Berkshire Hathaway's 1965 annual report letter and operating review, prepared as an English source article for Being Value.
November 9, 1965
To the Stockholders of Berkshire Hathaway:
The fiscal year ended October 2, 1965 resulted in Net Earnings of $2,279,206 as compared to net earnings of $125,586 for the prior year. These net earnings do not reflect any nonrecurring losses incurred on the disposal of assets due to the permanent closing of the King Philip Plants A and E in Fall River, Massachusetts, as such losses have been charged to a reserve previously established for such purpose.
Because of loss carryovers, no federal income taxes were payable by the Corporation with respect to either of these years; however, to prevent any misleading interpretation of future earnings when loss carryovers shall not be available, the Corporation has included in computing net earnings for 1965 and 1964 a charge substantially equal to the federal income taxes that would have been payable with respect to results of operations during each of these years.
The Corporation is continuing to operate King Philip Plant D in Warren, Rhode Island, and the Hathaway Synthetic, Box Loom and Home Fabrics Divisions in New Bedford, Massachusetts.
During 1965 raw material, stock in process and cloth inventories were decreased by $1,411,967 and bank loans of $2,500,000 were paid off. Also, during the year the Corporation purchased 120,231 of its own shares, leaving a total of 1,017,547 shares outstanding at the end of the fiscal year.
The Corporation made a substantial reduction in its overhead costs during the fiscal year just ended. Approximately $811,812 was invested by the Corporation during the year in the purchase of new machinery in a continuing capital expenditure effort to reduce costs and to improve quality. This program will continue during the current fiscal year.
A major portion of the machinery at King Philip Plant E Division has been sold. We expect to dispose of the remaining portion of this plant during the current fiscal year. This will complete the liquidation of our unprofitable plants. The proposed sale of the King Philip E Division will make it necessary to provide storage for raw cotton and grey cloth for the King Philip D Division at the Hathaway Division Plant C, formerly Langshaw Mill. Plans are under way to accomplish this within the current fiscal year.
After more than fifty years of service, Mr. Seabury Stanton resigned as a director and as President, and Mr. Kenneth V. Chace was elected to succeed him. At the same time, Mr. John K. Stanton resigned as a director and as Treasurer and Clerk. Mr. Harold V. Banks was elected to succeed him as Treasurer and Clerk.
All divisions of the Corporation currently have substantial backlogs of unfilled orders and we presently anticipate that operations for the coming year will continue to be profitable.
We wish to express our thanks to all the employees of the Corporation whose loyal cooperation and efforts have helped to make this year successful.
Malcolm G. Chace Jr. Chairman of the Board
Kenneth V. Chace President
Earnings for the fiscal year ended October 2, 1965 were $2,279,206 after depreciation of $862,424. This compares with earnings of $125,586 for the year ended October 3, 1964, after depreciation of $1,101,147. Sales volume for the year ended October 2, 1965 was $49,300,685, compared with $49,982,830 for the year ended October 3, 1964.
The financial position of the Company continues strong. Net working capital on October 2, 1965 was $17,869,526, or $17.56 per share, compared with $14,502,068, or $12.75 per share on October 3, 1964 on the shares then outstanding.
During the year, the Corporation purchased 120,231 of its shares, leaving a total of 1,017,547 shares outstanding. Bank loans of $2,500,000 were paid off during the fiscal year.
Inventories on October 2, 1965 amounted to $10,277,178 compared to $11,689,145 on October 3, 1964, or a decrease of $1,411,967.
As a result of contract negotiations, we, along with the rest of the New England cotton textile industry, granted a general wage increase in April 1965. Our present contract with the Union expires April 15, 1966.
During the fiscal year, Congress passed legislation which provides for the extension of one-price cotton through July 31, 1970, which will enable American textile mills to continue to purchase American cotton at the same Government established price at which it is sold to foreign countries.
We have had a substantial increase in sales in our Home Fabrics Division and look forward to continued growth in this area of our business.
A large part of the machinery at King Philip E Division has been sold. It is expected that the remaining portion of this plant will be disposed of during the current fiscal year. This will complete the program of liquidating unprofitable plants.
The Hathaway Division Plant C, formerly Langshaw Mill, is being prepared to provide storage for raw cotton and grey cloth for the King Philip D Division. This material is presently being stored at the King Philip E Division.
Because of a reappraisal of machinery listed for sale, we have increased the reserve for losses on sale of plant assets by $300,000.
The Company maintains four operating divisions: King Philip D Division in Warren, Rhode Island, and the Hathaway Synthetic, Box Loom, and Home Fabrics Divisions in New Bedford, Massachusetts.
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