巴菲特致股东的公开信 - 1984.pdf-资料库

To the Shareholders of Berkshire Hathaway Inc.: Our gain in net worth during 1984 was $152.6 million, or $133 per share. This sounds pretty good but actually it’s mediocre. Economic gains must be evaluated by comparison with the capital that produces them. Our twenty-year compounded annual gain in book value has been 22.1% (from $19.46 in 1964 to $1108.77 in 1984), but our gain in 1984 was only 13.6%. As we discussed last year, the gain in per-share intrinsic business value is the economic measurement that really counts. But calculations of intrinsic business value are subjective. In our case, book value serves as a useful, although somewhat understated, proxy. In my judgment, intrinsic business value and book value increased during 1984 at about the same rate. Using my academic voice, I have told you in the past of the drag that a mushrooming capital base exerts upon rates of return. Unfortunately, my academic voice is now giving way to a reportorial voice. Our historical 22% rate is just that - history. To earn even 15% annually over the next decade (assuming we continue to follow our present dividend policy, about which more will be said later in this letter) we would need profits aggregating about $3.9 billion. Accomplishing this will require a few big ideas - small ones just won’t do. Charlie Munger, my partner in general management, and I do not have any such ideas at present, but our experience has been that they pop up occasionally. (How’s that for a strategic plan?) Sources of Reported Earnings The table on the following page shows the sources of Berkshire’s reported earnings. Berkshire’s net ownership interest in many of the constituent businesses changed at midyear 1983 when the Blue Chip merger took place. Because of these changes, the first two columns of the table provide the best measure of underlying business performance. All of the significant gains and losses attributable to unusual sales of assets by any of the business entities are aggregated with securities transactions on the line near the bottom of the table, and are not included in operating earnings. (We regard any annual figure for realized capital gains or losses as meaningless, but we regard the aggregate realized and unrealized capital gains over a period of years as very important.) Furthermore, amortization of Goodwill is not charged against the specific businesses but, for reasons outlined in the Appendix to my letter in the 1983 annual report, is set forth as a separate item. (000s omitted) ---------------------------------------------------------- Net Earnings Earnings Before Income Taxes After Tax -------------------------------------- ------------------ Total Berkshire Share Berkshire Share ------------------ ------------------ ------------------ 1984 1983 1984 1983 1984 1983 -------- -------- -------- -------- -------- -------- Operating Earnings: Insurance Group: Underwriting ............ $(48,060) $(33,872) $(48,060) $(33,872) $(25,955) $(18,400) B E R K S H I R E H A T H A W A Y I N C .

Net Investment Income ... 68,903 43,810 68,903 43,810 62,059 39,114 Buffalo News .............. 27,328 19,352 27,328 16,547 13,317 8,832 Nebraska Furniture Mart(1) 14,511 3,812 11,609 3,049 5,917 1,521 See’s Candies ............. 26,644 27,411 26,644 24,526 13,380 12,212 Associated Retail Stores .. (1,072) 697 (1,072) 697 (579) 355 Blue Chip Stamps(2) (1,843) (1,422) (1,843) (1,876) (899) (353) Mutual Savings and Loan ... 1,456 (798) 1,166 (467) 3,151 1,917 Precision Steel ........... 4,092 3,241 3,278 2,102 1,696 1,136 Textiles .................. 418 (100) 418 (100) 226 (63) Wesco Financial ........... 9,777 7,493 7,831 4,844 4,828 3,448 Amortization of Goodwill .. (1,434) (532) (1,434) (563) (1,434) (563) Interest on Debt .......... (14,734) (15,104) (14,097) (13,844) (7,452) (7,346) Shareholder-Designated Contributions .......... (3,179) (3,066) (3,179) (3,066) (1,716) (1,656) Other ..................... 4,932 10,121 4,529 9,623 3,476 8,490 -------- -------- -------- -------- -------- -------- Operating Earnings .......... 87,739 61,043 82,021 51,410 70,015 48,644 Special GEICO Distribution .. -- 19,575 -- 19,575 -- 18,224 Special Gen. Foods Distribution 8,111 -- 7,896 -- 7,294 -- Sales of securities and unusual sales of assets .. 104,699 67,260 101,376 65,089 71,587 45,298 -------- -------- -------- -------- -------- -------- Total Earnings - all entities $200,549 $147,878 $191,293 $136,074 $148,896 $112,166 ======== ======== ======== ======== ======== ======== (1) 1983 figures are those for October through December. (2) 1984 and 1983 are not comparable; major assets were transferred in the mid-year 1983 merger of Blue Chip Stamps. Sharp-eyed shareholders will notice that the amount of the special GEICO distribution and its location in the table have been changed from the presentation of last year. Though they reclassify and reduce “accounting” earnings, the changes are entirely of form, not of substance. The story behind the changes, however, is interesting. As reported last year: (1) in mid-1983 GEICO made a tender offer to buy its own shares; (2) at the same time, we agreed by written contract to sell GEICO an amount of its shares that would be proportionately related to the aggregate number of shares GEICO repurchased via the tender from all other shareholders; (3) at completion of the tender, we delivered 350,000 shares to GEICO, received $21 million cash, and were left owning exactly the same percentage of GEICO that we owned before the tender; (4) GEICO’s transaction with us amounted to a proportionate redemption, an opinion rendered us, without qualification, by a leading law firm; (5) the Tax Code logically regards such proportionate redemptions as substantially equivalent to dividends and, therefore, the $21 million we received was taxed at only the 6.9% inter-corporate dividend rate; (6) importantly, that $21 million was far less than the previously-undistributed earnings that had inured to our ownership in GEICO and, thus, from the standpoint of economic substance, was in our view equivalent to a dividend. Because it was material and unusual, we highlighted the GEICO distribution last year to you, both in the applicable quarterly report and in this section of the annual report. Additionally, we emphasized the transaction to our auditors, Peat, Marwick, Mitchell & Co. Both the Omaha office of Peat Marwick and the reviewing Chicago partner, without objection, concurred with our dividend presentation. In 1984, we had a virtually identical transaction with General Foods. The only difference was that General Foods repurchased its stock over a period of time in the open market, whereas GEICO had made a “one-shot” tender offer. In the General Foods case we sold to the company, on each day that it repurchased shares, a quantity of shares that left our ownership

