need specify the purposes of the meeting.
4.9. Quorum. Except as may be otherwise provided by law,
by the certificate of incorporation or by these by-laws, at any
meeting of the directors a majority of the directors then in
office shall constitute a quorum; a quorum shall not in any case
be less than one-third of the total number of directors consti-
tuting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held
as adjourned without further notice.
4.10. Action by Vote. Except as may be otherwise provided
by law, by the certificate of incorporation or by these by-laws,
when a quorum is present at any meeting the vote of a majority of
the directors present shall be the act of the board of directors.
<PAGE> 8
Page 8 of 16
4.11. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the board of directors or
a committee thereof may be taken without a meeting if all the
members of the board or of such committee, as the case may be,
consent thereto in writing, and such writing or writings are
filed with the records of the meeting of the board or of such
committee. Such consent shall be treated for all purposes as the
act of the board or of such committee, as the case may be.
4.12. Compensation. In the discretion of the board of
directors, each director may be paid such fees for his services
as director and be reimbursed for his reasonable expenses in-
curred in the performance of his duties as director as the board
of directors from time to time may determine. Nothing contained
in this Section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving
reasonable compensation therefor.
4.13. Interested Directors and Officers.
(a) No contract or transaction between the corporation
and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association,
or other organization in which one or more of the corporation's
directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at
or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because
his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the board of directors or the committee, and
the board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the board of directors, a committee thereof, or
the stockholders.
<PAGE> 9
Page 9 of 16
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes the contract or
transaction.
SECTION 5
Officers and Agents
5.1. Enumeration; Qualification. The officers of the
corporation shall be a chairman of the board, a treasurer, a
secretary and such other officers, if any, as the board of
directors from time to time may in its discretion elect or
appoint including without limitation a vice-chairman of the
board, one or more vice presidents and a controller. The corpo-
ration may also have such agents, if any, as the board of direc-
tors from time to time may in its discretion choose. Any officer
may be, but none except the chairman and any vice-chairman of the
board need be, a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be
required by the board of directors to secure the faithful perfor-
mance of his duties to the corporation by giving bond in such
amount and with sureties or otherwise as the board of directors
may determine.
5.2. Powers. Subject to law, to the certificate of
incorporation and to the other provisions of these by-laws, each
officer shall have, in addition to the duties and power herein
set forth, such duties and powers as are commonly incident to his
office and such additional duties and powers as the board of
directors may from time to time designate.
5.3. Election. The officers may be elected to the board
of directors at their first meeting following the annual meeting
of the stockholders or at any other time. At any time or from
time to time the directors may delegate to any officer their
power to elect or appoint any other officer or any agents.
5.4. Tenure. Each officer shall hold office until the
first meeting of the board of directors following the next annual
meeting of the stockholders and until his respective successor is
chosen and qualified unless a shorter period shall have been
specified by the terms of his election or appointment, or in each
case until he sooner dies, resigns, is removed or becomes dis-
qualified. Each agent shall retain his authority at the pleasure
of the directors, or the officer by whom he was appointed or the
officer who then holds agent appointive power.
5.5. Chairman and Vice-Chairman of the Board of Directors.
Except as otherwise voted by the directors, the chairman of the
board shall be the chief executive officer of the corporation, he
<PAGE> 10
Page 10 of 16
shall preside at all meetings of the stockholders and directors
at which he is present and shall have such other powers and
duties as the board of directors, executive committee or any
other duly authorized committee shall from time to time desig-
nate.
Except as otherwise voted by the directors, the vice-chair-
man of the board, if any is elected or appointed, shall assume
the duties and powers of the chairman of the board in his absence
and shall otherwise have such duties and powers as shall be
designated from time to time by the board of directors.
5.6. Vice Presidents. Any vice presidents shall have such
duties and powers as shall be designated from time to time by the
board of directors or by the chairman of the board.
5.7. Treasurer and Assistant Treasurers. Except as
otherwise voted by the directors, the treasurer shall be the
chief financial officer of the corporation and shall be in charge
of its funds and valuable papers, and shall have such other
duties and powers as may be designated from time to time by the
board of directors or by the chairman of the board. If no
controller is elected, the treasurer shall also have the duties
and powers of the controller.
