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BerkshireHathawayLetter1973

TotheStockholdersofBerkshireHathaway.:

Ourfinancialresultsfor1973weresatisfactory,withoperatingearningsof$11,930,592,

producingareturnof17.4%onbeginningstockholders’equity.Althoughoperatingearnings

improvedfrom$11.43to$12.18pershare,earningsonequitydecreasedfromthe19.8%of

1972.Thisdeclineoccurredbecausethegaininearningswasnotcommensuratewiththe

reaseinshareholders’investment.Wehadforecastinlastyear’sreportthatsuchadecline

waslikely.Unfortunay,ourforecastprovedtobecorrect.

Ourtextile,banking,andmostinsuranceoperationshadgoodyears,butcertainsegmentsofthe

insurancebusinessturnedinpoorresults.Overall,ourinsurancebusinesscontinuestobeamost

attractiveareainwhichtoemploycapital.

Management’sobjectiveistoachieveareturnoncapitaloverthelongtermwhichaverages

somewhathigherthanthatofAmericanindustrygenerally—whileutilizingsoundaccounting

anddebtpolicies.Wehaveachievedthisgoalinthelastfewyears,andaretryingtotakethose

stepswhichwillenableustomaintainthisperformanceinthefuture.Prospectsfor1974indicate

somefurtherdeclineinrateofreturnonourenlargedcapitalbase.

TextileOperations

Textiledemandremainedunusuallystrongthroughout1973.Ourmainproblemsrevolved

aroundshortagesoffiber,whichcomplicatedoperationsandresultedinsomethinglessthanfull

utilizationofloomcapacity.Pricesofsomefibersskyedduringtheyear.

CostofLivingCouncilregulationspreventedthepricingofmanyfinishedproductsatlevelsof

someofourcompetitors.However,profitswerereasonablycommensuratewithourcapital

investment,althoughbelowthosethatapparentlymighthavebeenachievedhadwebeenableto

priceatmarketlevels.Thetextilebusinesshasbeenhighlycyclicalandpricecontrolsmayhave

servedtocutdownsomeofthe