percentage precisely unchanged. Again our transaction was pursuant to a written contract executed before repurchases began. And again the money we received was far less than the retained earnings that had inured to our ownership interest since our purchase. Overall we received $21,843,601 in cash from General Foods, and our ownership remained at exactly 8.75%. At this point the New York office of Peat Marwick came into the picture. Late in 1984 it indicated that it disagreed with the conclusions of the firm’s Omaha office and Chicago reviewing partner. The New York view was that the GEICO and General Foods transactions should be treated as sales of stock by Berkshire rather than as the receipt of dividends. Under this accounting approach, a portion of the cost of our investment in the stock of each company would be charged against the redemption payment and any gain would be shown as a capital gain, not as dividend income. This is an accounting approach only, having no bearing on taxes: Peat Marwick agrees that the transactions were dividends for IRS purposes. We disagree with the New York position from both the viewpoint of economic substance and proper accounting. But, to avoid a qualified auditor’s opinion, we have adopted herein Peat Marwick’s 1984 view and restated 1983 accordingly. None of this, however, has any effect on intrinsic business value: our ownership interests in GEICO and General Foods, our cash, our taxes, and the market value and tax basis of our holdings all remain the same. This year we have again entered into a contract with General Foods whereby we will sell them shares concurrently with open market purchases that they make. The arrangement provides that our ownership interest will remain unchanged at all times. By keeping it so, we will insure ourselves dividend treatment for tax purposes. In our view also, the economic substance of this transaction again is the creation of dividend income. However, we will account for the redemptions as sales of stock rather than dividend income unless accounting rules are adopted that speak directly to this point. We will continue to prominently identify any such special transactions in our reports to you. While we enjoy a low tax charge on these proportionate redemptions, and have participated in several of them, we view such repurchases as at least equally favorable for shareholders who do not sell. When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases. (Our endorsement of repurchases is limited to those dictated by price/value relationships and does not extend to the “greenmail” repurchase - a practice we find odious and repugnant. In these transactions, two parties achieve their personal ends by exploitation of an innocent and unconsulted third party. The players are: (1) the “shareholder” extortionist who, even before the ink on his stock certificate dries, delivers his “your- money-or-your-life” message to managers; (2) the corporate insiders who quickly seek peace at any price - as long as the price is paid by someone else; and (3) the shareholders whose money is used by (2) to make (1) go away. As the dust settles, the mugging, transient shareholder gives his speech on “free enterprise”, the muggee management gives its speech on “the best interests of the company”, and the innocent shareholder standing by mutely funds the payoff.) The companies in which we have our largest investments have all engaged in significant stock repurhases at times when wide discrepancies existed between price and value. As shareholders, we find this encouraging and rewarding for two important reasons