Any assistant treasurers shall have such duties and powers
as shall be designated from time to time by the board of direc-
tors, the chairman of the board or the treasurer.
5.8. Controller and Assistant Controllers. If a control-
ler is elected, he shall be the chief accounting officer of the
corporation and shall be in charge of its books of account and
accounting records, and of its accounting procedures. He shall
have such other duties and powers as may be designated from time
to time by the board of directors, the chairman of the board or
the treasurer.
Any assistant controller shall have such duties and powers
as shall be designated from time to time by the board of direc-
tors, the chairman of the board, the treasurer or the controller.
5.9. Secretary and Assistant Secretaries. The secretary
shall record all proceedings of the stockholders, of the board of
directors and of committees of the board of directors in a book
or series of books to be kept therefor and shall file therein all
writings of, or related to action by stockholder or director
consent. In the absence of the secretary from any meeting, an
assistant secretary, or if there be none or he is absent, a
temporary secretary chosen at the meeting, shall record the
proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and
transfer
<PAGE> 11
Page 11 of 16
records of the corporation, which shall contain the
names and record addresses of all stockholders and the number of
shares registered in the name of each stockholder. He shall have
such other duties and powers as may from time to time be desig-
nated by the board of directors or the chairman of the board.
Any assistant secretaries shall have such duties and powers
as shall be designated from time to time by the board of direc-
tors, the chairman of the board or the secretary.
SECTION 6
Resignations and Removals
6.1. Any director or officer may resign at any time by
delivering his resignation in writing to the chairman of the
board or the secretary or to a meeting of the board of directors.
Such resignation shall be effective upon receipt unless specified
to be effective at some other time, and without in either case
the necessity of its being accepted unless the resignation shall
so state. A director (including persons elected by directors to
fill vacancies in the board) may be removed from office with or
without cause by the vote of the holders of a majority of the
shares issued and outstanding and entitled to vote in the elec-
tion of directors. The board of directors may at any time remove
any officer either with or without cause. The board of directors
may at any time terminate or modify the authority of any agent.
No director or officer resigning and (except where a right to
receive compensation shall be expressly provided in a duly
authorized written agreement with the corporation) no director or
officer removed, shall have any right to any compensation as such
director or officer for any period following his resignation or
removal, or any right to damages on account of such removal,
whether his compensation be by the month or by the year or
otherwise; unless in the case of a resignation, the directors, or
in the case of a removal, the body acting on the removal, shall
in their or its discretion provide for compensation.
SECTION 7
Vacancies
7.1 If the office of the chairman of the board or the
treasurer or the secretary becomes vacant, the directors may
elect a successor by vote of a majority of the directors then
in office. If the office of any other officer becomes vacant,
any person or body empowered to elect or appoint that officer
may choose a successor. Each such successor shall hold office
for the unexpired term, and in the case of the chairman of the
board, the treasurer and the secretary until his successor is
chosen and qualified, or
<PAGE> 12
Page 12 of 16
in each case until he sooner dies, resigns, is removed or becomes dis-
qualified. Any vacancy of a directorship shall be filled as specified
in Section 4.4 of these by-laws.
SECTION 8
Capital Stock
8.1. Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the
series, if any, of the shares held by him, in such form as shall, in
conformity to law, the certificate of incorporation and the by-laws, be
prescribed from time to time by the board of directors. Such certificates
shall be signed by the chairman or vice chairman of the board of directors,
or a vice president and by the treasurer or an assistant treasurer or by
the secretary or an assistant secretary. Any of or all the signatures on
the certificate may be a facsimile. In case any officer, transfer agent,
or registrar who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer, transfer agent,
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent,
or registrar at the time of its issue.
8.2. Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim or account thereof,
as the board of directors may prescribe.
SECTION 9
Transfer of Shares of Stock
9.1. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent
of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including
<PAGE> 13
Page 13 of 16
the payment of dividends and the right to receive notice and to
vote or to give any consent with respect thereto and to be held
liable for such calls and assessments, if any, as may lawfully
be made thereon, regardless of any transfer, pledge or other
disposition of such stock until the shares have been properly
transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the
corporation of his post office address.
