To the Shareholders of Berkshire Hathaway Inc.:
First, a few words about accounting. The merger with Diversified Retailing Company, Inc. at yearend adds two new complications in the presentation of our financial results. After the merger, our ownership of Blue Chip Stamps increased to approximately 58% and, therefore, the accounts of that company must be fully consolidated in the Balance Sheet and Statement of Earnings presentation of Berkshire. In previous reports, our share of the net earnings only of Blue Chip had been included as a single item on Berkshire’s Statement of Earnings, and there had been a similar one-line inclusion on our Balance Sheet of our share of their net assets.
Net Earnings
Earnings Before Income Taxes After Tax
-------------------------------------- ------------------
Total Berkshire Share Berkshire Share
------------------ ------------------ ------------------
(in thousands of dollars) 1978 1977 1978 1977 1978 1977
-------- -------- -------- -------- -------- --------
Total - all entities ......... $66,180 $57,089 $54,350 $42,234 $39,242 $30,393
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Earnings from operations:
Insurance Group:
Underwriting ............. $ 3,001 $ 5,802 $ 3,000 $ 5,802 $ 1,560 $ 3,017
Net investment income .... 19,705 12,804 19,691 12,804 16,400 11,360
Berkshire-Waumbec textiles 2,916 (620) 2,916 (620) 1,342 (322)
Associated Retail
Stores, Inc. ............ 2,757 2,775 2,757 2,775 1,176 1,429
See’s Candies .............. 12,482 12,840 7,013 6,598 3,049 2,974
Buffalo Evening News ....... (2,913) 751 (1,637) 389 (738) 158
Blue Chip Stamps - Parent .. 2,133 1,091 1,198 566 1,382 892
Illinois National Bank
and Trust Company ....... 4,822 3,800 4,710 3,706 4,262 3,288
Wesco Financial
Corporation - Parent .... 1,771 2,006 777 813 665 419
Mutual Savings and
Loan Association ........ 10,556 6,779 4,638 2,747 3,042 1,946
Interest on Debt ........... (5,566) (5,302) (4,546) (4,255) (2,349) (2,129)
Other ...................... 720 165 438 102 261 48
-------- -------- -------- -------- -------- --------
Total Earnings from
Operations ............ $52,384 $42,891 $40,955 $31,427 $30,052 $23,080
Realized Securities Gain ..... 13,796 14,198 13,395 10,807 9,190 7,313
-------- -------- -------- -------- -------- --------
Total Earnings ........... $66,180 $57,089 $54,350 $42,234 $39,242 $30,393
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March 26, 1979
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