- one that is obvious, and one that is subtle and not always understood. The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediately increase, in a highly significant way, that value. When companies purchase their own stock, they often find it easy to get $2 of present value for $1. Corporate acquisition programs almost never do as well and, in a discouragingly large number of cases, fail to get anything close to $1 of value for each $1 expended. The other benefit of repurchases is less subject to precise measurement but can be fully as important over time. By making repurchases when a company’s market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management’s domain but that do nothing for (or even harm) shareholders. Seeing this, shareholders and potential shareholders increase their estimates of future returns from the business. This upward revision, in turn, produces market prices more in line with intrinsic business value. These prices are entirely rational. Investors should pay more for a business that is lodged in the hands of a manager with demonstrated pro-shareholder leanings than for one in the hands of a self-interested manager marching to a different drummer. (To make the point extreme, how much would you pay to be a minority shareholder of a company controlled by Robert Wesco?) The key word is “demonstrated”. A manager who consistently turns his back on repurchases, when these clearly are in the interests of owners, reveals more than he knows of his motivations. No matter how often or how eloquently he mouths some public relations-inspired phrase such as “maximizing shareholder wealth” (this season’s favorite), the market correctly discounts assets lodged with him. His heart is not listening to his mouth - and, after a while, neither will the market. We have prospered in a very major way - as have other shareholders - by the large share repurchases of GEICO, Washington Post, and General Foods, our three largest holdings. (Exxon, in which we have our fourth largest holding, has also wisely and aggressively repurchased shares but, in this case, we have only recently established our position.) In each of these companies, shareholders have had their interests in outstanding businesses materially enhanced by repurchases made at bargain prices. We feel very comfortable owning interests in businesses such as these that offer excellent economics combined with shareholder-conscious managements. The following table shows our 1984 yearend net holdings in marketable equities. All numbers exclude the interests attributable to minority shareholders of Wesco and Nebraska Furniture Mart. No. of Shares Cost Market ------------- ---------- ---------- (000s omitted) 690,975 Affiliated Publications, Inc. ....... $ 3,516 $ 32,908 740,400 American Broadcasting Companies, Inc. 44,416 46,738 3,895,710 Exxon Corporation ................... 173,401 175,307 4,047,191 General Foods Corporation ........... 149,870 226,137 6,850,000 GEICO Corporation ................... 45,713 397,300 2,379,200 Handy & Harman ...................... 27,318 38,662 818,872 Interpublic Group of Companies, Inc. 2,570 28,149 555,949 Northwest Industries 26,581 27,242 2,553,488 Time, Inc. .......................... 89,327 109,162 1,868,600 The Washington Post Company ......... 10,628 149,955 ---------- ----------

$573,340 $1,231,560 All Other Common Stockholdings 11,634 37,326 ---------- ---------- Total Common Stocks $584,974 $1,268,886 ========== ========== It’s been over ten years since it has been as difficult as now to find equity investments that meet both our qualitative standards and our quantitative standards of value versus price. We try to avoid compromise of these standards, although we find doing nothing the most difficult task of all. (One English statesman attributed his country’s greatness in the nineteenth century to a policy of “masterly inactivity”. This is a strategy that is far easier for historians to commend than for participants to follow.) In addition to the figures supplied at the beginning of this section, information regarding the businesses we own appears in Management’s Discussion on pages 42-47. An amplified discussion of Wesco’s businesses appears in Charlie Munger’s report on pages 50-59. You will find particularly interesting his comments about conditions in the thrift industry. Our other major controlled businesses are Nebraska Furniture Mart, See’s, Buffalo Evening News, and the Insurance Group, to which we will give some special attention here. Nebraska Furniture Mart Last year I introduced you to Mrs. B (Rose Blumkin) and her family. I told you they were terrific, and I understated the case. After another year of observing their remarkable talents and character, I can honestly say that I never have seen a managerial group that either functions or behaves better than the Blumkin family. Mrs. B, Chairman of the Board, is now 91, and recently was quoted in the local newspaper as saying, “I come home to eat and sleep, and that’s about it. I can’t wait until it gets daylight so I can get back to the business”. Mrs. B is at the store seven days a week, from opening to close, and probably makes more decisions in a day than most CEOs do in a year (better ones, too). In May Mrs. B was granted an Honorary Doctorate in Commercial Science by New York University. (She’s a “fast track” student: not one day in her life was spent in a school room prior to her receipt of the doctorate.) Previous recipients of honorary degrees in business from NYU include Clifton Garvin, Jr., CEO of Exxon Corp.; Walter Wriston, then CEO of Citicorp; Frank Cary, then CEO of IBM; Tom Murphy, then CEO of General Motors; and, most recently, Paul Volcker. (They are in good company.) The Blumkin blood did not run thin. Louie, Mrs. B’s son, and his three boys, Ron, Irv, and Steve, all contribute in full measure to NFM’s amazing success. The younger generation has attended the best business school of them all - that conducted by Mrs. B and Louie - and their training is evident in their performance. Last year NFM’s net sales increased by $14.3 million, bringing the total to $115 million, all from the one store in Omaha. That is by far the largest volume produced by a single home furnishings store in the United States. In fact, the gain in sales last year was itself greater than the annual volume of many good-sized successful stores. The business achieves this success because it deserves this success. A few figures will tell you why. In its fiscal 1984 10-K, the largest independent specialty