9.2. Record Date and Closing Transfer Books. In order
that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any
dividend or other distributions or allotment of any rights, or
entitled to exercise any rights in respect of any change, conver-
sion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days
(or such longer period as may be required by law) before the date
of such meeting, nor more than sixty days prior to any other
action.
If no record date is fixed:
(a) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of busi-
ness on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled
to express consent to corporate action in writing without a
meeting, when no prior action by the board of directors is
necessary, shall be the day on which the first written consent is
expressed.
(c) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on
which the board of directors adopts the resolution relating
thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
<PAGE> 14
Page 14 of 16
SECTION 10
Indemnification of Directors and Officers
10.1. Right to Indemnification. Each director or officer
of the corporation who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (herein-
after a "proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity or in any
other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the corporation
to the fullest extent permitted by the laws of Delaware, as the
same exist or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such
amendment), against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director or officer and shall inure to the
benefit of his or her heirs, executors and administrators:
provided however, that except for any proceeding seeking to
enforce or obtain payment under any right to indemnification by
the corporation, the corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if the corporation has
joined in or consented to the initiation of such proceeding (or
part thereof). The corporation may, by action of its Board of
Directors, either on a general basis or as designated by the
Board of Directors, provide indemnification to employees and
agents of the corporation, and to directors, officers, employees
and agents of the Company's subsidiaries, with the same scope and
effect as the foregoing indemnification of directors and offi-
cers. Notwithstanding anything in this Section 10 to the con-
trary, no person shall be entitled to indemnification pursuant to
this Section on account of any suit in which judgment is rendered
against such person for an accounting of profits made from the
purchase and sale by such person of securities of the corporation
pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934.
<PAGE> 15
Page 15 of 16
10.2. Non-Exclusivity of Rights. The right to indemnifica-
tion and the payment of expenses incurred in defending a proceed-
ing in advance of its final disposition conferred in this Section
10 shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the
certificate of incorporation, by-law, agreement, vote of stock-
holders or disinterested directors or otherwise. Each person who
is or becomes a director or officer of the corporation shall be
deemed to have served or to have continued to serve in such
capacity in reliance upon the indemnity provided in this Sec-
tion 10.
10.3. Insurance. The corporation may maintain insurance,
at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of
Delaware.
10.4. Expenses as a Witness. To the extent that any
director, officer, employee or agent of the corporation is by
reason of such position, or a position with another entity at the
request of the corporation, a witness in any action, suit or
proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her on his or
her behalf in connection therewith.
10.5. Indemnity Agreements. The corporation may enter into
indemnity agreements with the persons who are members of its
board of directors from time to time, and with such officers,
employees and agents of the corporation and with such officers,
directors, employees and agents of subsidiaries as the board may
designate, such indemnity agreements to provide in substance that
the corporation will indemnify such persons as contemplated by
this Section 10, and to include any other substantive or proce-
dural provisions regarding indemnification as are not inconsis-
tent with the General Corporation Law of Delaware. The provi-
sions of such indemnity agreements shall prevail to the extent
that they limit or condition or differ from the provisions of
this Section 10.
10.6. Definition of Corporation. For purposes of this
Section 10 reference to "the corporation" includes all constitu-
ent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation so that any person who is
or was a director or officer of such a constituent corporation
shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation
in the same capacity.
<PAGE> 16
Page 16 of 16
SECTION 11
Corporate Seal
11.1. The seal of the corporation shall, subject to alter-
ation by the directors, consist of a flat-faced circular die with
the word "Delaware" together with the name of the corporation and
the year of its organization, cut or engraved thereon. The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
SECTION 12
Execution of Papers
12.1. Except as the board of directors may generally or in
some particular cases authorize the execution thereof in some
other manner, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts and other obligations made, accepted or
endorsed by the corporation shall be signed by the chairman of
the board or by one of the vice presidents or by the treasurer.
SECTION 13
Fiscal Year
13.1. Except as from time to time otherwise provided by the
board of directors, the fiscal year of the corporation shall end
on the 31st day of December of each year.