retailer of home furnishings in the country, Levitz Furniture, described its prices as “generally lower than the prices charged by conventional furniture stores in its trading area”. Levitz, in that year, operated at a gross margin of 44.4% (that is, on average, customers paid it $100 for merchandise that had cost it $55.60 to buy). The gross margin at NFM is not much more than half of that. NFM’s low mark-ups are possible because of its exceptional efficiency: operating expenses (payroll, occupancy, advertising, etc.) are about 16.5% of sales versus 35.6% at Levitz. None of this is in criticism of Levitz, which has a well- managed operation. But the NFM operation is simply extraordinary (and, remember, it all comes from a $500 investment by Mrs. B in 1937). By unparalleled efficiency and astute volume purchasing, NFM is able to earn excellent returns on capital while saving its customers at least $30 million annually from what, on average, it would cost them to buy the same merchandise at stores maintaining typical mark-ups. Such savings enable NFM to constantly widen its geographical reach and thus to enjoy growth well beyond the natural growth of the Omaha market. I have been asked by a number of people just what secrets the Blumkins bring to their business. These are not very esoteric. All members of the family: (1) apply themselves with an enthusiasm and energy that would make Ben Franklin and Horatio Alger look like dropouts; (2) define with extraordinary realism their area of special competence and act decisively on all matters within it; (3) ignore even the most enticing propositions failing outside of that area of special competence; and, (4) unfailingly behave in a high-grade manner with everyone they deal with. (Mrs. B boils it down to “sell cheap and tell the truth”.) Our evaluation of the integrity of Mrs. B and her family was demonstrated when we purchased 90% of the business: NFM had never had an audit and we did not request one; we did not take an inventory nor verify the receivables; we did not check property titles. We gave Mrs. B a check for $55 million and she gave us her word. That made for an even exchange. You and I are fortunate to be in partnership with the Blumkin family. See’s Candy Shops, Inc. Below is our usual recap of See’s performance since the time of purchase by Blue Chip Stamps: 52-53 Week Year Operating Number of Number of Ended About Sales Profits Pounds of Stores Open December 31 Revenues After Taxes Candy Sold at Year End ------------------- ------------ ----------- ---------- ----------- 1984 .............. $135,946,000 $13,380,000 24,759,000 214 1983 (53 weeks) ... 133,531,000 13,699,000 24,651,000 207 1982 .............. 123,662,000 11,875,000 24,216,000 202 1981 .............. 112,578,000 10,779,000 24,052,000 199 1980 .............. 97,715,000 7,547,000 24,065,000 191 1979 .............. 87,314,000 6,330,000 23,985,000 188 1978 .............. 73,653,000 6,178,000 22,407,000 182 1977 .............. 62,886,000 6,154,000 20,921,000 179 1976 (53 weeks) ... 56,333,000 5,569,000 20,553,000 173 1975 .............. 50,492,000 5,132,000 19,134,000 172 1974 .............. 41,248,000 3,021,000 17,883,000 170 1973 .............. 35,050,000 1,940,000 17,813,000 169 1972 .............. 31,337,000 2,083,000 16,954,000 167 This performance has not been produced by a generally rising tide. To the contrary, many well-known participants in the boxed-chocolate industry either have lost money in this same