SECTION 14
Amendments
14.1. These by-laws may be made, altered, amended or
repealed by vote of a majority of the directors in office or by
vote of a majority of the stock outstanding and entitled to vote.
Any by-law, whether made, altered, amended or repealed by the
stockholders or directors, may be altered, amended or reinstated,
as the case may be, by either the stockholders or by the direc-
tors as hereinbefore provided.
<PAGE> 1
Reg S-K
Item 601
Exhibit 10.15
Page 1 of 2
AGREEMENT
This Agreement is entered into this 29th day of October,
1993, among Berkshire Hathaway Inc., a Delaware corporation ("Berkshire"),
National Indemnity Company, Columbia Insurance Company, Nebraska Furniture
Mart, Inc., National Fire and Marine Insurance Company and Cornhusker Casualty
Company (collectively, "Berkshire Subsidiaries") and Capital Cities/ABC, Inc.,
a New York corporation ("Capital Cities").
WHEREAS, Berkshire, the Berkshire Subsidiaries and Capital
Cities entered into an agreement (the "Stock Purchase Agreement") dated January
2, 1986, pursuant to which the Berkshire Subsidiaries purchased 3,000,000
shares of the common stock, par value $1.00 per share, of Capital Cities (the
"Common Stock") and Berkshire and the Berkshire Subsidiaries agreed not to
sell, transfer, assign, hypothecate, encumber or dispose of all or any part of
the shares of Common Stock they acquired except pursuant to certain procedures
set forth in the Stock Purchase Agreement.
WHEREAS, the Board of Directors of Capital Cities determined
on October 29, 1993 to offer to purchase from its shareholders up to 2,000,000
shares of Common Stock pursuant to an offer to purchase to commence on or about
November 2, 1993 (the "Offer to Purchase").
WHEREAS, Berkshire and the Berkshire Subsidiaries have
advised Capital Cities that the Berkshire Subsidiaries desire to tender
1,000,000 shares in response to the Offer to Purchase on certain terms and
conditions.
In consideration of the foregoing and the respective
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. Capital Cities agrees that notwithstanding any
restriction contained in the Stock Purchase Agreement, Berkshire and the
Berkshire Subsidiaries may tender up to 1,000,000 shares of Common Stock in
response to the Offer to Purchase.
2. Berkshire and the Berkshire Subsidiaries agree that they
will tender and not withdraw 1,000,000 shares in response to the Offer to
Purchase, subject to the condition that all such shares be purchased.
3. Except as modified by this Agreement, all of the other
terms and provisions of the Stock Purchase Agreement shall remain in full force
and effect.
<PAGE> 2
Page 2 of 2
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth in the first paragraph of this Agreement.
CAPITAL CITIES/ABC, INC.
By:_____________________________________
Senior Vice President
and Chief Financial Officer
BERKSHIRE HATHAWAY INC.
By:_____________________________________
(Name and Title)
NATIONAL INDEMNITY COMPANY
By:_____________________________________
(Name and Title)
COLUMBIA INSURANCE COMPANY
By:_____________________________________
(Name and Title)
NEBRASKA FURNITURE MART, INC.
By:_____________________________________
(Name and Title)
NATIONAL FIRE AND MARINE
INSURANCE COMPANY
By:_____________________________________
(Name and Title)
CORNHUSKER CASUALTY COMPANY
By:_____________________________________
(Name and Title)
<PAGE> 1
Reg S-K
Item 601
Exhibit 12
BERKSHIRE HATHAWAY INC.