period or have been marginally profitable. To our knowledge, only one good-sized competitor has achieved high profitability. The success of See’s reflects the combination of an exceptional product and an exceptional manager, Chuck Huggins. During 1984 we increased prices considerably less than has been our practice in recent years: per-pound realization was $5.49, up only 1.4% from 1983. Fortunately, we made good progress on cost control, an area that has caused us problems in recent years. Per-pound costs - other than those for raw materials, a segment of expense largely outside of our control - increased by only 2.2% last year. Our cost-control problem has been exacerbated by the problem of modestly declining volume (measured by pounds, not dollars) on a same-store basis. Total pounds sold through shops in recent years has been maintained at a roughly constant level only by the net addition of a few shops annually. This more-shops-to-get- the-same-volume situation naturally puts heavy pressure on per- pound selling costs. In 1984, same-store volume declined 1.1%. Total shop volume, however, grew 0.6% because of an increase in stores. (Both percentages are adjusted to compensate for a 53-week fiscal year in 1983.) See’s business tends to get a bit more seasonal each year. In the four weeks prior to Christmas, we do 40% of the year’s volume and earn about 75% of the year’s profits. We also earn significant sums in the Easter and Valentine’s Day periods, but pretty much tread water the rest of the year. In recent years, shop volume at Christmas has grown in relative importance, and so have quantity orders and mail orders. The increased concentration of business in the Christmas period produces a multitude of managerial problems, all of which have been handled by Chuck and his associates with exceptional skill and grace. Their solutions have in no way involved compromises in either quality of service or quality of product. Most of our larger competitors could not say the same. Though faced with somewhat less extreme peaks and valleys in demand than we, they add preservatives or freeze the finished product in order to smooth the production cycle and thereby lower unit costs. We reject such techniques, opting, in effect, for production headaches rather than product modification. Our mall stores face a host of new food and snack vendors that provide particularly strong competition at non-holiday periods. We need new products to fight back and during 1984 we introduced six candy bars that, overall, met with a good reception. Further product introductions are planned. In 1985 we will intensify our efforts to keep per-pound cost increases below the rate of inflation. Continued success in these efforts, however, will require gains in same-store poundage. Prices in 1985 should average 6% - 7% above those of 1984. Assuming no change in same-store volume, profits should show a moderate gain. Buffalo Evening News Profits at the News in 1984 were considerably greater than we expected. As at See’s, excellent progress was made in controlling costs. Excluding hours worked in the newsroom, total hours worked decreased by about 2.8%. With this productivity improvement, overall costs increased only 4.9%. This performance by Stan Lipsey and his management team was one of the best in the industry.

However, we now face an acceleration in costs. In mid-1984 we entered into new multi-year union contracts that provided for a large “catch-up” wage increase. This catch-up is entirely appropriate: the cooperative spirit of our unions during the unprofitable 1977-1982 period was an important factor in our success in remaining cost competitive with The Courier-Express. Had we not kept costs down, the outcome of that struggle might well have been different. Because our new union contracts took effect at varying dates, little of the catch-up increase was reflected in our 1984 costs. But the increase will be almost totally effective in 1985 and, therefore, our unit labor costs will rise this year at a rate considerably greater than that of the industry. We expect to mitigate this increase by continued small gains in productivity, but we cannot avoid significantly higher wage costs this year. Newsprint price trends also are less favorable now than they were in 1984. Primarily because of these two factors, we expect at least a minor contraction in margins at the News. Working in our favor at the News are two factors of major economic importance: (1) Our circulation is concentrated to an unusual degree in the area of maximum utility to our advertisers. “Regional” newspapers with wide-ranging circulation, on the other hand, have a significant portion of their circulation in areas that are of negligible utility to most advertisers. A subscriber several hundred miles away is not much of a prospect for the puppy you are offering to sell via a classified ad - nor for the grocer with stores only in the metropolitan area. “Wasted” circulation - as the advertisers call it - hurts profitability: expenses of a newspaper are determined largely by gross circulation while advertising revenues (usually 70% - 80% of total revenues) are responsive only to useful circulation; (2) Our penetration of the Buffalo retail market is exceptional; advertisers can reach almost all of their potential customers using only the News. Last year I told you about this unusual reader acceptance: among the 100 largest newspapers in the country, we were then number one, daily, and number three, Sunday, in penetration. The most recent figures show us number one in penetration on weekdays and number two on Sunday. (Even so, the number of households in Buffalo has declined, so our current weekday circulation is down slightly; on Sundays it is unchanged.) I told you also that one of the major reasons for this unusual acceptance by readers was the unusual quantity of news that we delivered to them: a greater percentage of our paper is devoted to news than is the case at any other dominant paper in our size range. In 1984 our “news hole” ratio was 50.9%, (versus 50.4% in 1983), a level far above the typical 35% - 40%. We will continue to maintain this ratio in the 50% area. Also, though we last year reduced total hours worked in other departments, we maintained the level of employment in the newsroom and, again, will continue to do so. Newsroom costs advanced 9.1% in 1984, a rise far exceeding our overall cost increase of 4.9%. Our news hole policy costs us significant extra money for newsprint. As a result, our news costs (newsprint for the news hole plus payroll and expenses of the newsroom) as a percentage of revenue run higher than those of most dominant papers of our size. There is adequate room, however, for our paper or any other dominant paper to sustain these costs: the difference between “high” and “low” news costs at papers of comparable size

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巴菲特致股东的公开信 - 1984.pdf

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