Calculation of Ratio of Consolidated Earnings to Consolidated Fixed Charges
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . . . . . $ 688,121 $407,285 $439,908 $394,093 $447,477
Income tax expense . . . . . . . . . . . 491,634** 138,089 142,058 112,047 159,287
Minority interest in earnings . . . . . 9,963 5,243 11,020 10,326 10,460
Equity in the undistributed earnings
of a less than 50% owned investee . . . -- -- -- 1,195 (319)
Fixed charges . . . . . . . . . . . . . 90,099 111,660 125,827 122,431 86,831
---------- -------- -------- -------- --------
Earnings available for fixed charges . . . $1,279,817 $662,277 $718,813 $640,092 $703,736
========== ======== ======== ======== ========
Realized investment gain, pretax, included
in earnings available for fixed charges . $ 546,422 $ 89,937 $192,478 $ 33,989 $223,810
========== ======== ======== ======== ========
Fixed charges
Interest on indebtedness (including
amortization of debt discount and
expense) . . . . . . . . . . . . . . . . $ 74,957 $ 89,985* $ 97,875* $ 90,717 $ 56,313
Interest on savings deposits . . . . . . 5,792 11,986 18,311 21,975 21,261
Rentals representing interest . . . . . 9,350 9,689 9,641 9,739 9,257
---------- -------- -------- -------- --------
$ 90,099 $111,660 $125,827 $122,431 $ 86,831
========== ======== ======== ======== ========
Ratio of earnings to fixed charges . . . . 14.20x 5.93x 5.71x 5.23x 8.10x
========== ========= ========= ========= =========
Ratio of earnings, excluding realized
investment gain, to fixed charges . . . 8.14x 5.13x 4.18x 4.95x 5.53x
========== ========= ========= ========= =========
</TABLE>
___________
* Excludes optional prepayment premiums of $22,525 and $5,661 in 1992 and
1991 respectively, related to redemptions prior to maturity of certain
term debt obligations.
** Includes charge of $70,984 representing the cumulative effect of change
in accounting for income taxes.
<PAGE> 1
Reg S-K
Item 601
Exhibit 22
BERKSHIRE HATHAWAY INC.
Subsidiaries of Registrant (1)
December 31, 1993
<TABLE>
<CAPTION>
State of
Company Name Incorporation
------------ -------------
<S> <C>
Berkshire Hathaway Credit Corporation Nebraska
BHSF, Inc. Delaware
BH Shoe Holdings, Inc. Delaware
Blue Chip Stamps California
Borsheim's Jewelry Company, Inc. Nebraska
Campbell Hausfeld/Scott Fetzer Company Delaware
Central States Indemnity Co. of Omaha Nebraska
Central States of Omaha Companies, Inc. Nebraska
Columbia Insurance Company Nebraska
Continental Divide Insurance Company Colorado
Cornhusker Casualty Company Nebraska
Cypress Insurance Company California
Dexter Shoe Company Maine
The Fechheimer Brothers Company (2) Delaware
H. H. Brown Shoe Company, Inc. Delaware
Isabela Shoe Corporation Delaware
Lowell Shoe, Inc. New Hampshire
MSMLMIC California
National Fire & Marine Insurance Company Nebraska
National Indemnity Company Nebraska
National Indemnity Company of the South Florida
National Indemnity Company of Mid-America Minnesota
National Liability and Fire Insurance Company Illinois
Nebraska Furniture Mart, Inc. Nebraska
Oak River Insurance Company Nebraska
OCSAP, Ltd Maine
Redwood Fire and Casualty Insurance Company Nebraska
The Scott Fetzer Company Delaware
Scott Fetzer Financial Group, Inc. Delaware
See's Candies, Inc. California
See's Candy Shops, Incorporated California
Wesco Financial Corporation Delaware
Wesco-Financial Insurance Company Nebraska
Wesco Holdings Midwest, Inc. Nebraska
World Book/Scott Fetzer Company Nebraska
</TABLE>
(1) Each of the named subsidiaries is not necessarily a "significant
subsidiary" as defined in Rule 1-02(v) of Regulation S-X, and Berkshire has
several additional subsidiaries not named above. The unnamed subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
"significant subsidiary" at the end of the year covered by this report.
(2) The names have been omitted of 30 wholly-owned U.S. subsidiaries of
The Fechheimer Brothers Company, each of whom operated in the business of
uniform manufacturing and/or distribution.
<PAGE> 1
Reg S-K
Item 601
Exhibit 23
Page 1 of 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-50989 of Berkshire Hathaway Inc. on Form S-3 of our reports dated March 7,
1994, appearing in this Annual Report on Form 10-K of Berkshire Hathaway Inc.
for the year ended December 31, 1993.
DELOITTE & TOUCHE
Omaha, Nebraska
March 30, 1994
